Question: Sale Closing

[Seth G.]

I'll be hitting the phones starting next week and I wanted to know the mechanical process for getting paid on a sale closure. There's a lot of info and I'm curious what has worked for you and what pitfalls to avoid

Say I'm selling widget X as the manufacturer to Customer Y.

Customer Y is ready to buy.

Do you take card info over the phone?
Send them an invoice? Wait for a purchase order?

Once the initial paperwork is done, when do you actually request payment? Is it net 30 days? Immediately?

Background:
My biz manufactures products and sells them to businesses that resell them at a markup.

What is the typical or ideal process (The mechanics) to move from ''yes let's do business" to product to the customer and money in your account?

 

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[CareCPA]

You can set your own terms.

I would not give them payment terms (i.e. net 30) until you have an established relationship with them, or if you can pull credit history through something like Dun and Bradstreet.
You can ask for a deposit, they may not want to give one. That's up to you to negotiate
You should invoice at the time of shipment if you can't get paid in advance.

Don't let strict payment terms keep you from closing a big deal, but at the same time, protect yourself that someone doesn't end up with thousands of dollars worth of product and no intention of paying you.

 

[RazorCut]

Be careful offering credit to anyone. We had an order from a prestigious British motorcycle manufacturer who have been in business for over 120 years. They wanted some custom products with their logo on to sell on to their customers. We made them and sent them off with an invoice. It took 3 months and several phone calls to get the money out of them. The second order took closer to 4 months despite their promise of payment within 30 days.

Fool me once, shame on you; fool me twice, shame on me.

On their 3rd order they called us a couple of weeks after placing it asking where their delivery was. We informed them that it was still pending payment as all credit terms had been rescinded due to poor payment history. They got the hump but phoned back a week later with a credit card number. All orders were paid for in advance from then on.

Prior to that I had Universal Pictures contact me to purchase a large quantity of product for a new film promotion. It came to something like $15-20k at the time.

They wanted it urgently and I was the only company they knew who could get it for them.

I told them I wanted payment in advance and they gave me the 'This is Universal Pictures, Do you not know who we are?' spiel.

We agreed 50% up front with 50% within 30 days of delivery in the end. The goods were costing me less than 50% so worst case scenario I still wouldn't be out of pocket. They paid quite quickly if I remember correctly.

Had Fox ring up with a similar request years later but it was not a lot of money so I did give them 30 days and they paid without problem. But you never know.

A lot of companies went under during the last (current) recession and we noticed some of our suppliers getting twitchy and reducing our credit limits so they were less exposed just in case.

So that is another thing to think about. Offering credit to companies you have built a relationship with but setting limits as to how much credit you will offer.

The other option of course is to use a company that will guarantee the payment for a fee if you have to give credit terms for a big player who won't play ball otherwise. You just incorporate that fee into your price.


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