Extended Credit

[Raymilkybarkid 0]

One of my large account customers for our productions has just written to us to extend its credit from 30 days to 90 days What would you do?

 

 

 

[Robster 0]

90 days!!!! I would say no unless you can afford to and it will guarantee there custom and increased business

[Dream Catchers 0]

It all depends on what will be the outcome if you refuse.

Will they go with somebody else that is willing to give them 90 days and kick you in touch?

 

Personally I would explain to them that the prices that you charge them reflect the fact that they have a 30 day account. See what they say.

 

In todays economic climate I would be reluctant to extend it to 90 days, the company may well be on shaky ground, could you afford to lose 90 days worth of receipts if they do go bust?

 

Jim

[Raymilkybarkid 0]

90 days!!!! I would say no unless you can afford to and it will guarantee there custom and increased business

 

My biggest problem that this customer is that it is one of our largest customers.

We have confirmed 4 bookings with them 3 award ceremonies and 1 staff Summer Ball (600 + Guests)

there is usually 3 - 4 more shows throughout the year.

 

It all depends on what will be the outcome if you refuse.

Will they go with somebody else that is willing to give them 90 days and kick you in touch?

 

Personally I would explain to them that the prices that you charge them reflect the fact that they have a 30 day account. See what they say.

 

In todays economic climate I would be reluctant to extend it to 90 days, the company may well be on shaky ground, could you afford to lose 90 days worth of receipts if they do go bust?

 

Jim

 

I don't think that they will go bust just yet there quarterly profit was xxx.xx Million.

[McCardle 1]

if its large sums of money then i'd be tempted to get a factor involved in the chain order to protect you from any losses. Have you done a credit check on them recently?.

 

I agree 100% with Mr B, personally it would be sounding warning sirens for me, as it indicates that perhaps the cash flow of this company is in dire straits and things may not be too rosey. I'd be wondering little things like will the company still be around in 90 days to pay me? :ads: .

 

I once got 'taken' in a similar manner by a company who had credit terms, I lost a significant amount of money which I had absolutely no chance of ever seeing again after HMCE and the Administrators had taken the lions share. Cheeky beggers even reformed under a different name some months later and came back expecting to do business again. The answer I gave them was the impolite version of 'go away quickly' :cense:

 

Don't make the same mistakes. Perhaps its time to knock on a few more doors, just in case. How much work have they currently placed with you (number of gigs rather than cost)

 

Bear in mind that just because a company has had a healthy turnover and profit doesn't mean that one of their clients hasn't just gone into administration owing them £15 million. It only takes one large customer to vanish leaving a debt to start a domino effect.

 

Incidentally, are you a ltd company with a six figure turnover yourself?. I only ask because I would be questioning (common sense) why a large company would be expecting to give / saddling a small company / sole trader such credit expectations. Do they get 90 days credit from the local papershop?, the milkman and the window cleaner?

 

30 days yes if the business was good and plentiful, but 90 days, nah!, I wouldn't.

 

Ask them if the business is going to increase as a result of consideration of these terms, there has to be loyalty and commitment on both sides.

Edited April 8, 2009 by McCardle

[Raymilkybarkid 0]

if its large sums of money then i'd be tempted to get a factor involved in the chain order to protect you from any losses. Have you done a credit check on them recently?.

 

I agree 100% with Mr B, personally it would be sounding warning sirens for me, as it indicates that perhaps the cash flow of this company is in dire straits and things may not be too rosey. I'd be wondering little things like will the company still be around in 90 days to pay me? :ads: .

 

I once got 'taken' in a similar manner by a company who had credit terms, I lost a significant amount of money which I had absolutely no chance of ever seeing again after HMCE and the Administrators had taken the lions share. Cheeky beggers even reformed under a different name some months later and came back expecting to do business again. The answer I gave them was the impolite version of 'go away quickly' :cense:

 

Don't make the same mistakes. Perhaps its time to knock on a few more doors, just in case.

 

Bear in mind that just because a company has had a healthy turnover and profit doesn't mean that one of their clients hasn't just gone into administration owing them £15 million. It only takes one large customer to vanish leaving a debt to start a domino effect.

 

Incidentally, are you a ltd company yourself?. I only ask because I would be questioning why a large company would be expecting to give a small company / sole trader such credit expectations. Do they get 90 days credit from the local papershop?, the milkman and the window cleaner?

