25 replies to this topic

[Bramy]

I'm just curious - is it okay to ask for 50% down upon art approval? How do you handle it when a terrific client pays you but it is sometime 45 days out?

I've recently gotten a couple orders that are anywhere between 8 weeks to 12 weeks before they are delivered - that can put a little crunch on cash flow if you have to pay the supplier right away.

Thanks!:)

[Allan]

You can a couple of things...
.
go and join a bigger distributorship like K&B....
.
sell your invoices to a factoring company....
.
talk to your customer.

Bramy said:

I'm just curious - is it okay to ask for 50% down upon art approval? How do you handle it when a terrific client pays you but it is sometime 45 days out?

I've recently gotten a couple orders that are anywhere between 8 weeks to 12 weeks before they are delivered - that can put a little crunch on cash flow if you have to pay the supplier right away.

Thanks!:)

[Bramy]

Thanks, Allan! I was with IPromoteU for awhile but at that time I wasn't doing enough business to justify the expense - so I went on my own. I have talked to my clients and that does work.

[AdmanGR]

Bramy said:

I'm just curious - is it okay to ask for 50% down upon art approval? How do you handle it when a terrific client pays you but it is sometime 45 days out?

I've recently gotten a couple orders that are anywhere between 8 weeks to 12 weeks before they are delivered - that can put a little crunch on cash flow if you have to pay the supplier right away.

Thanks!:)

Since it's your busness it is more than OK to ask for a deposit or credit card. Extending credit is a marketing tool that comes with a price.

As Allan stated, you may want to consider some partnering if it becomes problematic. There are some well heeled distributors in the industry that can handle carrying the paper for you should you realize the need.

It is nice to be able to accept any size order, extend 1%10, net 30 terms, and get paid a handsome commission the day you submit the order:)

[tmertz]

You can offer your customer a discount for prepayment. If they don't take advantage of this it provides you with additional information on their CASH FLOWS.

Many sales reps in our industry give the large Distributors a share of the order in order to get financing when their customer probably would have been more than willing to finance the order for a lot less if prepayment discounts had been offered.

Businesses of all sizes understand credit risk and cash flow management. I encourage all Distributors to have a prepayment discount as part of their quote process.

[AdmanGR]

tmertz said:

You can offer your customer a discount for prepayment. If they don't take advantage of this it provides you with additional information on their CASH FLOWS.

Many sales reps in our industry give the large Distributors a share of the order in order to get financing when their customer probably would have been more than willing to finance the order for a lot less if prepayment discounts had been offered.

Businesses of all sizes understand credit risk and cash flow management. I encourage all Distributors to have a prepayment discount as part of their quote process.

Tried this tactic several times over the years on larger orders. Do agree that it is a good idea / offer. However, in my experience, clients have always preferred to receive the goods before paying for them. 1%10, net 30 seems to be the preferred terms in my market so I use that as a marketing tool. I often check with our credit department to scope out a prospect. Nice to walk in on your first sales meeting and say "you have "such an such" line of credit if you would like to do business with us"

Also, as far as cashflows, in my case, SHOULD a client long / not pay, my commission isn't reveresed until 165 days. My only risk is the commission - not the material cost. Sure, I could absorb a few hundred bucks on laminated magnets gone bad, but a $20K wearables order would be a twist of the knife.

So, Bramy's bad case scenario - she waits 8 weeks after pre-payment to the supplier for the goods to be shipped, she races to e-mail the invoice to the client the day the order ships, and then finds that the client takes 45-60+ days to pay her....ouch( regardless of GP earned). In my case, I'd be back knocking on the same client's door asking for more business and not sweating it.

[AdmanGR]

Bramy said:

Thanks, Allan! I was with IPromoteU for awhile but at that time I wasn't doing enough business to justify the expense - so I went on my own. I have talked to my clients and that does work.

Thank you for the honesty regarding IPU...;)

[Chris Miller]

We've never had an issue asking for 100% payment up front. In fact, we require it. One of the areas biggest grocery chains just overnighted us a $14,000 check so that we would get them out a proof. This is standard practice. This really isn't too difficult folks.... I am no one special. It's all in how YOU perceive things and how YOU run your business. I like to keep my cash flow actually FLOWING so we ask for a credit card or prepayment by check. The only time we extend terms is to government and public education and with the way those two are falling apart, we're reevaluating that as well.

When a customer says "Oh we really need terms", what I really hear is "We really can't afford to pay for this right now" and every time I have went out on a limb, i've ended up with a 60-90 day paying customer.

We've never lost an order by requiring prepayment.

