First Things First

Before you begin searching for vendors, it’s important to analyze your business requirements. What products or services do you need? How important are they to your business? How often do you need them? How will these products and services affect your bottom line? How much are you willing to pay? What are your expectations of a vendor?

Thinking through these issues and putting the answers in writing makes it much easier to narrow your list of candidates and eliminate those that don’t meet your minimum requirements. Be sure to get input from those who will be directly affected by the vendor relationship.

Once you have determined your requirements, it’s time to put together a document that you can give to potential vendors stating your requirements and soliciting a response. Depending on your needs, this may take the form of a Request for Quotation, Request for Proposal, or Request for Information. In each case, this document should contain a detailed description of your requirements and expectations as well as any assumptions, constraints, or special conditions the vendor should know about. If you are looking for materials, be sure to request samples.

When you have received enough vendor proposals, you can begin the selection process. Always keep in mind that you are looking for a vendor that can provide what you need when you need it at a price that fits your budget. Due diligence in the selection process can make or save you a lot of money in the long run.

Pricing Isn’t Everything

It’s easy—and often foolhardy—to choose a vendor simply because they offer the lowest prices. It can also be tempting to switch vendors whenever you discover a less expensive deal. That deal can go sour very quickly if the supplier doesn’t deliver on time, fails to provide consistent quality, or refuses to work with you in times of special need. Value for your money should be a greater concern than just getting a bargain price.

Following are some other qualities you may wish to consider when searching for the best vendors for your enterprise:

Reputation

These days it’s easy to check a company’s reputation online. Look for ratings and comments from past and present clients and note especially any that talk about the financial effects of the vendor relationship. Be aware, however, that there may be false reviews, either positive or negative, on the Internet. If appropriate, you may wish to contact companies that have dealt with the vendor and get their opinions directly.

Stability

If you are looking for a long-term relationship, you will want to find a vendor that is likely to stay in business and provide consistent service for the foreseeable future. Longevity may be a key consideration, as well as the stability of the industry. Another consideration may be the number of clients the vendor services. A company that has only a few clients can quickly get into financial trouble if any one of those clients should disappear.

Reliability

The last thing you want is to fail your customers because a vendor failed you. You want to find a vendor who delivers accurately, on time, all the time, without excuses, and who acts quickly to resolve any problems. Spending time and money to fix mistakes caused by a vendor can be extremely costly both in lost revenue and loss of customer confidence.

Flexibility

When unexpected problems or opportunities arise, as well as in times of seasonal changes in demand, you want to be able to work with your vendors to make adjustments. An ideal vendor is willing to help you fill rush orders and change or cancel orders after they have been placed. There may be times when you need to delay payments or adjust terms. A vendor who understands and is willing to work with you can be a priceless asset.

Responsiveness

The right vendor will be easy to contact and will promptly answer your calls and correspondence. You should look for vendors who care about your business relationship and are committed to helping you succeed. Ideally, your vendor will be knowledgeable enough to give quick answers and creative enough to help you find quick solutions.

Integrity

Too many vendors make promises they can’t keep, in order to land a contract. Others may misrepresent their capabilities or fail to disclose potential problems. Look for vendors who are honest about what they can and cannot, will and will not, do. Watch for red flags that may indicate overpromising or dishonesty. A vendor with integrity will ask questions and point out concerns before entering into a contract.

Remember that integrity is a two-way street. It’s important that you be honest with potential vendors, and fully disclose any circumstances that could affect your business relationship. The value of a long-term partnership based on mutual trust and accountability cannot be understated.

Sealing the Deal

Once you have found a vendor you want to work with, it’s time to negotiate a contract. You want to work out the best deal possible for both you and the vendor. Some things to take into consideration are:

• Pricing and expectations regarding increases or reductions
• Payment terms and flexibility
• Communications
• Inventory balance (having sufficient to sell without tying up too much capital tied up)
• Exit strategy in case things don’t work out

Additional Tips for Choosing the Right Vendor

It’s important to remember that vendors are critical to your business. It’s a good idea to have at least 2 “go-to’s” for critical items. That way, if one is struggling you have options (as the saying goes, “Don’t put all your eggs in one basket”). It also helps in negotiating prices when suppliers know you have options to help keep them honest. We’ve found that, for the most part, vendors seem to understand it is part of smart to have a few sources of supply and don’t take it personally if they don’t get all your business.

For critical suppliers, it is important to meet with them at least a couple of times per year in a semi-formal “business review” setting. This helps keep surprises to a minimum for both parties and helps the relationship.

