Most Australian businesses receive a supplier price increase, sigh, and pay it.
That is a decision, even when it does not feel like one. On $450,000 of direct costs, a 3% improvement is $13,500 — comparable to an aggressive discretionary cost cut, for one conversation.
The four leverage points
You have more than you think. Know which one you are actually holding before you open the conversation.
1. Volume consolidation
If you buy the same category from three suppliers, you have three weak relationships instead of one strong one.
“We currently split this across a few suppliers. I’d like to consolidate with one. Here’s our annual volume — what does that look like on price?”
Strongest lever available to most small businesses, and the most under-used.
2. Payment terms traded against price
Your supplier has a cash cycle too. Faster payment has real value to them.
“If we moved to 7-day payment instead of 30, what could you do on unit price?”
Do the arithmetic before offering it. Giving up 23 days of terms to save 2% is only worth it if your own cash position can carry it. Often it cannot — in which case do not offer it.
3. Contract length
Certainty is worth money to a supplier planning production or stock.
“We’re happy to commit for 24 months if the pricing reflects that.”
4. A credible alternative
The strongest lever, and the one that must be genuine. Suppliers can tell the difference between a real quote and a bluff, and being caught bluffing costs you the other three levers.
“We’ve had a competitive quote at $X. I’d rather stay with you — can you get close?”
Responding to an announced increase
The default response is silence, which reads as acceptance. Ask three questions instead.
“What’s driving it?” Legitimate increases have specific causes. Vague ones are margin expansion, and asking politely exposes which you are dealing with.
“Does it apply to everything, or specific lines?” Frequently a blanket increase covers a cost rise in one input. Segmenting it can halve the impact.
“Can we phase it?” Half now, half in six months. Suppliers often accept this because they keep the increase and you get budget room.
Before you open the conversation
Know your spend. Twelve months by supplier, by category. You cannot negotiate volume you cannot quantify.
Know your alternatives. Get one real quote. Not to leverage it dishonestly — to know what the market actually looks like.
Know what you will trade. Price, terms, volume, length, exclusivity. Going in with only “can you do better” hands the conversation to them.
Talk to the right person. Your account manager may have a 3% discretion. Their manager has more. Ask who can approve what.
What not to do
Do not lead with a threat. It works once and damages the relationship permanently.
Do not negotiate on price alone. You will win 2% and lose service, priority and flexibility — which usually cost more than the saving.
Do not forget you are also a supplier. Everything above is being done to you by your customers. Worth noticing which of these tactics work on you, and why.
Where this sits
Procurement is lever five of nine in our profit lever hierarchy — moderate impact, moderate effort, genuinely worth doing.
It is not where the biggest money is. A 3% supplier improvement on $450,000 returns $13,500. A 5% price rise on $1m returns $50,000 — nearly four times as much, from a conversation you are probably avoiding for the same reason.
Where to go next
- The SaaS Audit\n- Switching Business Utilities\n- How to Cut Business Costs in Australia\n- Pricing for Profit
Sources: AMP Bank GO Small Business Cost Pressure Index 2026. Worked figures are illustrative. General information, not financial advice.