Keeping costs down is a key part of good business no matter what size you are, and there are often ways to ‘trim the fat’ in many different areas of an organisation. One of the key areas that many financially astute directors normally go to is in supplier relationships.
Negotiating lower prices and better long term rates can be a challenge, however, if you can offer your supplier something in return it can make sense for both parties, this is where contra dealing comes in. Here are some simple ways to upgrade your contra dealing skills in 2020 to save your business money.
1. Trade-in services that are core to your business
Whilst there may not be any money coming out of your account, you should treat your contra-deals just as you would any other expense within the business, and only acquire services that are core to your business. We recommend having a look at your business’s internal competencies if they cross over with what a supplier may be offering maybe a standard cash transaction may be more suitable.
2. Make sure you are clear on what you are offering to a supplier
One of the common issues we see with failed contra deals is a lack of clarity over what is being offered by both parties, both in terms of scope and timeframes. This is why we recommend that when writing up a contra-deal contract you should state explicitly what you are offering and the time frame you expect to deliver it in. This will stop break-downs in communication and save you money over time despite the initial time it may take to express your expectations.
3. Make sure you double-check your finances, contra deals are tax-deductible
Contra deals are great as they reduce barriers to trade and the operational costs of business, but many do not fully take advantage of the healthy tax benefits. Whilst it is a common misconception that that HMRC will not look at your contra-deals, they are still tax-deductible. This can help you to reduce your corporation tax which is due at the end of the year.
4. Market your contra-partnerships
Our 4th tip on how to maximize your contra-deal potential in 2020 is to tap into the marketing opportunities. Press releases illustrating you working with another company and social posts will allow you to get more coverage and maybe even access to the following of your contra dealing partners.