I have a company that wants to buy some more dog boxes from me, but I'm unsure whether to give them credit. They provide drug and security dogs.
Little history - they ordered a couple from me a couple of months ago. I did a quick credit check with the agency that lists the swedish version of CCJ's, and they came back clear. So I sent an invoice (ca. £1000) with 14 days credit. About 14 days later, they ordered another one, which I made, but told the guy collecting he couldn't have it until I was paid for the first 2. He said they only pay on 30 days, but called the boss and it was paid the next day. However, the invoice for the second box was also sent with 14 days, but hasn't yet been paid and is now on 31 days.
The boss man brought round another van last week for me to measure up for 3 big boxes worth around £2k. I asked him about the unpaid invoice, and he rather arrogantly (to my thinking) shrugged his shoulders and told me they pay on 30 days for everyone. I told him I thought it was a little unfair as I'm a small company turnover ca£28K/yr, plus I make them within a few days, good prices/quality etc. But didn't get a definite affirmative response.
I told them I would start the boxes at the weekend as they are desperate for them this week, but decided to see if they would pay the last invoice in the interim - which they haven't.
I know it's all fairly small figures, but it's actually quite a lot for me compared to turnover.
Anyway, I did a full credit check on them today, and not sure if I should extend them credit. Here's the figures converted to pound and translated:
Established 2007
Employees 11
Initial capital - £10,000
Credit rating 3/10 - "weak credit worthiness"
Turnover £1.5 million
Own capital 50K
Cash liquidity 101.87%
Profit last year £1K
Profit previous year £66K
Turnover has increased each year
Solidity 7.18
Recommended credit amount £10K
Number of requests to the state credit collection agency (but settled before court) 1
Value of the above request £500
I would could really do with the profit from this job (and any possible future work with them), but if I don't get paid it would be very difficult for me.
His lacky is coming round this evening to see how it's going, and I haven't even started yet as I had other orders to make for private customers who pay on collection, or pay before I ship.
So should I give them credit? I think not, and I should ask for half up front, then half on delivery.
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No credit for this order, no starting on any new box(s) till they pay your last invoice, which is now outside their credit terms.
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Years ago, a company with whom our leasing department were dealing, went spectacularly (and villainously) broke. Many of the items (tractors mostly) disappeared before we could repossess them.
While scouting around I called into a nearby petrol station and was regaled with a tale of woe about large outstanding bills for fuel, run up despite repeated requests for settlement.
"Why", I asked, "did you keep on supplying them?"
"Oh" came the reply, "they were our best customers".
No they were not - they were their WORST customers.
It is not uncommon to build trust by paying well before knocking your suppliers.
I advise care.
Last edited by: Roger on Mon 1 Oct 12 at 15:24
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No credit.
50% deposit on accepting order, and commencing construction.
other 50% paid prior to despatch of order.
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Ha, I hear what you're saying, and not disagreeing!
But a bit of background on business in Sweden.
When I first started, almost all my suppliers gave me 30 days without so much as a credit check. And 30 days is the norm here. If not paid within the correct time, they will often not chase for maybe another month. After that it may be another few weeks before they send a reminder with an interest charge. Maybe a further month after this they may pass to a collection company that will then send another letter with another charge. A month later maybe yet another letter with yet another charge. Eventually they may send it to the collections agency who will then send a letter asking you to confirm or dispute the debt within 2 weeks. If you agree the debt (or don't answer) you get CCJ. If you dispute it then it goes to court. So in other words the whole thing is generally pretty lax (in my view).
So I'm just trying to understand how much of my dealings with them so far is just the 'norm', and how much is warning signs.
They're an established business, but the dog thing is new to them as they have just landed the contract. I'm worried that taking on 2 new vehicles, 2 extra employees, and with all the expense that entails, they may be over extending themselves - possibly at my expense.
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Short answer is No!
Get your money up front. If they want the item badly enough they will pay.
They have already shown that they can pay when they have to.
