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Thread: Large order received - Payment terms - Help

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    Large order received - Payment terms - Help

    Hi

    I have received quite a large order from a large financial instituion. As I have never dealt with them before I assumed I would not get the order as they would need three quotes. I have never supplied them with any info to go onto their database. Long story short - Order is for R 149500.00 inc VAT. Only once I received the order - 2 pages - one
    with the official order and one with payment terms, I read that I am liable for the shipping - it will be local KZN - but this will still run into the thousands. Then payment will be made in 30 days providing all is correct.
    Now with supplying corporate gifts there is the chance that there might be a problem with a couple of goods being faulty.
    As I cannot physically check 15000 pens to see if they work, or the 3000 pencil case to see if the zips are all fine along with all the other items such as keyrings etc, if 1 has a slight problem it seems they can reject the entire order. My partner says we should get credit facilities from the supplier for the items, but I am not happy about this as it is a huge exposure and if something goes wrong it could finish us. I do realise that he does not want to turn orders away, but with all our other customers they know us and are happy that if an item is faulty they return it to be replaced. I think I must go with my gut on this one and decline the order.
    Any feedback would be great to put my mind at ease.

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    Diamond Member Justloadit's Avatar
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    A bit late now, but for the next offer for specially made corporate gifts, always request a deposit with the order, this always places you in a better financial position. Or you can supply 5% extra on the items as an immediate warranty.

    Not many companies like this, but when it is a tailor made product, you can not sell it to anyone else if it goes south.

    But see this thread What does CPA say about quotes, written and verbal
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Diamond Member adrianh's Avatar
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    I've done quite a bit of similar work. I'm actually in the process of making 5000 piggy banks for a bank. You should do the following:

    Split the order up into multiple invoices / deliveries. Lets say the customer wants 30,000 pens. What you do is to negotiate with the customer that you invoice for, and deliver say 6,000 at a time. Tell them that you need to manage your cash flow. So, you then get them to sign their order but you invoice on delivery of each batch. Have them sign off that they accept the batch. Make it clear that you are willing to resolve whatever issues may arise provided that payment is made for the batch. This way if a problem does occur you only need to deal with issues related to one batch. You can also split the order by product type, tell them that you outsource the manufacture of the various items and that you need to make payment to your suppliers as they deliver to you. So you then invoice for the different products separately. You must remember that most companies are willing to accommodate the small businessman provided that your requests are sensible and reasonable. I am sure that they don't want to toss R150K in the sea and sink you, they would far rather work hand in hand with you to ensure that the process is trouble free.

    I took it one step further and got them to pay 50% up front for the entire order. I said that I needed to have custom injection moulds made and that the delivery of the project was dependent on getting that done ASAP.
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    Thanks, all makes perfect sense, but when asked for a deposit I was informed that they do not work that way. My supplier has allowed me to make 50% deposit and balance in 30 days. Problem is I do not have that amount to make the deposit. Great idea
    to split up the order, when I offered that, again that does not work for them as all has to be delivered together. There is just no flexibility with them. So my last mail to them was that I need a deposit and if they are not willing then I have to decline the order. My quotes state all the terms and conditions for payment including deposit etc, but this was just totally ignored. I am not going to lose any sleep over this, but it just irks that because they are big their thinking is they can dictate that I must comply with them and totally disregard my situation.

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    Diamond Member Justloadit's Avatar
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    Gemais,

    I agree with you. A few years back I had the municipality looking for items, from me, when I quoted COD, they said they do not work like that. I replied, tough, that's the way I work, and quite frankly I do not give a piss about their business. We finally settled on a 7 day payment, and only because I had a connection in the accounts dept, who assured me that I would get paid.

    My competitor supplied on credit, and took a good few months to get his money.


    I also recently had a client approach me to supply a couple of thousand street lights for some municipality, which I said no problem, terms are 60% deposit, balance on collection. He said why must he pay the deposit, and I said, cos I use it to make your order, then he said why do I not take a loan at the bank, and I replied, that t I do not work that way. then he said mmm that means I must finance the government, and I said, well you want to do business with the government, it is your problem, welcome to the real world of business.

    I never got the order, nor has any one else, but what I have subsequently heard was that they are still waiting for the payment for a previous order from a municipality, which is over one year in arrears.

    They thought that I was going to supply on credit, and if they get paid, they keep their 200% markup, and pay the balance to me, however if they don't get paid, they had no risk, and I would be left going up the creek with out a paddle.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Moderator IanF's Avatar
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    Gemais
    When I first started I saw a printshop fold because he accepted a big order he subbed out. Then the client rejected it and couldn't carry that so he folded.
    I have not forgotten that and always look at the risk that the job will be rejected and you don't get paid for it. New customers can be pains so be careful.
    You are thinking correctly.
    Only stress when you can change the outcome!

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    I am not sure if I a agree with you.

    When you quoted you would have quoted on their terms - you cannot change the terms on your quote nether can you change the terms once you get the order.

    Not sure why people think this is ok??

    Just go for tenders that you feel comfortable doing - otherwise you are wasting their and your time. Seriously, I quote on about 10 - 20% of the jobs that come my way and get maybe 30-40 % of them.

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    Diamond Member AndyD's Avatar
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    I think it's a combination of doing your homework on the customers credit record and generally getting a handle on the risk involved plus fine tuning of your terms and conditions to minimise your exposure and finally establishing payment terms that you can work with ie what % deposit etc.

    There are many companies that will tell you they don't give deposits or they don't 'work that way' but believe me there's always lattitude for them to pay a deposit if they have no option. We are maintenance and repair agents for specific machine manufacturers and distributors and in many cases we're the only option the customer has for service and off the shelf spares without flying somebody in. We often have customers who will dig their heels in about paying a deposit of even COD for spares but they almost invariably 'make a plan' when they realise there's few other options.
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    Platinum Member Neville Bailey's Avatar
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    Slightly off-topic, but in the same vein...

    I have a few (thank goodness) large corporate clients that regularly request me to present them with my BEE credentials, failing which they cannot use me as a service provider. I have always fobbed off their requests (too much admin for a sole operator like me), yet they continue to use me and pay me promptly.
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    *** 20% DISCOUNT ON PASTEL XPRESS / PARTNER SOFTWARE UNTIL 15 DECEMBER 2017 ***

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    Diamond Member Justloadit's Avatar
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    Maybe another way is to make a few samples, I know it costs money, but cheaper in the long run. Present it to the client, who must inspect and officially approve the samples. When you deliver, and they complain it is not right, you present them with the acceptance certificate. They will pay as thy have pre-approved the product.

    The financial side, maybe look at a few credit institutions like Credit Guarantee,who will give you up to 80% of the invoice value on presentation of the signed delivery note and invoice to the client. Off course they do a credit risk analysis.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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