READ: How to Price for Profit » The shipping terms determine when you are able to invoice your customer and start the clock on the agreed terms.Shipping terms also determine when your liability ends and the goods become the property and responsibility of your customer.
e recently had a client who was excited to share with us his great news—he had just received his first purchase order from Walmart.
For an entrepreneur, getting a PO from Walmart is like winning the entrepreneurship Super Bowl.
There are often penalties for missing delivery windows, taking longer than anticipated to unload, or not delivering the goods in the precise manner expected.
READ: How to Ship on the Right Terms » Upon setting up an account with a customer and receiving a vendor number, you will be asked to submit remittance details (where payment should be made) and form of payment (cheque or direct deposit/EFT).
In addition to early payment discounts, Walmart typically has a table in their vendor agreement that includes all other deductions and discounts.
Some of these are on-invoice (they are directly deducted from the gross invoice amount to be paid to you) and some are off-invoice (a monthly or quarterly charge).
This means the cost to you to get paid 30 days earlier by Walmart is 2.2%, or 26.7% per year!
You can go to a third party funding source and pay a lot less—the cost of funding a Walmart invoice through Fund Through is typically 0.033% per day, or 12.0% per year.
If you are planning on factoring your invoices or using a third-party asset-based lender, you will likely need to change your remittance details to a bank account controlled by the factor or asset-based lender.
Implementing this change occasionally takes time to work its way through the customer’s organization, and may be easiest if done up front when you first sign an agreement with the company.
Since cash flow is critical for small business owners, many companies opt to include early payment discounts in their vendor agreement.