[AdmanGR]

Chris Miller said:

We've never had an issue asking for 100% payment up front. In fact, we require it. One of the areas biggest grocery chains just overnighted us a $14,000 check so that we would get them out a proof. This is standard practice. This really isn't too difficult folks.... I am no one special. It's all in how YOU perceive things and how YOU run your business. I like to keep my cash flow actually FLOWING so we ask for a credit card or prepayment by check. The only time we extend terms is to government and public education and with the way those two are falling apart, we're reevaluating that as well.

When a customer says "Oh we really need terms", what I really hear is "We really can't afford to pay for this right now" and every time I have went out on a limb, i've ended up with a 60-90 day paying customer.

We've never lost an order by requiring prepayment.

If we ever leave K&B, that will be our first tactic...pre-payment ~ as Like to get paid the day of the sale too.

[djoctagone]

If a customer beats me up on price, I remain firm with my pricing, but I offer lower pricing with different terms.

On my last big project (90 days lead time), we went from 50% deposit, then 66% deposit, and then 100% deposit. Each time, I lowered the price.

I stress to the customer that I want them to pay by check instead of credit card in order to avoid eating my share of the processing fees.

[Bramy]

Thanks for all the great advice! I really appreciate it!!

I started in the business selling for my brother-in-laws embroidery and screen printing business and I got paid when the bill was paid - they took all the risk. When my brother-in-law sold out to his partner who was the "Ad. Specialties" guy. He was so bad that he cost me clients and reputation. That is when went with IpromoteU.

About the same time my husband needed me to help him with Real Estate so I put this on the back burner to help him. I basically maintained the clients I had so there is only a handfull that do the 30 to 45 day net, right now.

I really believe that everything should be paid up front (atleast 50%). I just didn't know if it would be "proper" to ask. Now I won't have any problem asking for it, at all! Actually, I asked for half down on Friday and the check is coming. Thanks!

Chris, do you give them an estimate for shipping and adjust when product arrives? Or, do you keep to the estimate and charge tax and everything up front? My husband really appreciated your post - that is how he thinks I should be doing this.

Thanks, again!

Tammy:)

[Chris Miller]

Bramy said:

Chris, do you give them an estimate for shipping and adjust when product arrives? Or, do you keep to the estimate and charge tax and everything up front? My husband really appreciated your post - that is how he thinks I should be doing this.

Hey Tammy,

We generally get a shipping estimate from the factory (or do one ourselves) and apply a standard markup. We make a little on shipping for the most part, and on some we lose a little. It averages out though and doing it this way allows us to move on quickly to another order.

We generally collect 100% of the invoice within 1-2 days after the order is placed. It's very rare that we have to go back and bill for extras.

Remember, don't assume anything. Chances are we don't know our buyers as good as we think ;) We felt weird in the beginning asking for prepayment too, but after 3000 or so orders, and no complaints, we realize that people are fine with it. In fact, we get a ton of compliments for taking all forms of credit card, and being able to produce a paid invoice the same day or next. It just makes things easier on them and they can get on with more important things. :)

It's also great to know that many of our competitors still think they HAVE to operate as a bank to keep their customers happy. So they run to the big distributors for support (giving away as much as 50% of profits), or they float orders for 30-90 days which kills many of them. Getting paid up front gives us more cash flow to be more flexible which gives us an upper hand.

Hope this helps.

[AdmanGR]

Chris Miller said:

Getting paid up front gives us more cash flow to be more flexible which gives us an upper hand.

Makes sense to me !

[Bramy]

I have to laugh - I'm telling my husband about you Chris and he is saying "See, why don't you listen to me?". I guess I needed to hear it from someone that is actually in the business...thanks so much! I'm not in to giving up any commission for a little security when I can get paid upfront and not have to worry about getting paid. :D

[AdmanGR]

Bramy said:

I have to laugh - I'm telling my husband about you Chris and he is saying "See, why don't you listen to me?". I guess I needed to hear it from someone that is actually in the business...thanks so much! I'm not in to giving up any commission for a little security when I can get paid upfront and not have to worry about getting paid. :D

See you at the top!! :D

[ProPrinters]

I have asked for a 50% deposit on program sales, where there are many moving parts, programming, custom website etc.

Also when I run a promotion, and there is prize insurance, the client has to pay for the insurance up front, it is in the contract and in many cases I can get much of the fee paid then.

I am lucky. Most of my accounts, with exception of one, are paid within 30-45 days, which I am fine with.

Derek

[sacajamo]

I can see some smaller companies paying up front, but I would be laughed out of the building if I asked for a 100% or even 50% deposit on the front end of some of my larger clients. We work with some Fortune 500 types, and they just dont do deposits, plain and simple. If I made a stand on it, I am sure they would just kindly be polite and move on to another distributor that would offer terms.