They have now exceeded their credit terms and are not to be trusted.
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If they pay in thirty days, then continue to supply.
The first time they don't, speak to their MD, and if payment then occurs, as above.
First time it doesn't, call MD and say you will release goods on immediate payment of previous.
Credit control is vital to small businesses.
Conditions are a two way street.
If you don't like it you don't have to do business.
Is there much competition for your product?
Beware of increasing your production on the basis of just one "good" customer.
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>>"they are desperate for them this week,"
You're desperate to be paid for last month's work.
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My erstwhile small business ( and indeed everything we own ) very very nearly went under due entirely to bad debt from some customers. It didn't collapse in the end but it cost and lost me a lot of money and stress.
I am now an employed sales director of a much larger company and some of those customers want to buy from me again in my current role.
Guess what I tell them.
Clue, it involves a form of rotation...
:-)
Tell them you will require 50% up front on receipt of orders and the balance paid before shipment. Not negotiable. You could build in a sweetener of a an early settlement discount. Maybe 5%.
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I was a FD in construction and recognise the buying technique well.
They are desperately short of cash and need their business to be financed by suppliers..
They also think you are dumb enough to do so and have not even the money to pay your overdue invoice - which any normal customer would do.
My advice:
nothing doing until you are paid for the prior order and the money is in your bank. Cleared. No post dated cheques.
And then insist and in writing - cash with order. Period. 100% cash upfront.
They are in the process of going broke.. Don't finance it..
And if they object.. just tell them the story of the first order and their inability to pay as agreed.
Be 100% tough.
If they need you that badly they will pay. If not, well better someone else loses their money...
We avoided a bad debt of over £100k doing that. The customer hated us: they had no choice so complied. And duly went bust...owing us nothing.
Last edited by: madf on Mon 1 Oct 12 at 17:50
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I spent may years in the finance business. A large part of our time was spent chasing knockers.
In fact in my first company there was more pressure to control defaults than in getting new business.
One thing I learnt - he who is persistent and is VERY firm, but not necessarily rude with it gets paid first.
Last edited by: Roger on Mon 1 Oct 12 at 17:56
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" If not, well better someone else loses their money..."
Repeat, 1,000 times.
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It's a negotiation, pure and simple. As with all negotiations, it's difficult to get anywhere without credible leverage or something to trade.
You can bluff, but the best leverage is when you are prepared to lose the business rather than lend him money, which is what he is asking for.
In terms of something to trade, what can you offer that is of value to him and doesn't cost you much? Any added extra you can chuck in in return for which he will pay up front?
His 'normal payment terms' are irrelevant unless you have accepted them.
The better you can get inside his head the more chance you have. He has already slipped up telling you he is desperate for them. He has presumably accepted some work for which he has to provide dogs for which he needs vans in which he needs the boxes. He probably won't get paid for 30+ days himself, and one way of increasing his working capital to grow his business is to use your money.
In other words, the expansion of his business could be straining his finances - not profitability, but available cash. In the end you have to do the best deal you can and then decide if the risk is acceptable.
Just watch out that he doesn't play ball on the one he owes you for, and then order 6 and stretch out the credit, as somebody above warned. There's a lot to be said for a downpayment that at least covers the materials so it doesn't start jacking up your working capital needs too much.
Be prepared to have the devil's own job getting money out of him when he isn't desperate for more boxes...
EDIT - I'm making a meal of it in an attempt to be helpful. madf is is probably right, and more succinct. Bad business is worse than no business.
Last edited by: Manatee on Mon 1 Oct 12 at 17:59
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It may well be an old fashioned way now...I've been out of sales for over 30 years...but it was always drummed into me that 'a sale isn't a sale until the invoice is paid'.
I used this with a customer of mine three years ago who told me his terms were 90 days when I chased him.
I didn't contact him the following year, he soon rang me and asked me to train his drivers, but I insisted on 30 days payment.
It was on time and has been this year as well.
