Following on from the blog on Monday about Wholesaling, today I will talk about getting paid from your wholesale accounts. Generally the business of wholesale requires a little give and take, you give your product and then it is time to collect payment and the way in which you do this will be layed out in the terms section of your wholesale agreement.
In order to turn your inventory into cash you will need to send your retailer an invoice which is pretty much a list of what they ordered and a total sum due. You may also include the date of order, an invoice number, your company details, mailing address and phone number. It is also essential to include the terms of payment and the buyers purchase number. If the order was prepaid with a credit card or cheque make a note of this on the invoice. Something you might also want to bear in mind is to write INVOICE really big and central to let your buyers know that it is a bill and consider offering a small (like 1.5%) discount if it is paid early or charge a daily interest rate if it is overdue - just make this clear on the invoice.
Paying by credit card is easy, quick and convenient but there are costs associated with it. If you have to purchase processing equipment you will be subject to various charges but using PayPal or some merchant card processors you can escape these charges by processing the transaction over the internet. In order to accept credit card payments you will need to set up an account through your bank or merchant card processor, do some research to see who has the most competitive rates and always keep in mind that you may be able to negiotiate. When you do accept credit cards, maintain good financial records of the transactions incase there is ever a dispute with the card holder. If a problem arises and you are unable to provide sufficient evidence your processor will withdraw the amount from your account along with any charge back fees.
Cash on Delivery
Accepting cash on delivery allows the buyer to pay at the time of delivery (kind of obvious wasn't it!) Once the item has been put in the mail you will need to let the buyer know and then a cheque can be raised. Upon delivery, the buyer will then send the payment to you, I would strongly suggest you insist on registered post!
Net 30 Day Terms
Getting paid on 30 day terms is a much slower form of payment so bear in mind you could offer 15 days for payment but also know it might not be you setting the payment terms, if you are lucky enough to work with large retailers, you will have to accept their requirements which might even be 60 or 90 day terms. What ever the term, the general idea is that you send your buyer an invoice and they have 30 days in which to pay. This form of payment does carry risk in that you run the risk of not getting paid. If you end up with a cheque that bounces, call the buyer immediately and see what they will do about it. To counter-act this, consider keeping their credit card details on file with an agreement that it will be charged if a cheque bounces.
Billing and payments can be a hard part of business to manage, you will need to be efficient and keep up-to-date with invoices and chasing payments to keep your cash flowing. If a buyer is late with a payment, keep hold of their order until the bill has been settled. New business owners can be incredibly shy when it comes to payments and bills because you want to keep hold of the buyer but if you dont, you may end up in debt just to keep your cah flow moving. You will still have supplies to purchase and bills to pay so you need to get paid to.
Coming in the next business tips on Monday 15th March: How to approach a store.
I am a paper crafter and supporter of all things handmade! I love to create cards for people but not only papercrafts I also like to sew, knit and make soap.
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