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EagerToSucceed
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Manufacturing sheet metal products/ductwork.
Unfortunately, when it comes to dealing with suppliers (our wholesale maket), they tend to need longer terms of payment due to large stock levels required at all times. The goods that they purchase tend to sit on their floor for up to a month therefore affecting their possibility for investment if the goods were to have been paid prior to delivery, especially if the goods are not sold during that month. The more credit they have at hand the more room for investment they have, and therefore bring us more business. In case of liquidation, those goods can be returned to us if accepted (as the goods remain our property until paid for in full).
30 day accounts allow for more growth for you and your customer. How much credit limit you give is another story.
Example:
Client has approached us from the word of mouth wanting to start his business from scratch. He needed an account so that goods can be supplied. After signing contracts, an account was opened. That customer has went from 1K dollars per month to 15K per month. Another client we have operates on 30 Day basis, we agreed to 30 day terms, contract signed and now their annual purchases exceed $700K p.a. proving to be our biggest client.
Without opening up the initial 30 Day account we ourselves would not have been able to have invested in our business.
Don’t get me wrong though, certain jobs require payment in stages (custom work/duct lines). Those goods can not be returned. As the client relies on you to complete the work (if not THEY are liable for the dellays to the builder), they will have no choice but to pay.
You definately should be careful who you give credit to, and that all the paperwork has been signed with a personal/directors guarantee if needed. My suggestion is to always ALWAYS do a credit check and if they are running late with their payment check the credit limit and talk to the client directly. More than often a solution can be brough forward. There are bad eggs though, and if all fails, you can always apply for a VCAT hearing which only costs $350.00. that cost is payable by the debtor as it should state in T&CoT.

Honestly, I wish our margins were big enough to allow for discounts :)

The joys of manufacturing for wholesale.