Pat
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>> So should I give them credit?
No.
Usually, when you have misgivings about something there's a valid reason and it's usually best to follow your gut reaction.
Then, some people with real knowledge on the subject have given good advice, to the negative.
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His guy came by this evening, so I gave him the bad news! Felt a bit sorry for him really as he has a new guy coming this week with 6 dogs and no way of transporting them. But he was understanding, and realised they'd had a couple of opportunities to prove themselves. He was a little shocked when I showed him the poor credit check as well.
But he's going to speak to the boss man tomorrow and come back to me. I told him 50% up front and 50% before collection (or 100% up front, their choice).
I did find out though that with the security contracts they have, they actually get paid up front. Cheeky so and so's. They get paid up front, but make their suppliers wait for 30 days.
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Good for you. Keep us posted.
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Ha, I did suggest to him that if he was so sure that the company would pay, he could pay me personally up front, I would invoice the company, and when paid I would in turn pay him. Humph, he said, I don't have £2k to give you for a month. So what makes you think I have £2k to effectively give to your employer for a month, I said.
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Hi Dave, do you have a website? I am looking at Lintran at the moment, a Lincoln to be precise.
Cheers.....................Martin.
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Good boxes, those Lintran ones. Friend of mine has them.
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Beware the sum involved: £2000 is enough to hurt your business badly if/when they don't pay, but not enough you can afford to go through the courts to chase. So once he's got the boxes, he can happily tell you buzz off.
Under the circumstances, you know you're better off with private buyers who pay up front. If he's that stuck, he can pay up front too. He didn't get that 3/10 rating for nothing!
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>> Hi Dave, do you have a website? I am looking at Lintran at the moment, a Lincoln to be precise.
Posting it from Sweden might be costly.
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Update time!
I spoke with the guy today, and they have paid (at their end) the outstanding invoice today. So that should appear in my account tomorrow after midday. He also wants me to send an invoice for the new order and they will pay that asap. So I have emailed that this evening, but if they pay it tomorrow the money won't appear until Thursday lunchtime, which may be a little too late for his 'deadline' of one box completed by Friday morning.
So I wait to see if both lots of money arrive as promised. I'm certainly not starting any until it does.
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>> So I wait to see if both lots of money arrive as promised. I'm certainly
>> not starting any until it does.
>>
Good on you.
Why should the small businesses be eternally pushed around by the big ones, who insist you jump to their tune.
If your product is good enough, they'll still want it, as you've proven.
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>> Update time!
>>
Glad you took the advice given here, and stopped the credit.
As a small one man band business, which hand crafts items to order, you cannot afford to run it like a big business.
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Dave
Thanks for the update.
Good luck.
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>> Posting it from Sweden might be costly.
>>
Only asked if he had a website..............so ner........
Oh! alright then, you're probably correct. (0:-:0)
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>>So should I give them credit? I think not, and I should ask for half up front, then half on delivery.
I think if their normal terms are 30 days and if 30 days is kind of inherent in your market, then you'd have to have a good reason, or exceptional value, to step out of that.
If you are the only supplier, then clearly you can push harder. If it’s a competitive market then you need to think.
Firstly, on the occasions I review procurement portfolios the first thing I look for is any special arrangements. Maybe that doesn't matter, but it does mean that you'll constantly stand out, be in people’s minds, and perhaps a source of irritation.
Certainly my recommendation for longevity of agreement is to keep your head below the admin/procurement review horizon.
It would seem that they are slow payers, which is a worry, on the other hand, you want the business so a risk is worthwhile.
Let’s assume an average unit value of £500 for the sake of argument.
I would have thought a conversation with them that says something like
- 30 days is no problem
- You will charge 1% of outstanding balance per day for late cleared payment
- The credit limit is £1,000 so they only order two before settlement will be required to clear sufficient credit for a 3rd unit.
Limits your exposure, stays within their terms, rewards you if they're late and everybody’s happy.
