Terms Of Account

[wctsigns]

I am finding that some of my good clients are asking for terms which we haven't extended in the past. I am looking for some sample credit applications other sign shops use.

 

[Oroscoe]

Google it. Extend the really good ones 30 day term. After 30 days if they have paid then you should feel better about continuing the terms. If they are slow to pay, cut them off and tell them this is why we don't extend terms.

 

[DerbyCitySignGuy]

Net 30 is pretty standard and you can easily find information by Googling "net 30 terms" as Oroscoe mentioned.

I wouldn't extend more than net 30 unless a very large client required it and you have the means to pay your bills for three months while waiting to get paid.

 

[Solventinkjet]

Giving small companies/customers terms is a real mistake. We used to do it and we got burned so many times that everyone is credit card only. Out of 1000's of customers we give maybe 5 companies terms. Those 5 companies never miss a payment and spend big bucks with us. If you aren't spending $30,000 plus a year, you get nada.

 

[Gino]

Totally agree with VanderJ. Very few of our customers have terms much over 10 days. From the time they receive an invoice and send out the check, it usually takes a few days. Those that need 30 and 45 days, just hafta pay a higher price, cause I ain't gonna finance their job, that's for sure. You wanna work with us, than finance your own job with 50% upfront and the balance within a few days. Anything more results in getting re-billed with a penalty.

If you are any good, they will meet your terms..... now. If you give them 30 days, be prepared. If they can't pay you now, they can't pay you in 30 days either and 30 days will turn into 36 days and all the excuses you're getting for cash on the barrel head will just be 4 weeks later. Kinda like novocaine..... it just puts the pain off for a while.

 

[printhog]

You're not a bank, and unless you have a revolving line of credit with your bank to facilitate extending the client terms, you'll be funding their credit with your cash, very bad idea and a common cause of small business failures. Credit costs money. Successful sign shops typically use a deposit/balance due structure to have the client get skin in the game. extending credit will affect that.

My businesses have done both internal and external funding of credit. I prefer risking someone else's money.. since youre asking for a free contract im assuming youre not prepared for any of the issues below.. Im assuming you dont have an attorney, you'll need one, and you likely haven't got an accountant, as they'll recommend an attorney.

For your credit issues-

1. You need accounting and legal representation that's accurate enough to understand and compare the costs of internal vs external credit before you extend clients internal credit. You will need that level of accounting to enforce your internal credit offer should you proceed. That accounting person must be good at skip tracing, banking, financial lines, receivables management, default litigation preparation and more.. if you don't have that, you're not ready.
2. Before you extend a client credit you need to know their credit worthiness. you need to know when to ask for a personal guarantee and what amount of credit you will grant. This means you need their credit reports, both the business and its officers, you need to understand how to read those, how to identify a credit risk, search govt records, and you need to actively check all the references and bank accounts they list. You also must secure that information with regards to your local privacy laws. hassle.
3. your credit application and agreement MUST be tested in court and meet applicable laws. Is it consumer credit by design, secured or not secured, purchase money, revolving trade??? Each has different laws. This means you hire an attorney to do it.
4. Is your contract worded so having one clause ruled illegal at suit time wont cause the entire agreement to be thrown out and you lose?
5. do you know how to navigate and respond to a bankruptcy? you'll likely need to know.
6. these are just the tips or the iceberg.

there are options:

1. I'd recommend you stress the client use their credit card. Your credit card processor is likely between 0.5% and 3% in fees, a far site cheaper than carrying someone internally. Negotiate the best rate and fee structure you can get as monthly fees and merchant costs are usually not considered by small business owners until they eat your profits. give a small discount for them as a marketing ploy.
2. research receivable financing like factoring, they will setup the contracts and handle the legalities of the credit worthiness, and you get funded 80% within 72 hours of invoicing and the balance less their fees at the time client pays. Its a great way to extend large firms credit while covering your cash needs.
3. meet with your banker and discuss getting a line of credit and then ask their input. banks have many financial products available for businesses needing to offer terms.
4. meet with your attorney and accountant together and review the idea before you do it.

whatever you do, don't go copy/pasta from the web as you have asked .. it'lll get your butt in trouble, this is your livelihood and you can make a big mistake giving terms that arent properly managed.

 

[wctsigns]

I am pretty stingy with my terms I am definitely not a bank and many sign shops get into cash flow trouble over this type of thing. The clients that are asking for terms are not small and paying isn't an issue, the whole point of the form is to have back up data just in case I need it. They won't stop using me I am not worried about that. Most have head offices elsewhere and this is convenient. If they don't pay in the agreed days I stop the terms they can go down the road.
What I was looking for was a sample credit form that you might use in your shop. I did Google and didn't find anything that I like and yes I can re-create the form but I wanted to see what other shops use.

 

[printhog]

You need a credit application and contract for your province and Canada. I'd suggest you ask one of your local suppliers for theirs as it's likely compliant with the region's laws. I'd offer mine but it's California. Your original post should have said for Alberta, Canada. Big issue in addressing the proper venue.

To offer terms without the hassle look into receivable factoring or talk to your banker about it. If your clients are big you'll get a deal together.

For a product line at Office Depot we negotiated a factor that funded 80% of invoice face value at the time of our invoice, 20% was held on reserve, fees were $18.75 per thousand if paid on the 60th day (it was $0.325 per day per thousand borrowed if paid earlier), if paid late they would charge the same rate and hold the reserve until paid. fees were taken from the reserve, reserve paid out monthly.

Together we extended a $1 million USD net 60 line to my clients that had a history of "paying as agreed" for the last three years. Net 30 to those who had glitches. They did the credit research for us. They supplied the original application and contract for us to build on.

When the client paid, they cashed the check ( you assign them that authority), they took their fees, and sent us the remaining money.

It worked well. The reserve was essentially our profit margin on many orders.

We used the ability to extend large lines as a tool to grab the big fish in our market. Not to help out existing clients. Gatekeepers scheduled appointments with power buyers almost all the time when told their firm had been granted a million dollar line. We got two national hotel chains, home depot,Procter & Gamble, Office Depot, Comcast, two West coast telcos, three major trucking lines, 3 major national outdoor advertising firms, a dozen regional media outlets, two networks, 5 large casinos, and even one of our suppliers directly from this. The Size of their line of credit was the prime reason they went with us when surveyed.

But we properly set it up, purposefully wrote the contracts and application thru our lawyer. We were so serious about this direction we put him on staff as VP of legal affairs. At the time we did this we were a 2 man shop growing about 20% and grossing $150k. We blew that apart the next year.

its only a freaking sign!

 

[CanuckSigns]

Ask them to secure the account with a credit card, tell them you will happily give them 30 days to pay, but if you don't have a cheque from them on day 40 (to account for postal delays, etc) you will run the balance plus the processing fee on their credit card.

We extend credit to about 65 percent of our clients, if you don't give terms, larger companies won't buy from you, period. If you think a company like Pepsi or Bass pro shops is going to have a cheque ready for you when you deliver you are mistaken.