 

We are a limited company.. I hadn't thought about the smaller guy like myself, that may be my tactical approach to them as I am not a major player / supplier to them.

 

 

[McCardle 1]

What indications have been given (by them) that you (your company) will become any more of a 'player' if you offer agree to these terms.

 

They could rewrite these terms into their revised terms of trading and ask you to sign it. This means you could just accept the terms and they then say 'thank you kindly' and still keep you on the sidelines with the same amount of work - nothing changes other than your own cashflow. Other than adversely affecting your own cashflow I cannot see any other effect that this scenario would play, other than all negative (to you are least).

 

With a change of this magnitude there HAS to be something in it for you, and agreed as a contract. You cannot really offer something and hope that people will get the hint, you have to spell it out. Take your contact and buy him / her lunch, and put it all on the table as an idea which has to benefit each side.

 

Always a danger of putting too many eggs in one basket. If your biggest customer goes elsewhere, goes out of business or stipulates terms which are simply untennable or expectations which are unrealistic then the loss felt is great if a parting of ways is the inevitable option. Its far better in ANY business to have lots of small customers and keep knocking on doors for new ones, rather than relying on one source, because you never know how long that source will exist.

 

Personally i'm all for giving customers additional value added services, a bit of flexibility here and there, buying them gifts at xmas and taking them for the odd lunch or pint to keep my foot in the door, but extending to this level of 'flexibility' should be done on a 'quid pro quo' basis - in other words, like for like benefits to all parties.

 

90 days credit is good and acceptable for companies doing £100k - £1 million+ and with a healthy weekly order book from them, but several bookings a year?. Thats ludicrous. I guess they'll be trying to tell you next that they have a 90 day account with the local card shop for the £1.00 card and the £15.00 bunch of flowers everytime a member of staff leaves or goes on maternity smile icon

 

Quite honestly if seven gigs per year is literally the level of business you do get, i'd be thinking more of petty cash than a 90 day account . (and I don't mean that as a tax fiddle, just as a prospective)

Edited April 8, 2009 by McCardle

[C.S 0]

personaly i would be asking for advance payment. Ok its one of your biggest customers but if they are asking for longer to pay then they have problems. The danger of you doing the gig and not getting paid for it is there.

[Dukesy 0]

I agree with the Mac.

 

 

 

 

 

 

[Kingy 0]

I would load their payments and offer settlement if they pay within 30 days. Why should they have your money free of charge for a quarter of a year?

 

Failing that, drop them. I am not a bank and Lloyds kindly recipocate this arrangement and don't do discos.

[vokf 0]

As McArdle says - run a Credit Check on them. It will cost £20-£30, but is worth it. In the first instance, check if they are late in filing their accounts (free check on companies house) - if this is significantly late its often bad news.

Once accounts are filed, it will effect their credit rating. Many companies insure their depts, and a poor rating will mean suppliers will need payment apon delivery/collection (this is what killed Wollies)

 

Companies are looking to ease their cashflow, and I've seen many companies asking for discounts (15%?!), or extended credit terms.

At the same time, suppliers are pulling down their payment terms...

 

You could look into insuring their dept to you - and pass on these increased costs in exchange for longer terms.

If they go under, you'll claim from your insurance. I don't think the insurance will cover profit - but will cover costs.

 

It sounds like a face-to-face meet is in order if they are important to your business.

[Dukesy 0]

A golf club manager says to my face before my third year of Christmas bookings including NYE (this was a while back) can he pay me after Christmas…like a month after 31st December?

I said I do not give credit as such, and as you won't give me a deposit upfront for one off gigs....how about a retainer to cover all the Christmas bookings?

How much, they asked?

I said 50% up front, and that I'll accept the balance settled at the end of January.

They declined my service and said they would book with someone else who was more reasonable with rates.

The DJ they 'found' turned out to be the guy I had been dealing with….and their 18 dinner and disco nights were apparently "total crap".

 

Time passes and I'm then contacted to meet the manager again to discuss covering a gig at the same venue in the February. I meet him. We discuss terms and agreement is made.

The paperwork is signed there and then but will have to be finalised / sent on to me with enclosure because the cheque has to be signed / approved by their finance dept., yet two days before the gig, having chased them up a couple of times, the manager rings up shouting and screaming that I am unavailable. They could not meet my T&Cs for a deposit - no cheque had arrived, so I accepted work elsewhere!

Then this very same guy has the cheek to say that I should change my payment system to be more accomadating to them?!