NB: Obviously you'd stick in your own figures, mine were just for illustration.
Last edited by: No FM2R on Tue 2 Oct 12 at 20:06
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>>Firstly, on the occasions I review procurement portfolios the first thing I look for is any special arrangements. Maybe that doesn't matter, but it does mean that you'll constantly stand out, be in people’s minds, and perhaps a source of irritation.
I dare say you were acting for the buyer, not the seller.
"Procurement" can be a very value-destroying discipline. Vide car insurers' repair contracts, which ISTR you knew something about? I never let the blighters near my contracts. Fine for a simple one off purchase, very destructive to any continuing relationships.
I've always worked for big companies until now. I've seen them pillaging suppliers for every cent of their profits. The way for a small supplier to ensure their big customers keep coming back for another bite out of their fleshy parts is to keep giving in to them.
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>> "Procurement" can be a very value-destroying discipline.
Thats my job!
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>> >> "Procurement" can be a very value-destroying discipline.
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>> Thats my job!
You'll know what I mean then ;-)
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I had a pal work as a 'buyer' in a major construction company (based in Wolverhampton) 15-20 years or so back - his eternal frustration was trying to get suppliers to give good prices, or even sell at all due to the company's practice of late paying (until accounts were cleared the suppliers wouldn't release more goods).
Someone must have been able to stand up in board meetings and say "we've saved £XXXX by paying late and keeping the cash in our own accounts" while it was likely they were being given less favourable rates and destroying goodwill in the long term to make up for this.
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Well they paid the outstanding invoice yesterday, and I also received an email from the boss I sent the proforma invoice to. He asked me how he could be sure he would get the boxes if he paid me in advance, and also why I wanted payment first.
I sent a reply back but have heard nothing since, and no more money has arrived today. Neither him, or his man seem to be taking my phone calls, so it looks like maybe they won't be ordering. A shame really as I could do with the business (if they paid), but such is life I guess.
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I used to run my own business and have now thankfully cashed in and retired.
Even so, I still remember the bad debts and you might say I'm haunted by them. Memories of people who didn't pay me maybe 15 years ago still flit across my mind from time to time. It really winds me up and I wish I could forget.
If you ask me Dave - you did the right thing.
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>> If you ask me Dave - you did the right thing.
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Ditto.
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>> you did the right thing.
Who knows?
Maybe you'd have gone with their terms and got the business.
Maybe you'd have gone with their terms and lost your money.
However, FWIW I would have gone with their terms and managed it very tightly. But that's the joy of haivng your own business, you get to do it your way.
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>> Who knows?
>>
>> Maybe you'd have gone with their terms and got the business.
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Who knows?
maybe the'll be coming back in a few days with the upfront payment because they want the goods.
>> However, FWIW I would have gone with their terms and managed it very tightly. But
>> that's the joy of haivng your own business, you get to do it your way.
>>
From the OP's past tales about the development of his product, IIRC, he is running a hand-to-mouth operation. If that is true, then I would have done exactly as he has now.
YMMV
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I have no idea whether the cost of the product is mostly in the time or the materials. If in time, I'd have risked it if I had spare capacity, if materials I would not.
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I'm no businessman so haven't commented, however i've known lots of people who own small business and self employed chaps....every one of them could have spent a lifetime doing good work for nothing, when you are easy going on payments the order books are always full.
Incidentally i always have received preferential treatment from the small business and self employed fellows i use (and their contacts who get the nod about a good payer) cos i always pay up promptly and properly, and i get their discounts etc when needing materials, its a two way street.
Seldom use large companies for this very reason, no personal touch.
My tuppence is you did the right thing.
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I was always a good payer, probably because the business was pretty profitable. I always paid my regulars on receipt of invoice whatever their terms were. It let me call in favours and get priority attention when I needed it. It was very useful on occasions.
On the other hand, the big organisations who I rarely dealt with or who I used only once got paid on the last day of the agreed terms.
