Show Me the Money: On Getting Paid

It’s so warm and fuzzy bunny slippers easy when you do a nice safe retail show. Happy smiling customer hands you the thing. You take the thing. The customer takes out their wallet. You smile and say, “Cash or credit?” Customer pulls out a wad of cash or a piece of plastic. 
 
Bada bing bada boom. Everyone’s happy. They go home with baubles, you go home with $$$.
 
Then you grow up and wander past some imaginary line into the Wonderful World of Wholesale and all of a sudden reality cracks. 
 
Now you’re dealing in – to a degree – hypotheticals. “If I make you this, you’ll pay me this…. right?” Cash rarely changes hands at the order stage in the wholesale world. So how in the hell DO you get paid? 
 
There are a couple of ways to go about it. Best you understand each one so you don’t look like a goober. Then we’ll talk about what’s best:
 
1) Pro-Forma 
     This is fancy language for “paid ahead”, either at the time of order or sometime later, but before delivery. Unless you’re a very hot, in demand, (and very booked) artist, this probably ain’t happening for you at wholesale. 
 
2) Deposit with Order, Balance on Ship
     Whatever the terms, 50% down, balance on ship, etc, again, this is unlikely to fly in today’s wholesale world. If you can’t finance your own orders, you may need to re-think your readiness for wholesale. The exception would be accounts who have proven themselves shaky. More on that later.
 
3) Pay on Ship
     This is the standard today. Most manufacturers will retain credit card info on file for their accounts, and charge the card at the time of shipment. This is also the closest analog to the standard face-to-face transaction, except that the selections have been made ahead of time. 
 
4) COD
     A variation of pay on ship, Cash-On-Delivery where the carrier obtains payment for you in the form of a certified check when your package is delivered and returns is to you (do NOT allow anything other than a certified check. Just sayin’)
 
5) Net terms
     AKA dating, where the store pays you a specified period of time after receipt of the goods. Common net terms are Net 30 (payment due 30 days after receipt) or even Net 60 or Net 90 for larger stores. Another old variants is 2/10Net 30, which means the store receives a 2% discount if they pay within 10 days, but the net invoice (without the discount)  isn’t due for a full 30 days.
 
6) Factoring
     Factoring is essentially selling your receivables to another company who than collects the debt on your behalf. You get paid right away by the factor, minus a “service charge” which is usually around 2-5% of the gross invoice. The store then pays the factor, but receives longer dating. This can be a good option when your stores want net terms and you’re unable to handle the gap in cash flow – but it’s usually not available for orders under $5,000 or so- and the factor checks YOUR credit first before granting you the option.
 
Most of us won’t be able to use Pro-Forma or Deposits. I truly suggest you don’t try. Why? Because you will most likely get the skunk eye from most of the stores you’re targeting, and you’ll have a great deal of trouble getting an order if you require a deposit or payment up front. One of the biggest reasons stores are hesitant to place orders with new lines is the fear they won’t ship; if you’ve already been paid – in the buyer’s mind – you have less incentive than ever to actually ship. It doesn’t set up a happy scenario. If you truly can’t afford to make your goods without the store’s deposit, you are not ready for wholesale and we need to have a talk about where you are with your business. 
 
The exception: If you have experience with a store and they’ve proven to be difficult to extract payment from in the past.
In that instance it is very reasonable to request either a deposit with order, or payment as you near the ship date – and to be upfront as to why. If a store has a sketchy payment history they know it. And you will not be the only vendor asking for payment assurance. Absent these sorts of unusual circumstances however, pull up your big girl panties and do what the rest of us do, and CHARGE ON SHIP!
 
GETTING THE GOODS. or, er, the NUMBER.
 
Let’s talk about that credit card number for a moment, because this gets glossed over quite often. Here’s how it often goes at a trade show, market or desk side: “Alrighty, I think we’re done! All I need is to get your payment info and I will get out of your way and let you get on with your day.” The the buyer says,”Just call me when you’re ready to ship and I’ll give you a card number.”
 
Mike drop.
 
Cue stomach knot.
 
Whether the buyer realizes it or not (and believe me, many DO) they have just engaged you in a power play. A subtle one, but a power play nonetheless. How you handle this may set the tone for your entire relationship. Here’s the thing: You are not necessarily looking for the higher ground here. But YOU MUST NOT CEDE IT EITHER.
 
Here’s how I suggest handling a situation like this:
 
“Oh, our accountant insists that we have a form of payment on file before we place an order into production. Would it be easier for me to give you a call when you get back home or should I send you our payment form to return by fax?”
 
The key here is to give them a choice of some kind – it doesn’t matter WHAT that choice is, just that they have a choice. “Would you like to ______ or _____?” Fill in those choices with whatever works for you that you can manage. An online something, a fax, an email, a phone call… just a choice. Even a choice of times for a phone call. The point is that you deflect the CHOICE from WHETHER OR NOT they’re going to give you a card number to HOW they’re going to give you a card number. 
 
Make 100% sure that you follow up on whatever you set up here. Send what you promise to send, call when you say you will. If you don’t get the number, push their ship date back. Don’t go into production without a form of payment. 
 
Many buyers actually don’t carry their corporate cards at market because of theft concerns, and I get that. Some have them memorized. Everyone is different. Be firm but very polite about getting a form of payment into your system and they will respect that. Then make sure that you stick to your own system. We are frequently the source of our own holes.
 
