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Equipment sales policies |
..Bill M, June 1/06 |
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Over the last few months I have seen a number of orders that we have invoiced turn sideways and we have had to delete the invoice and try to re-sell the units. There are differing reasons such as inability to get financing, different size unit than expected, etc. On the plus side we have not been burnt (yet) by delivering units to people who cannot pay.
I thought I would take this opportunity to reiterate what our policy is. We are so busy there is no need for us to have to play around with people who cannot pay.
1) As a general rule we should ask for a deposit of at least 10% of the total value of an order before we even think about putting it into production. If it is an item with lots of custom work then we should be looking for more like 20% to 25% as a deposit. Obviously we do not need this from our established customers but new ones we should get all the time.
2) When the order is complete the customer needs to pick it up in a timely manner. We cannot be sitting on the unit for weeks or months waiting for them. We cannot afford to have our money tied up in inventory. If the customer did not need the order when he said then we would have filled other orders first. If the customer is unable to take the product as promised then we should actively sell it to someone else, and then we will reschedule his order.
3) A sale should not be recorded until the order is complete. The order is not complete until the customer takes delivery. Just because it is "ready to go" does not mean it should be invoiced. The only time we should be invoicing in advance is for the odd occasion when it is needed in advance to arrange financing.
There have been numerous times where I have phoned customers for payment on past due invoices only to find that it has not been delivered. Sometimes the invoice ends up being deleted and resold elsewhere. We have to report our financial results to 3rd parties (like banks). They do not like it when previously reported results change. It makes them wary and it makes us look amateurish.