#Immediacy on speech making

It should enable you to work out the total cost of supplies ...

It should enable you to work out the total cost of supplies in your business and indicate where you may have opportunities for cutting your costs. Choosing suppliers When a new business is starting, the owner often has little choice of supplier. Few if any will offer credit terms to an unknown; his order quantity is too small for a frequent delivery service, and those willing to supply him / her may not be the most reliable. Things are now different You have demonstrated your ability to survive and, I hope, pay your bills on time.

Even if the major suppliers are not yet queuing at your door, there should at least be some element of choice open to you.

How will you exercise that choice? From your experience and from talking to other entrepreneurs, you should have a good idea which suppliers will meet your standards for quality and reliability. But there is another question which you may find more difficult to decide: should you go for single or multiple sourcing? In an effort to reduce their costs at one stage, the car manufacturers went for single sourcing, ie: only one supplier for a particular component.

This gave them considerable leverage in negotiating terms with that supplier.

After a prolonged series of strikes, when some suppliers were strikebound while others were not, they changed to multiple sourcing, i.e.. at least two suppliers for every component. The theory was that what they now lost on unit cost they gained in security of supply. You may face the same problem of potential disruption due to strikes hitting your suppliers and must decide whether to combine as many orders as possible for one supplier or not.

You will be choosing between cheaper supplies as a result of better discount or easier credit terms and more reliable supplies. The choice cannot be sensibly made without knowing how to calculate the value of the various discounts and credit terms and this is the subject to look at next. In each of the following examples, we have used the same simple figures to make the calculations easy to follow, viz. average monthly purchases £14,000, average interest rate for overdraft 15 per cent.

CASE 1 SPOT CASH This is the base case. Since you pay cash when supplies are delivered, your average monthly payment is £14,000 and there is no interest saving. CASE 2 NORMAL MONTHLY CREDIT This case represents fairly typical credit terms.

It is assumed that supplies are received throughout the month and a statement is submitted at the end of the month. Payment is due at the end of the following month. Taking the mid-point of the month as the average date for delivery, in effect you pay for your supplies 1.5 months after delivery.

Monthly payment = £12,000 Interest saving = £12,000 x 15/100 x 1.5/12 = £137. CASE 3 DISCOUNT FOR EARLY PAYMENT Practices vary quite a bit in different trades, so this may not be typical of yours, but the method of calculation can be adapted to your needs.

It is assumed that you are offered a discount of 2 per ...

It is assumed that you are offered a discount of 2 per cent for payment within 14 days of invoice date, i.e.

approximately % month after delivery. Monthly payment = ... read more

Price is not the only consideration, of course; quality also matters. But ...

Price is not the only consideration, of course; quality also matters. But quality is not always easy to assess in the way it affects you. Where the yield of final out... read more

So before you make a final decision on bulk buying you should ...

So before you make a final decision on bulk buying you should check the financial and operational implications discussed above. Storage Depending on the nature of your business, the c