How to Profit On Purchase Orders

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1. Negotiate Terms. Buyers will tell Sellers that purchase order is non-negotiable. However, you can negotiate terms. Hidden costs in moving to a competitor, risks in supply chain, learning curve on new technology, additional costs of competitors which add to total cost--these items can give you leverage. You may provide additional services or have a unique product offering. These are all sources of power you can converse tactfully about with Buyers.
2. Connect. Get to know them as people first. Talk to them about their job, areas they cover. What can suppliers do to make their life easier? Talk to them about the weather, their location, family. Human connection must occur before you can find out about flexibility and workarounds.
3. Use your Contact(s). Ask your contact at Buyer (a) to introduce you to Procurement, (b) to let you know if there is a master agreement that controls over the P.O., (c) to help you if negotiations get stuck with Procurement to speed up delivery of your goods/services.
4. Dealing with Bids and Requests for Proposals. Use any preexisting relationships with the company and procurement to ask, well before the end of the contract, about renewals and see if bidding is coming. Check with procurement to see if you can give them criteria to use for buying your service/product. Conversely, if you aren’t an existing supplier, find out if the bid outcome is preordained, especially if another company has been a longtime supplier.
5. Resolve the Battle of the Forms Issue. If a seller sends goods without a response when the Buyer’s terms and conditions limit acceptance to those contained in the Buyer’s offer, Buyer’s terms will control—there are a number of reasons Sellers don’t want this, e.g. acceptance, risk of loss, etc. a Seller should make sure that goods are shipped only following express and unqualified acceptance of the seller's terms. If that can’t be done, get a written agreement.
6. Get a Written Agreement, if it’s important enough. Provide in the agreement that the terms of that agreement prevail over any purchase order of Buyer or Seller or other document.
7. Dealing with Tough Tactics. Buyers may threaten to put contract out to bid, buy from competitors if you don’t cut price, make unreasonable demands, misrepresent facts, get angry. Don’t respond in kind. Be prepared—justify what you’re proposing and why. Possible arguments (backed up with facts) why you won’t make price concessions—market doesn’t justify price, their pricing is inconsistent with your pricing to others based on volume or spend. Determine if competitor is going to cut services, features, quality, etc. so they can make a profit? Get something in return if you make a concession—change scope of deal, volumes, timeliness or decrease add-on services.
8. Look for Metrics beyond Price and Cost Savings. Ask Procurement and/or your company contact, what are the end goals? What impact does quality, convenience, service, features play in Buyer’s ability to meet those goals, desired results? Who is procurement accountable to and what are they asked to deliver. What are the risks they’re concerned about in the supply chain?
9. Payment. Find out the name of the person in charge of payment and who actually does the processing. How are payments made? In other words, do they pay on time, what documentation do they require? How do they process your invoice? Who approves those invoices? From the time the invoice is approved, how long does it take for a check to be cut? Who signs the check? What’s the approval process? Agree on payment dates. Use the term on or before to make it clear when payment is due. Get agreement on what happens if payment is late—who can you call? Be pleasant and friendly—you want the buyer’s folks to understand you want to get paid. But don’t be pushy and make them think this company and this sales person are going to be a royal pain in the neck and they haven’t even delivered the product or service yet.
10. Mutual, Fair and Reasonable. Use this as your mantra with the other side. You want a constructive and fair outcome in reaching agreement with Buyers.
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