34 replies to this topic

[busydeb]

I have been in business for over 4 years and for the first time am struggling. I was just wondering when you require your customers to pay: Up front for entire order, a percentage of order, or when merchandise is delivered?

The reason I am asking is I pay my vendors up front and then it leaves me cash poor until the customer pays me. Trouble is, they aren't always in a hurry to pay or pick up because maybe they don't have the money or timing is wrong. Or they forget their checkbook or credit card (can you imagine going to Walmart and forgetting your money and just leave with the goods?). I am at their liberty when they will come in and pay, and have been stiffed by "friends" and well-known local businesses.

On my invoices now I add my terms: Production will commence after artwork approval and payment is received. They don't always see it.....
Thanks for any advice!;)

[Chris Miller]

Credit card pre payment here... about 95% of the time.

[keyfobber1]

On my invoices now I add my terms: Production will commence after artwork approval and payment is received. They don't always see it.....
Thanks for any advice!;)[/quote]

This sounds like good advice to me! We are new in the promo products market as a supplier but I have been selling plastic injectin molding services for the past year, and we require 50% down payment for tooling and then upon approval of work and production of acceptable sample, we require the second half of invoice.

We then go on to manufacture parts.

I am still awaiting a large order where this is how I will present.

Good luck.

Regards,

Sean Griffin
Keyfobber LLC
[URL="http://www.keyfobber.com"]www.keyfobber.com[/URL]

[busydeb]

Thanks for the responses. I just implemented my pay first plan after years of trusting people. About 95% of my clients are great, but why do I always remember the poor 5% who wreck it for everyone else? I just wanted to see if I am out of line and with a not-so-good attitude.

[ScottH]

I probably do less than 10 orders a year that I have clients prepay on. The other 500 orders or so are billed net 30. Really don't have too much trouble becasue if a client pays late the first time, it will be the last time they ever place an order with me.

Fundamentally, it's about whether your business is made up of customers or clients. I have clients, and very, very few customers.

[busydeb]

I love your client vs customer mentality! I believe the 95% of my CLIENTS are the great people, but the 5% CUSTOMERS are what frustrate me.:)

[gil levitch]

busydeb said:

I have been in business for over 4 years and for the first time am struggling. I was just wondering when you require your customers to pay: Up front for entire order, a percentage of order, or when merchandise is delivered?

The reason I am asking is I pay my vendors up front and then it leaves me cash poor until the customer pays me. Trouble is, they aren't always in a hurry to pay or pick up because maybe they don't have the money or timing is wrong. Or they forget their checkbook or credit card (can you imagine going to Walmart and forgetting your money and just leave with the goods?). I am at their liberty when they will come in and pay, and have been stiffed by "friends" and well-known local businesses.

On my invoices now I add my terms: Production will commence after artwork approval and payment is received. They don't always see it.....
Thanks for any advice!;)

Why do you pay your vendors up front? I would think that fter 4 years you would have sufficient credit to buy on terms.

I invoice my clients on net 30. I have never had anyone late on me.

[bigimpression]

Like Chris the majority of my clients are pre-pay. I personally extend credit to a few local businesses and haven't had any problems with payment from them.

[busydeb]

I prefer to pay upfront so I don't forget! If anyone has a system for paying bills, I am all for it! I use Quickbooks Pro and ACT database management software. I do have vendors that extend me credit, but the cash flow just isn't there for me by the time the client pays me. When I order clothing online, I just pay for it so there is no delays in getting the product.

[aapromotions]

I extend my clients net 30 terms with the exception of the few and that really is based on if I think it is a one of order or if it is a specific type of industry; ie. Small Restaurants, Personal Trainers. The types that might not be around in 6 months. It is something I look at carefully. Most real businesses who have a relationship with clients will extend terms be it 15 or 30 days. It's just how business is run. In fact, if I run into a company that seems sound, I usually ask if they have terms with their current distributor. It has driven business my way.

I follow the above even if I have to pay a supplier up front. I have credit but still get asked if it's a first time order. I tend not to argue with the supplier, but have them send me credit apps for followup orders. Most of the apparel guys want payment up front and sometimes it just easier to do it with the credit card. But in this case I still give the client the terms.

It seems to me that the problem you have is one of general cash flow. That isn't good if you are prepaying, receiving credit.

I use QB Pro and it's very easy to remember and that's an important part of business. Get yourself a numbered accordion file and place the bills in the date with the corresponding invoice date. When you get to that date, mail a check.

[busydeb]

Thanks Allen!