 

Nothing in it for me. No pay - no play.

Edited April 8, 2009 by Dukesy

[UKHero 0]

If you have to hire in kit or subcontractors do you get 90 day turms? This is a big indication of the state of this company and its finances and given the economic climate I would be very careful. But only you can truly decide which way your business decides to jump. Good luck

 

Nik

[haydengoy 0]

A golf club manager says to my face before my third year of Christmas bookings including NYE (this was a while back) can he pay me after Christmas…like a month after 31st December?

I said I do not give credit as such, and as you won't give me a deposit upfront for one off gigs....how about a retainer to cover all the Christmas bookings?

How much, they asked?

I said 50% up front, and that I'll accept the balance settled at the end of January.

They declined my service and said they would book with someone else who was more reasonable with rates.

The DJ they 'found' turned out to be the guy I had been dealing with….and their 18 dinner and disco nights were apparently "total crap".

 

Time passes and I'm then contacted to meet the manager again to discuss covering a gig at the same venue in the February. I meet him. We discuss terms and agreement is made.

The paperwork is signed there and then but will have to be finalised / sent on to me with enclosure because the cheque has to be signed / approved by their finance dept., yet two days before the gig, having chased them up a couple of times, the manager rings up shouting and screaming that I am unavailable. They could not meet my T&Cs for a deposit - no cheque had arrived, so I accepted work elsewhere!

Then this very same guy has the cheek to say that I should change my payment system to be more accomadating to them?!

 

Nothing in it for me. No pay - no play.

 

 

 

 

 

me too no pay-no play. I've use to do many disco at a venue and found before deposits i was getting dropped like no tomorrrow because of people cancelling the events. Now i take a deposit and take the balance on the night in cash only I've had 3 cancel but I keep the deposits. I wouldn't do 90 days terms for anybody as that does normally mean there in trouble as they cannot get ends to meet so there 2 months behind with everything use the 3rd month for payments.

[DJ JENX 0]

Maybe they are trying the old trick of offering 90 in a hope of getting half that.

 

Make it sound like you win when you agree to 45 instead.

 

only you can make this decision, based on sound facts, reviewing your finances, and then asking them what guarantees they can make to ensure payment.

 

Just because they turn over XXX million per year doesnt mean that they can afford to pay everyone. Perhaps the XXX million is dwindling away in the current crisis?

 

Be careful, but it sounds like you need these guys as much as they need 90 days!

[Kingy 0]

By the way.

 

Remember (those of you who don't know) this would be a B2B (Business to business) deal and therefore you would have limited powers when it comes to court action, especially if the company goes into recievership. It's not like taking a friend to court as an individual. I recommend that you look it up.

[Raymilkybarkid 0]

Problem has now been resolved. After being on hold for 1 1/4 hours due to the influx of calls to their uk office.

The letter was sent out to all their suppliers instead of the larger ones that it was intended for.

My terms will remain at 30 days for the duration.

 

My client is a Global company with a turnover and profits of many Billions of $ / £.

I have been reassured that I will receive an official apology.

 

Many Thanks to all who shared there advise and support.

Ray

 

 

 

[Kingy 0]

 

 

My client is a Global company with a turnover and profits of many Billions of $ / £.

I have been reassured that I will receive an official apology.

 

 

Ray

 

I hope you do, but i wouldn't hold my breath.

[Raymilkybarkid 0]

I hope you do, but i wouldn't hold my breath.

 

I'm not going to but it would be nice to receive so that i can hang it in my office with pride (Yea right)

 

Well at least the admitted the mistake in the first place...

[McCardle 1]

Your customer isn't Halfords or Boots is it?. Just wondering.

[TonyB 0]

Definitely not! 90 days is taking the Mick. If its a hotel ask them if they would let you book a room or have a meal and then invoice you with 90 days to pay. Its probably the accountants pushing them to do it as credit is more difficult to get hold of, one way of raising funds is to try and get extended credit terms with suppliers.

 

Most I would give is "up to" 60 days. That would be invoice at month end for previous months work and then 30 days to settle invoice (100% net 30 days). Anything done on the 1st of the month would in effect be 60 days credit.

 

I would also add to the payment T&C's that overdue payments will be subject to interest of 8% above the prevailing Banks of England rate in accordance with the Late Payment of Commercial Debts (Interest) Act 1998

[Raymilkybarkid 0]

Your customer isn't Halfords or Boots is it?. Just wondering.

A large oil company