Smart negotiations with your suppliers and vendors will lead you to generate thousands of dollars in savings throughout the year. We have asked procurement experts and successful builders about some of the best helpful tips and ideas they have used, and here is a very important list. Some of these ideas can be used when purchasing, acquiring or leasing material and equipment from suppliers and vendors for your construction project.
#1: Use Early Pay Discounts
If you have the opportunity to get savings for early payments, use it.
Normally, your supplier or vendor will try to get early payments discounts from you if the invoice is paid earlier than the usually 30-day period. How much interest could you earn in a year if you received, say, a 3 percent early pay discount on materials every time you paid a bill 15 day from the date of invoice instead of 30? The answer is 72 percent annualized income!
#2 Higher Early-Pay Discounts
When negotiating a big supply for a project or several projects, you can get your supplier to offer you higher discount rates for early payments on large orders. By doing this you will need to pay faster so be sure to account that during your cash flow projections. Reduce the term payment by 5 to 10 days and you can be saving up to 10% of the total purchase.
#3: Let Yous Suppliers Do Some Work for You
If you can get and negotiate an early completion bonus, you’ll have suppliers and vendors wanting to get involved more with you.
If that’s the case you can ask the supplier to prepare submittals, shop drawings, or can manage your inventory. Also you can pay them less but more frequently. They can even go and help during site visits and pre-construction meetings and discussions.
#4: Replace Your Problems
One of the most important tips you can use to save money with your suppliers is to have them engaged and producing the results you are expecting from them.
If your vendor or supplier is causing you delays, or is performing well under expected, replace them with other alternatives. Conduct progress meetings with your vendors or suppliers and let them know how they are performing for you, and get feedback from them also.
#5: Construction Accountant
Do not use any type of accountant. Try to get an accountant with construction expertise that can know all tax codes written for the construction industry.Nowadays, there are many software and products that can help you keep the most accurate information for your invoices and finance. A good accounting firm or department is vital to a healthy negotiation with your suppliers.
#6: Surety Credit
Your bonding agent must be able to understand the way your payments are being handled. This is very important if you want to establish an aggressive method of paying vendors and suppliers. An aggressive payment method for a supplier can lead to an increase of your surety bond or at least your surety agency will look at you better over similar competitors or construction companies. Improving your company’s financial strength may help you obtain a lower bonding rate.
A good relationship with your surety agent can save you money, so be sure to supply current, accurate, user-friendly financial information when purchasing, acquiring or leasing material and equipment from suppliers and vendors for your construction project.
Article By Juan Rodriguez