Changing your supplier while you still owe him money

Agree a written payoff schedule with the old supplier before you place a single order with the new one. A fixed amount, a fixed date, four or five months, both of you holding a copy. The slow fade costs far more than the balance itself, and the overlap months are where good shops run out of cash.

The morning the better rate walks in

Kashif comes in at eleven on a Tuesday, when the counter is empty. He is the new man for a distributor two streets over, and he lays a rate sheet on your glass. The carton you have been buying at Rs 2,520 sits at Rs 2,340 on his list. His van runs Monday and Thursday, fixed days, and he carries both of the brands your present supplier keeps running short on.

You move about forty cartons a month. Rs 180 a carton is Rs 7,200 a month, and that is before you count what an empty shelf on a Friday evening costs you.

Then you remember the number that stops you. You owe Rafiq Rs 140,000 on running credit, built up over two years of Monday deliveries and part payments that never quite closed. You tell Kashif you will think about it, and go back behind the counter with a problem that was never about rate at all.

The rate decision took four minutes. The exit will take four months, and how you handle it decides whether you keep a second door open in the bazaar or slam it shut behind you.

Why the slow fade is the expensive way out

Here is what most shopkeepers do instead. They say nothing. They order a little less each week, pay a little slower, and hope the balance quietly sorts itself out.

It never does. Watch what happened to Imran, who runs a cloth shop near the main crossing. He found a better wholesaler and simply started ordering less from Shafiq, who had supplied him for six years. No conversation, no plan. He sent Rs 5,000 when he felt bad about it, Rs 8,000 when Shafiq's man pushed hard.

Fourteen months later he still owed Rs 71,000 of an Rs 96,000 balance, and Shafiq's rate to him had gone up twice, because a shop that pays late is priced like one. Then a big wedding order came in and Imran needed Rs 60,000 of stock in three days. The only wholesaler who could move that fast was the one he had spent a year avoiding. He got the goods, paid cash in advance, and did not argue about the rate, because he had no standing left to argue with.

That is the real bill for the slow fade. The balance stops moving, so it sits for a year instead of four months. His terms harden, so whatever you still need from him arrives dearer. And your name softens in a bazaar where suppliers talk over tea, which makes the next credit line harder to open, with him or with somebody who has never met you.

None of it is punishment for leaving. It is the cost of leaving without telling anybody.

The overlap months nobody plans for

Now the part that actually breaks shops. Switching is not one payment. It is a stretch of months where you are paying down the old balance and buying from a new supplier who wants cash until he trusts you.

Say you owe Rs 140,000 and the new van starts next week

Old supplier's balance, still openRs 140,000

What your shop normally sends suppliers in a monthRs 105,000

Month 1: new supplier's stock, cash on deliveryRs 90,000

Month 1: agreed payment to the old supplierRs 35,000

Month 1 total going out, against Rs 105,000 coming freeRs 125,000

Month 2: the same two payments againRs 125,000

Month 3: the same two payments againRs 125,000

Extra cash you must find, every month, three months runningRs 20,000

Read the arithmetic slowly. Your shop frees up about Rs 105,000 a month for stock. That was enough when Rafiq's Rs 90,000 of goods came on credit and you paid him whenever the galla allowed. Now the new supplier wants his Rs 90,000 in cash on the van, and Rafiq wants Rs 35,000 on the fifth. Rs 125,000 out against Rs 105,000 free.

Rs 20,000 a month, three months running. Rs 60,000 the shop has never had to find before, landing in the same weeks as rent, wages and the electricity bill.

Something has to give, and it is better if you choose which. Make the first new order smaller and build it up over three deliveries. Stretch the old payoff to six months at Rs 23,000 instead of four at Rs 35,000. Or take one hard month of very tight buying. What you cannot do is find out on the fifth.

This is the squeeze that buying stock on credit hides while everything runs smoothly. Credit feels free until the day you want to leave. So count before you agree dates. A shop that does a daily cash count knows what a normal month releases; a shop that does not will promise Rs 35,000 and find Rs 12,000 in the drawer.

The conversation to have with the old supplier

Go and see him. In person, in the morning, before his loading starts, and not through his delivery man.

The ten-minute talk, before the first new order

1. 1Go to him, in the morning, before his loading startsNot on the phone, and never through his delivery man. Ten minutes in his own office is worth an hour of messages later.
2. 2Say it in one line, with no invented reason"I am moving most of my buying to another supplier. I wanted to tell you before I did it, not after."
3. 3Put the date and the amount on the table before he asks"Rs 35,000 on the fifth of every month, four months, and your balance is finished." A number you can keep, not the number that sounds brave.
4. 4Ask for the two things you actually need in returnNothing fresh loaded onto the old balance from today, and one last order at your old rate if you still need his range.
5. 5Write the four dates down and both of you keep a copyOne page, four lines, both signatures. Then pay the first one two days early so the second month needs no phone call at all.

Say it in one line and do not invent a reason. "I am moving most of my buying to another supplier. I wanted to tell you before I did it, not after." That is the whole speech. Do not say his rate is too high, and do not blame a cousin who is now in the business. An invented reason gives him something to argue with, and an argument is the one thing you are trying to avoid.

Then put the date and the amount on the table before he asks. "Rs 35,000 on the fifth of every month, four months, and your balance is finished." Say a number you can actually keep. The number that sounds brave in his office is the number that makes you avoid his call in week six.

Then ask for what you need in return. Nothing fresh loaded onto the old balance from today, so the number can only fall. And if you still need part of his range, one last order at your old rate rather than the rate a leaving customer gets.

Write it on one page, both signatures, a copy each. Then pay the first one two days early. That act does more for your standing than any explanation, because it proves the schedule is real.

Buy-down or pay-down: two honest routes

There are only two real shapes for the exit, and shopkeepers usually pick one by accident.