[royhill]

I'm on net 30 with most of my supliers and bill my clients net 15 from delivery. Most of the time I am paid before my supplier bill is due. As mentioned above QuickBooks works well. Good luck - Roy

[SunEmbroider]

95% pay in full up front - less worry. I've had too many problems. Unfortunately with the present economy there will be more people who don't pay their bills on time. Its custom work so it can't be resold.

[busydeb]

Thanks for all your helpful replies. I feel it is the right thing for me to ask for payment up front, but do take into consideration the size of the order too. I usually get onsies/twosies, but the occasional 24 quantity does come in. I wish I would get bigger orders!

I just wanted to find out from others what their take was on this and it seems that if you know your customer or feel comfortable that they will pay, you don't have trouble with the net terms. I have repeat orders and I think they expect to wait to pay. But with new people, I think it is expected they would pay at least something up front before production or ordering takes place.

I had a "friend" who took me to the cleaners for over $1200 with decorated wearing apparel. He was fascinated by the art of embroidery and screen printing and wanted to watch. He was a 3XL size and wanted some hoodies, etc for him and his drinking buddies. He kept "forgetting" his checkbook, money, credit card, etc., but would keep adding garments to the order when he called to see if they were done. Of course, he was in a hurry to get them. When the time came to pick up the last order - he kept standing me up.

Shortly after, he moved out of town and got gastric bypass surgery and lost a whole 'nother person! Of course he wouldn't be needing his big garments now, so why pay me????????? I saw him at the credit union where he said he received a loan to pay his bills. You guessed it - I wasn't one of them.

When he was a big dude, he heard my frustration over another business that was not paying me the $1100 they owed me for over 6 months (2 collection companies with unsuccessful attempts at collecting) and offered to get the money his way....then he turns around and does the same thing to me!!

That's why I asked the question, because I think I may have bad luck towards trusting people. Like I said earlier, 95% of my people are great, but the thousands of dollars I lost on those few customers really hurt financially and emotionally.

Have a Merry Christmas! :D

[SunEmbroider]

I think after the first "no pay" you can't do additional orders even if the customer wants to add to the inital order. I think everyone has some trouble at some point if they don't require prepayment. For many business owners times can change. A business that could previously be "trusted' might not be counted on in today's economy. Promotional products and apparel aren't necessities and when business operating money gets tight owners are more likely to pay other vendors and employees that they need to stay in business rather than their promotional products distributer.

[busydeb]

Well said...

[InnoPack07]

We are a small supplier and ask that the first 3 orders with a client, they pay 50% up front. Most choose to use a credit card.

I get in a PO, send the distributor a confirmation from QuickBooks (PM me if you want to know how I sent it up) and at the bottom of the confirmation is a section that they fill in the credit card info and sign the bottom line and fax it back to me.

I let them know that the order won't start in production without the deposit and art approval.

Then, as long as they pay the balances on the first 3 orders within their 30 days, we will extend terms on the later orders.

If they are late, they stay on a deposit basis.

With the deposit, you know you are at least covering your costs.

If the order value is less than $400, we ask for full prepayment, and any balking is easily handled with the explanation that we are a small and growing company. It's true.

Occasionally, I have distributors threaten to not order because we won't give them terms to start and I let those guys find someone else to order with. If I can't get them to see the partnership involved, I think they should shop elsewhere. I don't operate on threats!

I believe that if they are unwilling to meet halfway on it, I stand a strong chance of getting stiffed on the whole thing if we give straight terms.

Also, since most do pay by credit card, they are often getting another 2-4 weeks to pay, depending on where they are at in their billing cycle. Not to mention points/miles earned.

Don't be afraid to ask for payment up front, or at least a deposit, you are taking a risk on a custom job, and should minimize any damage caused by late and/or non-paying customers, such as your "friend" that stiffed you!

[busydeb]

Thanks, Sara, My "friend" signed my estimate that I gave him and also made a $200 deposit. Why wouldn't I trust him??

[kristiy]

Actually all but one of my customers prepay me. Usually by check though.
They get the check sent out to me within a week of ordering, and I usually, depending on the client, already ordering from the supplier on terms.

To tell you the truth, the way business has been lately for me, I am running "an order behind" so that the next order I get pays the supplier from the last order I did.. I need to get more caught up- LOL.
My biggest HATE it to be late paying suppliers- it really bugs me. I try not to do that.
Of course, I am a small company myself, and if I get 4 orders in a week, I am BUSY! LOL!
I am happy with at least one-two a week. When the kids get a little older and I am free to do more of what I want to do, I am sure I will grow my business as much as I really want to.

[busydeb]

Thanks for your comments, Kristi. I understand "the order behind" principle! LOL