Wholesal Payment Terms - WarmGlass.com

Wholesal Payment Terms

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Isabell
Posts: 12
Joined: Sun Oct 26, 2003 6:33 pm

Wholesal Payment Terms

Postby Isabell » Sat Feb 07, 2004 8:05 pm

Hello!
I am just about to have my first wholesale client and I would like to find out how other people like me set their payment terms with their clients, specially for the first time order.
Any info is great!
Thank you
Isabella.

Kitty
Posts: 437
Joined: Sun Mar 09, 2003 4:12 pm
Location: Gig Harbor, WA

Postby Kitty » Sat Feb 07, 2004 11:39 pm

unless you have some reason to NOT trust them, conventional business terms are Net 30. i sometimes limit a first-order customer to $250 worth of goods (wholesale).

i offer discounts to stores that pay COD or within 7 days.

i never do business on consignment.

Isabell
Posts: 12
Joined: Sun Oct 26, 2003 6:33 pm

Postby Isabell » Sun Feb 08, 2004 11:36 am

Hi Kitty. Thanks.
I think the discount idea is a great one.
Isabella

Dennis Brady
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Joined: Fri Dec 19, 2003 9:06 pm
Location: Victoria BC
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Postby Dennis Brady » Sun Feb 08, 2004 3:32 pm

It's fairly common to ask a new account to pay COD on the first order. It's also fairly common to ask for a significant opening order. If a store has only a sprinkling of your work on display, it's unlikely to sell. They should be encouraged (as aggressively as you can get away with) to start with enough variety to provide a good display.

After the 1st order, it's usual for your customer to expect 30 day credit - just you expect the same when you buy supplies. However, an increasing number of businesses are paying with credit cards. They like to generate airmiles. The disadvantage to you is you pay a percentage for processing the payment (usually starts at about 3.5% and can later be negotiated down as low as 1.75%). The advantage is you KNOW you have the money.

BEWARE of stores that take 30 days then want to pay on a credit card. It should be clearly agreed that it's either/or. Either pay in 30 days with a check, or pay upfront (before shipment) with a credit card. Otherwise you are double penalized. You pay the collection fee (allowing the customer to collect air miles) plus you wait 30 days before being paid. Not fair.

...and as the other poster says, NEVER sell on consignment.

I go so far as to even not grant sales credit terms to a shop that takes anyone's work on consignment. My belief is that consignment galleries almost always go broke. If the owner doesn't know their business well enough (or have sufficient finances) to buy outright, I'm not willing to extend them credit.
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Marty
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Postby Marty » Sun Feb 08, 2004 10:09 pm

Au contraire, M. Brady. I find that the shops that take a decent assortment (credit card before shipping) ask for, and usually get (from me), a larger or more expensive or one-of-a-kind piece on consignment. These shops/galleries know the work, sometimes have a buyer in mind, but just can't blow the extra on that show piece. Doesn't do me any good sitting in my studio- I know what it looks like!
How about a solo or group show? You gonna make 'em buy the whole body of work? That's consignment too.
You can't make a blanket statement about consignment- you gonna turn Heller or BE down?

The current wisdom of COD first order, net 30 thereafter, is meaningless.
You ship the first one, you get paid, and you still haven't learned a thing about the customer. And if you're going to get references (and check them) why not do it from the beginning?
When I buy from a vendor repeatedly, I have to request terms and submit a credit sheet for approval. Net 30 doesn't come automatically with that first purchase. And I like paying by credit card as well for the same reasons that I prefer my customers to pay me by cc: the certainty, the grace period, the miles, ease of bookkeeping. And the 2% (or less) is already included as part of the cost of doing business, no matter how you pay (unless you get/offer 2% net 10).

Kitty
Posts: 437
Joined: Sun Mar 09, 2003 4:12 pm
Location: Gig Harbor, WA

Postby Kitty » Sun Feb 08, 2004 11:30 pm

isabelle -- an opening order for me is typically about $750, with terms of Net 30. but i forgot to mention that i ASK the buyer whether they honor terms of Net 30. sometimes they say no, that they actually pay Net 45. i only have a couple of stores that pay that way, but since i know it, it's OK with me. i'd rather have the account at N45 than not have the business.

there are about a half dozen extremely well-known retailers where i live with poor payment reputations, and under no circumstance would i sell to them and open the door for nonpayment. big retailers are not set up to handle COD orders, either, so it's just easier to stay away from that kind of account. i must say, however, that i have friends who are willing to accept terms of Net Whenever I Feel Like It, which might be 120 days. that's not for me.

good luck with your first wholesale account! it's always exciting when you see your business take off.

whitejoyce
Posts: 28
Joined: Sat May 10, 2003 6:06 pm
Location: Phoenix,AZ

Postby whitejoyce » Sun Feb 08, 2004 11:46 pm

Hello everyone,
I have a few questions about this subject.

