Issue link: https://docs.hic.us/i/403552
All of these techniques are used by Embroiderers, and all of them have the potential to put you into debt trouble very quickly. The reality is that you never get caught up. As your business grows you need more and more money to buy the merchandise being ordered by your customers. Typically, you will be ordering faster than you are getting paid, which results in negative cash flow. On paper, you can see your profits, but in reality you may be drowning in debt. Solving The Working Capital Issue The real problem is not obtaining more Working Capital, the problem is customer payment practices. By not requiring some form of advance payment, you are forced to use your money (and pay interest) to finance the customers order. Essentially, you are becoming a bank, but are not reaping any benefits for it. Unfortunately, this industry has gotten itself locked into this scenario and is having trouble escaping it. The reason for this is that most Embroiderers have focused on capturing Corporate clients, as they tend to order in large volumes and provide plenty of repeat business. The downside is that this type of client is used to having payment terms of 30, 60 or even 90 days. They don't care how small you are. If you want to do business with them, then you have to play by their rules. So you have a choice; find a way to play their game or forget their business. It can be a difficult choice to make. The result has been that many Embroiderers have resorted to the methods listed (and more) to provide Working Capital. Before you get yourself caught up into an endless loop of debt, take another look at the situation. The real problem is not obtaining Working Capital, it's allowing customers to place orders without advance payment. How many businesses do you know of that let you to do this? Even most Doctors require payment at time of service. So why shouldn't you? This is your business, so you must set the payment policies. The first rule should be to: Require full payment when the order is placed. This will work great for retail orders, but you will probably meet resistance from Corporate and Small Business clients, so on to the second rule. Require a 50% deposit when the order is placed. This will suffice for some other customer groups, but you will still have resistance from the Corporate world, so on to the third rule. Require full payment with a Credit Card. www.hsi.us care@hsi.us 64