It’s easy to lose track of just how much money your company spends with individual non-fuel vendors each year. To discover how much you pay to who, run an Accounts Payable Report by vendor which shows the total year-to-date dollars paid. This report will serve several useful purposes.
First, it will help you identify your company’s largest vendors. Those vendors where you spend the most amount of money are the ones you should be able to bargain with for their best rates. By pointing out to the vendor the amount of annual dollars you spend at their establishment, you gain clout to negotiate the best rates.
Second, the report may help you isolate where you are unnecessarily using multiple vendors. With good data regarding your purchase requirements, you can then go to each vendor to receive bids on your future purchases. For instance, you may discover that you are buying truck tires from three different suppliers because you have three bulk plant locations. If you were to budget your next 12 months’ tire purchases and then take bids from the three tire shops, you may find you get considerably better pricing.
One of the most common areas for deep discounts is office supplies. If you add up all your supply costs, you likely spend a pretty penny. You should be getting volume discounts by selecting one office supply vendor and guaranteeing a minimum annual purchase.
When comparing bids from vendors, remember to factor in the vendor’s terms. There is a time cost of money, therefore, a vendor with 10-day payment terms must offer lower prices than a similar vendor with 30-day terms.
As you review your payables listing by vendor, also look for the fat that can be trimmed from next year’s budget. Was each purchase justified? Are you buying things that are “nice to have,” but not necessary to have? If so, now is a good time to cut the expense.
If you have vendors where you don’t do enough regular business to justify a healthy discount, remember that there may be benefit to charging those expenses on your corporate credit card if that card gives you purchase rebates or airline miles. You may be able to fund some of your required meeting air travel with frequent flyer award coupons. The two most popular programs are American Express Membership Rewards and Discover card’s rebate program.
In summary, determine what vendors you need, negotiate the best discount you can using annual expense projections, and then use the most advantageous payment terms, including credit card discounts or bonuses. By using your Accounts Payable Vendor Report, you’ll be able to immediately slash some of your recurring operating expenses.