PDA

View Full Version : Payment Terms with Distributors/Suppliers



briangaylor
11-20-2014, 07:30 PM
I'm about to pull the trigger on an SBA loan and keep re-tooling my cash flow analysis. Can someone do a sanity check on a few assumptions here?


1. % of sales made on credit (to customers/distributors) = 95
2. Time to receive credit card funds from customers = 5 days
3. Time to receive payment from distributor = 30
4. Time allowed to pay suppliers = 30

I am wondering if suppliers will let me delay payment like that or will require cash up front... im also curious if a distributor would call me crazy for asking for cash up front...


Cheers!


Brian

uptown brothers
11-21-2014, 11:59 AM
Between you and your wholesaler/distributor, some states actually prohibit the extension of credit between a manufacturer and a wholesaler, or a wholesaler and a retailer (which however can mean, invoice has to be paid within 30 days, as opposed to true C.O.D.). Check with your state alcoholic beverage control person. Takes the embarrassment out of asking for cash...and puts a cap of 30 days on it, even they won't pay you COD.

lhall
11-21-2014, 06:04 PM
Ok, this is important. You must try to negotiate the longest term for paying your bills and the shortest time for getting paid. Ask your suppliers for net 30. They will want the first order paid in advance but they should accept terms after. Explain to your distributors that you need cash flow to be able to invest in new equipment, hiring new sales staff, etc. The most important and beneficial thing your distributors can do is pay you cash on the barrel, or at least net 15. Don't worry about anything else until you have good payment terms. You will most likely be small potatoes to your distributor at the beginning, and it shouldn't be a big deal to them.

So many good businesses have run out of cash trying to grow. CASH IS KING! Google cash gap and understand how it affects your business.

beauxman
11-23-2014, 06:38 PM
+1 to "CASH IS KING" because cash flow is everything. Depending on your state laws, it can be something that you might be able to negotiate with the distributor. As with almost everything in this business, the answer is "it depends". Net 15 would not be an unreasonable request.

Beaux Bowman
Black Raven Brewing

Bainbridge
11-24-2014, 08:50 AM
Assuming your distributor actually pays you on time. Which happens only when Jupiter is in the House of Aquarius, I believe...

briangaylor
11-25-2014, 07:54 AM
Assuming your distributor actually pays you on time. Which happens only when Jupiter is in the House of Aquarius, I believe...


Haha what is your average experience with distributor payments? Or rather, what ranges have you seen?