What is net 30 & 2% net 10?

Do you create the credit terms for them?

If so, are you actually checking there credit history to see the payment history?

Do you run a credit check ?

How do you run a credit check on a company?

What the net 2% 10 day ?

What are their minimum purchase?

Is their a standard amount they should purchase?

If there is some where I can find this information?

Thank you all in advance for your suggestions, answers, and any advice.

Joyce
J. White

Gabriel
Posts: 28
Joined: Sat Apr 19, 2003 4:36 pm
Location: Fort Wayne, IN

some answers

Postby Gabriel » Mon Feb 09, 2004 12:05 am

Credit checks for companys and handled by Dun and Bradstreet. There may be others that do, but this a company I have used for years and I believe is the standard.
http://www.dnb.com/us/
How do you run a credit check on a company?

Kitty
Posts: 437
Joined: Sun Mar 09, 2003 4:12 pm
Location: Gig Harbor, WA

Postby Kitty » Mon Feb 09, 2004 1:32 am

joyce, you dont need to get too involved in credit checks that are done by a professional company. you can check things out yourself. you ask your prospective customer for a few references, which will be other people they buy from. you call those people up and ask 'em how they like doing business with So and So. i dont do that, myself. i know who my stores are, and i get a lot of new customers on referral, so nothing is stone cold and unknown. Gabriel has a reason he's using D&B, so i am not saying what he does is unnecessary -- people have different business needs.

here are some little details about regular business terms.

Net 30 means that they have to pay you within 30 days of the date of the invoice. it can also mean that they pay you within 30 days of the day they receive the goods. Net 30 is often expressed as N30.

2%Net 10 means that if they pay you within 10 days of the date of the invoice, they may deduct 2%. Now, 2% isn't very much of a discount unless somebody's buying mega quantities from you, so if you want to enhance your cash flow and see that money in your hot little hand faster, you offer a discount that gets their attention. That might be FREE FREIGHT on orders that pay within 10 days; or you might offer 5% or 10%.

2%Net10 is usually expressed as 2%N10.

If you are offering a discount, AND/OR terms of Net 30, you can write the terms like this: 2%10,N30. What you're saying is, you can pay me in ten days and take off 2%, or you can pay me Net 30.

I have a couple of customers who buy a lot from me, and I offer them a substantial discount, but a very narrow window of opportunity. They have to get that check processed and out the door in 7 days. To help them get the discount, I fax the invoice to accounting, with a little cover note telling them the goods have been shipped, the discount is X-dollars, the total due is $X, thank you for your continuing business, and call me if there are any questions. With one of these customers, I even email the woman in accounting to let her know that I have confirmed with UPS that the goods are in their warehouse.

The whole purpose of discounts is to get that money right away, so you have to decide how much of a cut you are willing to take in order to bank the bucks more quickly. Free freight is nice, because freight charges are deducted at tax time, and discounts arent. So for free freight, you put those charges on the invoice, and the customer doesnt pay that part if they pay early, according to whatever arrangement you've worked out.

Kitty
Posts: 437
Joined: Sun Mar 09, 2003 4:12 pm
Location: Gig Harbor, WA

Postby Kitty » Mon Feb 09, 2004 1:39 am

joyce, i dont know what you are selling, so it's hard to guess what a minimum order might be. but if it is smallish merchandise, destined for a gift gallery type of store, i should think a minimum order would be $250 or so. whatever the dollar amounts, you just want they to have a nice array of your goods, so that lonely orphans aren't hanging around a shop looking forlorn.

plus, you need to get an order that doesnt use up foo much of your time ... you dont want people to order $90 worth of stuff. you need to get that commitment from them that they're going to order your goods, place them in good spots in their store, and actively sell to customers.

i used to shy away from small orders, but i've sort of changed my opinion of that, in contradiction to what i wrote above. i've got a string of little stores on maui and kauai that buy maybe $200 at a time from me, sometimes even less, but they buy often, and over the course of a year, the total sales are definitely worth my time, and theirs. and they always pay right on time, and feature my jewelry in their main case, so what's to not like?

Marty
Posts: 855
Joined: Mon Mar 10, 2003 3:58 pm
Location: Maine
Contact:

Postby Marty » Mon Feb 09, 2004 8:15 am

Isabelle and Joyce- check out the Crafts Report and the Rosen Agency sites for articles, books and seminars on crafts business issues.

whitejoyce
Posts: 28
Joined: Sat May 10, 2003 6:06 pm
Location: Phoenix,AZ

Postby whitejoyce » Mon Feb 09, 2004 2:21 pm

Thank s everyone for any and all advice & suggestions.
J. White


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