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Yeah, it's pretty hand to mouth at the moment. It's actually been quite a good year so far, achieving last years turnover already, and with much higher profits. But I'm mindful that I don't currently pay any tax due to previous losses which have been carried over. But that will soon end, which will take away nearly 50% of the profit.
I had a very quiet September, which was good in a way as I've been renovating my new house and really wanted to get at least the living room and kitchen finished so I could move in before the winter. It wanted to get everything done while it's still warmish and lightish, and then get the fire going to really dry it out over the dry (here) winter. The downside is that I've spent more than I wanted to, as is always the case. In hindsight I should have set a budget and stuck to it, even if it meant not moving in this year. But it's hard to only do half the wiring or half a kitchen. Then I find out the water pump doesn't work, and half the floor is rotten.
I've built up quite a good stock of material, all bought and paid for, as I have to order quite large quantities and don't like buying stuff unless I have the money to pay for it straight away. So even waiting 30 days for payment on a large order could cause a problem if November and December are quiet, and non-payment would certainly cause a problem. Not least because I would have to order more material with no guarantee that orders would come in to pay for it within the 30 days I get from suppliers. Classic cash flow problem. At the moment, if no more orders come in, I have no liabilities apart from living expenses.
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>> I sent a reply back but have heard nothing since, and no more money has
>> arrived today. Neither him, or his man seem to be taking my phone calls, so
>> it looks like maybe they won't be ordering.
Clearly they dont value you as a supplier.
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They might be saving up.
If they were just being gits, they might not have paid the outstanding invoice yet!
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>>Clearly they dont value you as a supplier.
Indeed, or not sufficiently.
The difficulty arises when you do value them as a customer.
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Didn't Dave offer them the option of 50% down payment with balance on collection? That gives them the guarantee they'll get the goods. So sounds like they're just trying to play hardball.
Imagine how customer like that might behave when he's got the goods he needs and isn't beholden to you any more come the bill's due date..
Last edited by: Gromit on Thu 4 Oct 12 at 18:28
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Crack on Dave and good luck. You did the right thing in my book.
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Martin, you asked earlier:
"Hi Dave, do you have a website? "
See www.car4play.com/forum/post/index.htm?v=e&t=4725&m=102969
Last edited by: John H on Thu 4 Oct 12 at 20:54
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Their man came by yesterday and said they don't want to pay anything upfront, but will pay on collection. It seemed a reasonable compromise, so I start making them on Monday. I just hope they do pay up when the time comes, as I don't want to be stuck with the boxes!
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Think I would have stuck out for half down, half on collection. Till they prove their worth.
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Make sure to be paid after the first one if you're doing a few - have had a friend caught out (signwriter) that way - once the sign was finished the guy reneged on price and offered him half for it.
Signs are rather bespoke.
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>> Make sure to be paid after the first one if you're doing a few -
>> have had a friend caught out (signwriter) that way - once the sign was finished
>> the guy reneged on price and offered him half for it.
>>
>> Signs are rather bespoke.
So is graffiti for non payment......
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>>So is graffiti for non payment......
Ahhh, *that* would explain the sign in front of your place. I thought it was a strange name for a house.
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>> >>So is graffiti for non payment......
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>> Ahhh, *that* would explain the sign in front of your place. I thought it was
>> a strange name for a house.
< puffs out chest with pride >
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>> Think I would have stuck out for half down, half on collection. Till they prove
>> their worth.
>>
If I had a big fat order book, I would have done. As it is, the order book is decidedly thin, so decided to take the chance.
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Well If the potential loss wont cripple you, its a commercial risk worth taking.
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The money is in the bank! Despite agreeing to pay on delivery, they paid on Monday. Not sure if it was a mistake or not, as they already had the invoice, but either way I'm happy.
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now we have signs that they value you as a supplier, knowing that you can relax a little and build to order, but dont get more than one order/ payment behind.
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Should I give them credit? - Zero