If a buyer flat out refuses to supply info, you have to make a call. You can cancel the order, or you can have a frank (and most likely slightly uncomfortable) conversation with the buyer as to why they’re unwilling to supply payment assurance. Frequently it comes down to they’ve been burned by vendors misusing their card info – sickening, but I’ve heard this so often. They may be concerned with your card handling security, any number of things, MOST of which have nothing to do with their unwillingness or inability to actually pay for the order. Sometimes it’s simply a need for a good air-clearing.If you want to keep and move forward with the account, you’ll need to have an adult conversation and address the elephant in the room. Sometimes vendors misbehave and sometimes stores don’t pay. Make sure that you both understand that neither of you fits those categories, give assurances all around, shake hands and your relationship will be more solid for it. But get the payment info.
 
Now then… if you’ve been around the block once or twice, you’re aware that just having a card number doesn’t guarantee you payment. Cards get stolen, cancelled and go over-limit all the time. MANY stores also use debit cards that are zero value until they transfer funds onto them. (and sadly the reason for that is so many vendors who place unauthorized charges onto those cards!)
 
So what do you do if you get a bum card?
 
First of all, you need to verify the card with your processor immediately once you get the number to make sure you got the number right. No transposed, digits, etc. Not all merchant processing accounts can do this, so speak to your account rep to see how to do this. It’s a valuable tool.
 
If your system is able to “Authorize” only, without capturing funds, you can do this about a week before shipping. This assures that those funds will be available of you the day you ship. Most authorizations are only good for 7 days so time carefully. You go back into your system when you’re ready to ship and “Capture” the authorization. Here again, not all merchant accounts are created equal so check with your account rep to see if yours can perform this trick.
 
But what if you get the card, the card verifies, and then its a dead card when you need it? What if the buyer is unavailable or seems to be giving your the runaround? Then what?
 
First of all, let’s examine some assumptions.
 
Grab a glass of something and take a deep breath. Let’s take stock of a few things before we jump on that warm fuzzy conclusion. (trust me, as nice and inviting as it looks, it’s filled with exploding thumb tacks)
 
In all likelihood, your runaway buyer is not avoiding you. More likely is that they are simply busy being a buyer. And possibly a mom, a daughter, a wife, and lord knows what else may be impinging upon what YOU need her to do RIGHT NOW. Life and plans you know. And just like your life gets away from you from time to time, her life might possibly be feeding her pits right now too. So cut some slack. 
 
Where are you on the calendar? Is it a season that may make her especially busy? Trying to get hold of a buyer at a prom store during homecoming season will make you bang your head against a wall. Or a buyer anywhere in New Orleans during Mardi Gras. Or a buyer anywhere between Thanksgiving and Christmas.
 
Check the weather. Did a tornado or hurricane or other major weather event just impact their area? You’ll feel like a boob if you’re bugging them for payment and their store is all over the parking lot. Or even if their power has simply been out for two days. It does happen. 
 
Please default to understanding. You can always up your ante to pissed off, but it’s next to impossible to back off from pissed off to understanding. Burn a bridge here and it’s really tough to rebuild it. Wallets get stolen, cards get compromised ALL the time. I mean ALL the time. Just because a card doesn’t work does not mean your buyer is a deadbeat, so going in with all guns blazing is a Dumb Thing To Do.
 
Email the buyer that you need to update her payment information because you’ve been unable to obtain an authorization. Include a PDF of the invoice. “Please let me know if you have any questions” Sit on it it for two to three days. 
 
If you haven’t heard back in three days, follow up, copying your first email. “Following up – I’m concerned that everything is okay! Can you please contact me so we can get your order out to you?”
 
This will usually shake a response loose, especially with a store you have a relationship with. If not the next step is a phone call. Remember, you are not privy to what may be going on. It is very, very rarely some sort of attempt to circumvent paying you. In as many years as I have been in business I have only encountered one store that placed an order and then completely tanked on it – because they went out of business in the interim. I’ve had to chase a few for a while for one reason or another, but I’ve never had anyone simply walk away. Buyers are too busy to write orders they don’t intend to take.
 
RESIST THE URGE to get snarky or rude with a store that isn’t paying fast enough for you. It won’t do you any good in the long run unless your aim is to lose the account. It doesn’t matter to them that you “made it especially for them”. That’s not their problem. You don’t make any friends by laying your problems on their door when they have their own. You’re free not to take their order next time, or to add conditions. But suck it up and be a pro here. 
 
95% of all the wholesale relationships you build will be smooth. Most of the problems come from misunderstandings and inconsistencies. Buyers like smooth and consistent as much as we do. The reality is though, that we’re usually driving this relationship. Buyers are looking to US to have a system and a workflow for how we do things with our business. If we don’t …… well then who do we have to blame when things get screwed up? 
 
Please default to understanding when dealing with buyers. Firm, polite, understanding. And systematized. Remember, you’re building long term relationships here. While it’s tempting to go for the fast hit (and I know you need the money and you need it now. I feel you) the long game is much more rewarding than short term panic ever was. Whatever your reaction is, sit down and let it percolate for a day or so. Don’t jump. You will nearly always collect, albeit occasionally a little later than you’d like. As i said way back earlier in this novel, if you can’t absorb your manufacturing costs, don’t do wholesale yet. That’s not an indictment, it’s simply a fact. You need to be able to cover your supply chain AND your sales flow. Payment is part of your sales flow. Bookmark this and come back to it the next time you’re ready to strangle a buyer. They’re only human too.

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