Two ways to clear him, and what each one costs you

Buy-down: keep taking a shrinking orderPay-down: stop dead, pay fixed amounts

How the balance movesBuy-down: keep taking a shrinking orderDown slowly, because part of what you hand him pays for the goods he just deliveredPay-down: stop dead, pay fixed amountsDown in a straight line, because nothing new is being added on top

Months you stay under cash pressureBuy-down: keep taking a shrinking orderSix or seven, but each month is gentler on the gallaPay-down: stop dead, pay fixed amountsThree or four, and every one of them is tight

What the old supplier feelsBuy-down: keep taking a shrinking orderYou are still his customer, so his patience holds and his van still comesPay-down: stop dead, pay fixed amountsYou are a leaving customer, so his patience is short and every date matters

If one month goes badlyBuy-down: keep taking a shrinking orderEasier to absorb, the payment was smaller and the order can shrink furtherPay-down: stop dead, pay fixed amountsHarder, a missed date breaks the agreement you just made with him

Effect on the new supplier's trustBuy-down: keep taking a shrinking orderSlower, your orders to him stay small while you split the buyingPay-down: stop dead, pay fixed amountsFaster, he sees full orders and clean cash from the very first van

Pick this whenBuy-down: keep taking a shrinking orderYou still need part of his range, or your cash cannot take a hard three monthsPay-down: stop dead, pay fixed amountsThe new supplier covers everything you sell and your selling season is strong

Buy-down means you keep taking a shrinking order while the balance comes down. He delivers Rs 40,000 of goods instead of Rs 90,000, you hand him Rs 60,000, and the difference eats into the old number. You stay his customer, so he stays soft, his van stays available for emergencies, and every month is gentler on your cash. The cost is time: six or seven months instead of three.

Pay-down means you stop buying from him dead and pay fixed amounts against a frozen balance. The number falls in a straight line and it is finished in four months. The cost is that all four are tight, and that his goodwill went on day one. Miss the fifth twice and the agreement is worth nothing.

Choose by the size of your galla, not by how you feel about the man. If one supplier fills most of your shelf, as one supplier or several sets out, a clean pay-down is dangerous: you have nowhere to go if the new van fails.

What the new supplier will want at the start

Do not walk in expecting the terms you had after two years with the old one. You will not get them, and asking damages you.

Kashif's distributor will want cash on the van at first. That is not distrust of you personally. He has no history with your shop, and he has been burned by shops that took thirty days of credit and then went quiet. Expect six to ten weeks of paying on delivery before anybody mentions terms.

What earns credit faster is behaviour, not talk. Order on the same day every week, so his van planning gets easier. Take a similar quantity each time instead of a huge order followed by nothing. Pay early twice, visibly. Settle a short delivery or a damaged carton in writing rather than by shouting at his driver.

And do not ask for credit in the first conversation. A new customer who opens with "what are your credit terms" tells a wholesaler one thing: this shop is looking for money, not for goods. Buy cash for two months, be boring and reliable, and let him offer. He will, because a shop that pays on the van is the customer he wants to keep.

Nor should the switch become an excuse to over-order. A better rate tempts every shopkeeper into a bigger first delivery, and that is how stock that never sells is born, in the month your cash is tightest.

Leaving the door open behind you

The reason to end it well is not politeness. It is the Thursday the new supplier is out of the one item everybody in your street is asking for.

That day you want to phone Rafiq and have him take the call. Keeping that possible costs almost nothing. Clear his balance on the dates you promised. Take his call when he rings. If somebody asks about him, say he supplied you well for two years, because he did.

An open door also protects you from the mistake underneath all of this: putting your whole shelf on one van again. A shop that keeps a live second option never runs this exit twice, and never buys in a panic. The same logic decides how much stock to take at once.

All of this works only if the numbers are not in your head. You need the old balance to the rupee, every bill and every payment against it, and the payoff dates somewhere you will see them. Wasoolo gives a supplier his own page with what you owe, entries posted against each bill, and expenses and cash and bank beside it, so the payoff schedule sits next to what the shop actually holds. On the fifth you hand Rafiq's man a PDF statement you have both been reading from, and nothing is left to dispute.

Common questions

Can the old supplier refuse to let me leave until I have paid everything?

He cannot stop you buying elsewhere. He can refuse further deliveries and press hard for the balance, which is fair, and is why you agree the schedule first. A supplier holding a written date presses far less, because it gains him nothing.

Should I tell him about the new supplier or just say I am buying elsewhere?

Say you are moving most of your buying elsewhere. You do not owe him the name, and he will hear it within a week anyway. But do not lie if he asks directly. A shopkeeper caught in a small lie is remembered far longer than one who simply left.

He is offering to match the new rate if I stay. Do I take it?

Consider it seriously, because a rate he can match now is one he could have given you long ago. If you are leaving over delivery days or stock gaps rather than price, matching the rate fixes nothing and you will be back here in six months.

What if I cannot afford both the payoff and the new supplier's cash orders?

Stretch the payoff and start the new supplier small. Rs 20,000 a month for seven months is a schedule you can keep. Rs 35,000 for four months that breaks in month two is worse than never promising it. Agree what your worst month can carry.

He keeps adding new goods to the old balance even after we agreed. What now?

Stop taking his deliveries until it is fixed, and go and see him that same week. Get the balance re-agreed from the bills in front of both of you. This is the reason for a written page with a starting figure: without one, a running balance can be argued in either direction forever.

Is it worth leaving a supplier over a small rate difference?

Work it out in rupees first. Rs 180 on a carton looks small until you multiply it by forty cartons and twelve months. But rate is rarely the only thing. A supplier who delivers on fixed days and takes returns without a fight beats a cheaper one who does neither.