Retail Terms

Understanding Payment Terms with Retail Chains

Hey everyone, this is Karen Waksman, founder of Retail MBA. Today, we’re diving into the world of payment terms. If you have a great product and you’re trying to sell to bigger retail chains, understanding payment terms is crucial to ensure that you get paid. This short video training, we will provide insights and tips on navigating these waters.

What Are Payment Terms?

Payment terms are the conditions under which a seller will complete a sale. Typically, these terms specify the period that a buyer has to pay for the goods they have purchased. In the context of retail chains, these terms can vary significantly and are crucial for managing cash flow and expectations.

Common Payment Terms Offered by Retail Chains

During one of our Q&A calls, a client asked about the typical payment terms she might encounter with retail chains. She was offered a deal with 60-day payment terms, which meant she would have to wait two months after delivery to the retailer’s warehouse before receiving payment. Understandably, she was hesitant, as this could impact her business’s cash flow.

Here’s a breakdown of the typical payment terms you might encounter:

• 30-Day Terms: This is often the most common payment term offered by retail chains. It means that the payment is due 30 days after the invoice date or delivery of goods.
• 60-Day Terms: Less favorable for suppliers, this term extends the payment period to 60 days. It’s not uncommon but can be challenging for businesses with tighter cash flows.
• 90-Day Terms: These are less common and usually reserved for very large deals or specific circumstances. It can be quite burdensome for a supplier.

Navigating Unfavorable Payment Terms

When faced with unfavorable payment terms, such as the 60-day or 90-day terms, it’s important to know how to respond. Here are some strategies:

• Negotiation: Always try to negotiate better terms. Politely express your preference for shorter terms, like 30 days. For example, you might say, “I understand the standard terms are 60 days; however, for us to manage our operations effectively, we would prefer 30-day terms. Is there any way we can work towards that?”
• Decision Making: If negotiation fails, you need to decide whether the opportunity is worth the extended payment term. Sometimes, securing a deal with a major retailer can justify longer payment terms due to the volume and exposure it brings.
• Third-Party Financing: If you’re worried about cash flow, consider third-party financing options. There are companies that specialize in financing orders or invoices, which can help bridge the gap between delivery and payment.

Leveraging Retail MBA for Better Deals

In our Retail MBA training program, we delve deeper into strategies for negotiating better payment terms and handling objections from retail buyers. We provide comprehensive guidance on how to secure favorable terms even after contracts are signed.

For those looking to expand their knowledge and skills in dealing with retail chains, our program offers both do-it-yourself and done-for-you services. These resources are designed to equip you with the tools needed to navigate the complex landscape of retail sales successfully.

Conclusion

Understanding and negotiating payment terms with retail chains can be daunting, but it’s a crucial part of ensuring the financial health of your business. By being prepared to negotiate and knowing your options, you can enter these discussions with confidence. Remember, while securing a deal with a major retailer can be beneficial, it’s important to ensure the terms don’t jeopardize your business’s cash flow.

For more insights and assistance on navigating retail partnerships, consider joining our Retail MBA program. Visit Retail MBA for more information on our training modules and services. Stay informed and empowered to make the best decisions for your business in the retail industry.

Thank you for reading, and don’t forget to subscribe for more useful tips and updates on working with retail chains. Your success in retail is just a negotiation away!