The supply chain industry is made up of small businesses. Owned and operated by families, industry veterans, and close-knit communities, it’s a profession where every dollar counts. When we talk to suppliers around the country, they often share stories of neighbors, competitors, and friends who have had to shut their doors due to poor financial decisions. So whether you have your entire fiscal year planned to the penny or could use some financial guidance, here are three pitfalls to avoid when handling your job shop’s finances.
Negotiating Weak Contracts
No matter how tedious it can be to negotiate contracts, doing so is necessary for your business. A strong contract serves as a legal record that holds all parties accountable to the agreed upon deal and limits your exposure to risk and less than desired outcomes. That said, a weak contract could put you in just as precarious a position as having no contract at all. Besides the normal specifications often outlined in RFQs and other preliminary records, contracts should offer one critical piece of information — a contingency plan.
Because unpredictable circumstances happen to even the best manufacturers, having a contingency plan in your contract is essential. What happens if you cannot make quota? What is the payment plan? What is the supply order flexibility? Where is inventory being stored, and how secure is it? Customers can have a load of questions, and you should have honest answers for all of them. This is for their protection just as much as your own. You don’t want to give anyone a reason to not make a payment.