Final Thoughts

Having the right vendors can make or break your business financially. A long-term relationship with a vendor who provides well-priced products and services in a consistent and timely manner and is willing to work with you in times of special need is of inestimable value.

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Do I still have enough knowledge to be handling my own finances?

Let’s be honest, most business owners don’t have a ton of experience or education on managing accounting or financial duties. However, it’s usually how it starts in order for you to get up off the ground. With that said, as your business grows, the accounting usually becomes a bit more complex and there are more factors to think about (tax, growth strategy, raising money, international sales, etc.). It’s important to eventually move to an expert to get full support as your business starts to expand and grow.

Do I have time to handle the finances, and do I want to?

You are probably only doing this to get it done for reporting or tax purposes, not because you want to. You also would be best suited for other tasks in your business, such as managing the development team or the business development and customer relationships. Your goal is to grow and manage a successful business, and usually, finance is not a priority in this. You will start to know when you want to be doing more of the “cool” work and less of the tedious bookkeeping and reporting tasks.

Can I afford a finance team or CFO?

In the first year of business, money is always tight. It’s important to be mindful of where money is being spent, but at the same time be okay with investing in something that will provide a ton of long-term success and growth. In our experience, it’s common for businesses earning 100k per year or more to start outsourcing to a finance team to manage this for them. However, if you are still in that pre-revenue or early-stage revenue range, then we may have an alternative for you…

Finance 101 for Business Owners

Would you like to have more time doing what you love? Are you interested in seeing your business thrive and scale? It’s common for business owners to wear multiple hats at the beginning, but usually, one thing gets missed… finance!

We’ve started from the beginning too, and we’ve helped tons of businesses that are in the same position. We want to help you too! Here’s your chance to get ahead of your business so that you can spend more time driving growth while creating the life and business that you want and simply doing more of what you love.

Picture this…

● Cutting your bookkeeping and admin time in half!● Pulling LIVE reports from your accounting system that is ready to go on a daily, weekly, or monthly basis● Being able to show growth potential over the next 1-2 years with a positive CASH balance● Having actual cash in your business bank account!● Spending less time worrying about your financials, and more time finding ways to grow and scale your business

We would love to be able to do all this for you! However, if you are not ready for someone else to manage it, now is your chance to take full control and implement it on your own!

The post When Is It Time To Outsource Your Business’s Accounting? appeared first on VVREDDY & ASSOCIATES.

A CFO can help with strategic hiring for startups by offering data-driven advice around when to hire, as well as around what to offer new hires. This can include guidance on wages, benefits, and other perks. Ultimately, CFOs can provide financial leadership to help startups make better-informed decisions around all areas of growth, including hiring. 

CFOs & When To Hire

As we said, startups are eager to grow. They want to move out of the startup phase as quickly as possible, and this typically requires more people.

But given that payroll and associated expenses are typically a company’s biggest expense, knowing when to actually hire is a delicate balance. Just because it might be helpful to have a few extra hands around, that doesn’t mean you can afford to pay them.

Presumably, your CFO will help you build a budget for your startup. This budget will be a jumping-off point they can use to help determine when is the right time to hire new staff. Alternatively, they can help your startup determine whether it makes more sense to hire new employees or contractors right now, which is an insight that can prove invaluable.

 CFOs & How To Hire

Maybe you’ve made the decision to hire … but now what? What can you afford to offer in terms of salary and benefits? What can you afford not to offer? As we all now know, we’re in the middle of the Great Resignation, and it is absolutely an employee’s market. The only way to attract and keep top talent is to offer the most competitive compensation you can afford.

And the best way to figure out what compensation you can afford? You guessed it – a CFO.  The right CFO can help you determine the right salaries, raises, bonuses, health care plans, and other benefits for all your employees.

The Right CFO For Your Startup

We get it. Money is often tight for young companies. You might be at a stage where you’re unsure about even hiring a CFO, let alone hiring anyone else.

Remember that a CFO can do more than help with your strategic hiring. They can also assist with fundraising, help you transition to cloud-based accounting, figure out whether to pay yourself in dividends or salary and determine if or when to incorporate your startup.

In other words, CFOs are essential to helping your startup grow, which includes guidance on strategic hiring.

If you’re still unsure about your needs, see our guide to when startups should and should not hire a CFO.

As a Virtual CFO, we work with companies of all shapes and sizes, but we have a passion for startups, especially tech-based startups. We’re a startup ourselves, so we have special insight into how to help you stay in control of your finances, improve your cash flow, and keep investors happy. 

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