I am being a little extreme (we have good relationships with our customers and I dont think they would stop doing business with us because we asked for deposits), but it would definitely be a sticking point. The only time we usually ask for a deposit is for an overseas order (becuase we, in turn have to pay a deposit to our vendor).

Just curious, for those that ask for deposits up front--how would you react if your suppliers asked you for the same? Would you be okay with it?

[Chris Miller]

sacajamo said:

I can see some smaller companies paying up front, but I would be laughed out of the building if I asked for a 100% or even 50% deposit on the front end of some of my larger clients. We work with some Fortune 500 types, and they just dont do deposits, plain and simple. If I made a stand on it, I am sure they would just kindly be polite and move on to another distributor that would offer terms.

I think many distributors "think" this is the case, but I know for a fact it's not. Now I certainly don't know YOUR customers, but we too deal with fortune 500 companies and they don't balk at us, so why would they with you? We don't ask for deposits either, we REQUIRE 100% prepayment. Some of these people don't like credit cards, so they overnight a check. We just had a church prepay for a $16,000 order, and another company prepay $10,000 for multiple orders - this is the norm. We've wrote many orders over $20,000, one over $40,000 and all were prepaid. Big names too.... Coca Cola, Campbell's, AAA, ADP, Chrysler Financial, Citigroup, FBI, Metlife, Merril Lynch, man I could go on and on. I just randomly pulled these names from our art files because I know they all prepaid. Keep in mind, these people don't know us when they call in either. We've never met them in person, and they are hardly ever in the same state as us. It's not that we have some magic wand of trust, its that we have not established a relationship with them where they are the ones in charge. Big difference I guess.

I really have nothing to prove, I just think distributors who WANT to get prepayment and are afraid to ask, are really missing the mark on this. People will prepay... stop assuming they wont!

The ONLY people who don't like to prepay are these little schools and stuff we work with so we give them terms. The orders aren't big anyway and I don't consider them a risk. Never had a school not pay.

Quote

Just curious, for those that ask for deposits up front--how would you react if your suppliers asked you for the same? Would you be okay with it?

They do, and we have no problem with it. After all, I have 100% of my customers money when the supplier calls for prepayment so why not give it to them?

[AdmanGR]

Chris Miller said:

I think many distributors "think" this is the case, but I know for a fact it's not. Now I certainly don't know YOUR customers, but we too deal with fortune 500 companies and they don't balk at us, so why would they with you? We don't ask for deposits either, we REQUIRE 100% prepayment. Some of these people don't like credit cards, so they overnight a check. We just had a church prepay for a $16,000 order, and another company prepay $10,000 for multiple orders - this is the norm. We've wrote many orders over $20,000, one over $40,000 and all were prepaid. Big names too.... Coca Cola, Campbell's, AAA, ADP, Chrysler Financial, Citigroup, FBI, Metlife, Merril Lynch, man I could go on and on. I just randomly pulled these names from our art files because I know they all prepaid. Keep in mind, these people don't know us when they call in either. We've never met them in person, and they are hardly ever in the same state as us. It's not that we have some magic wand of trust, its that we have not established a relationship with them where they are the ones in charge. Big difference I guess.

I really have nothing to prove, I just think distributors who WANT to get prepayment and are afraid to ask, are really missing the mark on this. People will prepay... stop assuming they wont!

The ONLY people who don't like to prepay are these little schools and stuff we work with so we give them terms. The orders aren't big anyway and I don't consider them a risk. Never had a school not pay.




They do, and we have no problem with it. After all, I have 100% of my customers money when the supplier calls for prepayment so why not give it to them?

Nice that you have such trusting clients to send you $16,000 in the mail and not even know you!:D

[Chris Miller]

AdmanGR said:

Nice that you have such trusting clients to send you $16,000 in the mail and not even know you!:D

Happens every day. (well not the 16k part, but you get what im saying)

Not to be a smart *** about it, but we average 40k a month in sales and it's all prepaid, and they are all out of the state. What's there really to trust? Companies know they are protected by law, their credit card company, etc. There's not a whole lot at risk anymore. That's my best guess anyway (or maybe my wife is a real sweetheart on the phone? :D ) but we've never had a complaint unless it was a school.

I feel like my posts might be coming across as bragging, and please understand that's not the goal here at all. The only reason I am even using numbers is to help people understand what is happening RIGHT HERE on a daily basis. This is not a dream, and getting prepayment is not some fantasy.

I hope my posts here help some others who might want to ask for prepayment but are afraid. Even if you don't feel comfortable "changing the rules" with your current customers, lay down the rules early with your next new customer and I can guarantee you'll have the same results as us.