Payment up front

[wheeler-dealer]

Hi. Just looking on other people’s thoughts on this.
We run a staircase manufacturing business on supply only. We are happy to give net 30 days terms with bigger companies we deal with but am looking to switch to full upfront payment on smaller or one off companies. We have previously been operating on 50% deposit with balance after deliver. I always thought this was fair for both parties but unfortunately we seem to spend more and more time chasing the final payment. No issues with what we supply it’s just the same old problem people aren’t in a rush to pay once they receive the goods. Is it unfair to ask for full payment up front, I have tried every other incentives. if I wanted credit for our business we would have to jump through hoops to get it so why should we offer it to others without credit checks.

 

[AllUpHere]

It's becoming more and more acceptable to want to be paid upfront. I never do anything until I've been paid and I know a lot of people who operate in the same way. It's very common now in my line of work (marketing consultant).

The internet helped with the push in this direction. People are now very used to paying for something, and then waiting for it to be delivered.

 

[JEREMY HAWKE]

If you place a booking with us it is payment on booking with bank Transfer or a card over the phone

 

[fisicx]

@wheeler-dealer - just change to 50% deposit then the rest on delivery. They don’t get the stairs until they have paid.

 

[Chris Ashdown]

As Fisick states full payment completed upon delivery

 

[MBE2017]

@wheeler-dealer - just change to 50% deposit then the rest on delivery. They don’t get the stairs until they have paid.

Doesn’t help recoup the balance though if they go out of business etc. Unless a stock item just require all specials to be 100% proforma, money first. End of the day it’s your company, you decide.

 

[DontAsk]

Offer a discount for full payment up front.

Include interest for late payment of balances in your terms.

 

[wheeler-dealer]

Doesn’t help recoup the balance though if they go out of business etc. Unless a stock item just require all specials to be 100% proforma, money first. End of the day it’s your company, you decide.

Thank you. I totally agree, it’s interesting to get other peoples view on this. In the world of business things are hard enough, so chasing money if it can be avoided is definitely a move in the right direction.

 

[A Cik]

We only offer 1 of our customers the option of 30 days credit and regret it because it's now 90 days from the order and payment has not reached us.

I would say for one-off customer and smaller projects for a value under £...... aks 100% upfront

For the larger and regular customers, here are 2 options

Option 1)

Change to 50% upfront and either ask for a card on file so you can charge it once the order has been delivered if BACS Payment is not received within 3 days.

Option 2)

Set up a direct debit with them (you can use GoCardless for this) charge the 50% also using the direct debit so you have their permission to charge them, and let them know that the remaining 50% will be charged also through direct debit on the day of delivery.

If this does not work go to 100% upfront.

I hope this is helpful.
Abraham

 

[wheeler-dealer]

We only offer 1 of our customers the option of 30 days credit and regret it because it's now 90 days from the order and payment has not reached us.

I would say for one-off customer and smaller projects for a value under £...... aks 100% upfront

For the larger and regular customers, here are 2 options

Option 1)

Change to 50% upfront and either ask for a card on file so you can charge it once the order has been delivered if BACS Payment is not received within 3 days.

Option 2)

Set up a direct debit with them (you can use GoCardless for this) charge the 50% also using the direct debit so you have their permission to charge them, and let them know that the remaining 50% will be charged also through direct debit on the day of delivery.

If this does not work go to 100% upfront.

I hope this is helpful.
Abraham

thank you for your advice

 

[Frank the Insurance guy]

Offer a discount for full payment up front.

Include interest for late payment of balances in your terms.

This - increase your quotes by 25%, so discount to your original quote if paid up front, or +25% if not, plus interest if any late payments!

 

[Martin Patfield]

We produce majority of items to order depending on customers dimension request.

Large orders of over £100,000 can be a little twitchy. 50% payment to secure the raw materials. Payment before delivery.

Some customers that have had financial difficulties are pro forma invoicing.

Everyone else 30 days terms.

Some customers get a quarterly rebate depending on sales revenue being above a certain amount.

It's got to be what you feel comfortable with.

 

[MBE2017]

Everyone has to make their own decision, personally I am borderline insane regarding bad debt, rarely lose more than £100 even in bad recession years.

Personally, everyone, no matter who they are trade cash up front 100% for a minimum of six months, most stay that way forever. Even huge concerns like GEC etc only get 30 days credit after six months, and they are chased ruthlessly if the payment is late.

It stops some from trading with you, it also prevents bad debt, with a recession coming over the horizon I would advise every business to tighten up their credit control, because a lot out there have none.

 

[pentel]

We credit check everyone who applies for credit, and make our own opinion of the customer, not the credit agencies suggestion.

Always 100% upfront first order and for all orders under £100.

Our standard is 30 days end of month and we chase very hard, if its more than 14 days late then proforma moving forwards, especially if communication is difficult.

Most of our work is custom and this has worked well for us.

 

[wheeler-dealer]

We credit check everyone who applies for credit, and make our own opinion of the customer, not the credit agencies suggestion.

Always 100% upfront first order and for all orders under £100.

Our standard is 30 days end of month and we chase very hard, if its more than 14 days late then proforma moving forwards, especially if communication is difficult.

Most of our work is custom and this has worked well for us.

Thank you for your input. I think credit check everyone and having credit insurance is the way to go to have the reassurance with all clients.

 

[pentel]

Thank you for your input. I think credit check everyone and having credit insurance is the way to go to have the reassurance with all clients.

We have found that credit insurance was not cost effective.

 

[wheeler-dealer]

We have found that credit insurance was not cost effective.

Can I ask why you found that credit insurance wasn’t cost effective. It is something new we have been looking at and would like to find out the pros and cons regarding it from others that have used it.

 

[pentel]

Can I ask why you found that credit insurance wasn’t cost effective. It is something new we have been looking at and would like to find out the pros and cons regarding it from others that have used it.

Each customer would be given a credit limit by the insurer before the debt is insured. This limit can change to zero with zero days notice.

For example you get a new customer. To be insured they have to be approved by the insurer. Lets say they set a limit of £25,000. That is the most coverage the insurer will give. After a few months the customer is buying up to their limit and now want to place an order which will take them over their limit.

Options are

1) take on the risk yourself. This may be against the terms of the insurance and may invalidate any claim

2) Put the customer on proforma... lets look at it from the customers point of view. They always pay on time, want to spend more and now they are going onto pro- forma. They will probably look for another supplier

Then there is the cost. If you are a high net margin (30-40% )business then 2-3% of invoice value is not a high proportion of your profit. However if you are at 10% ( which a lot of people are ) this is 20-30% of your profit to the insurer.

The cost to insure some of our debtors worked out at around £11,000 per year.

Over 20 years we have lost a total of around £35,000 to bad debt.

We are £185,000 up by not insuring.

 

[HFE Signs]

In your trade I'd expect to pay 50% at point of order and 50% on completion.

 

[MBE2017]

For example you get a new customer. To be insured they have to be approved by the insurer. Lets say they set a limit of £25,000. That is the most coverage the insurer will give. After a few months the customer is buying up to their limit and now want to place an order which will take them over their limit.

Options are

1) take on the risk yourself. This may be against the terms of the insurance and may invalidate any claim

2) Put the customer on proforma... lets look at it from the customers point of view. They always pay on time, want to spend more and now they are going onto pro- forma. They will probably look for another supplier

Option 3 Call them, explain they have reached their credit limit and get an interim payment.

BTW the scenario you have put forward is exactly why so many companies get hit with bad debt. Sometimes you have to question why YOU are getting the orders, not someone else. Are your customers on stop elsewhere?