At LFR, we’ve been thinking of late that far too much news originates from manufacturers and suppliers. Whilst we need to hear about what is new and exciting in our industry, we also believe it’s important to give end-users a platform to voice their opinions.
It is for that reason that Peter French, Projects Manager, at SignTec Ltd Sign makers in Chelmsford, Essex, has joined our editorial team as a regular contributor. He will offer unedited insight into the real issues that ‘the man on the ground’ is facing in today’s testing business environment.
We hope you enjoy his latest musings on the issue of payment terms. Whilst not specific to the wide format printing industry, it is certainly something that is having considerable impact on sign making businesses...
Peter French asks... Are You Being Paid Promptly?
Everyone I speak to these days, across all business areas, reports that one of their biggest concerns is getting paid on time. With banks squeezing businesses by reducing overdraft limits or rejecting bridging loans, cash flow is a priority. Certainly, the company or person with cash in their pocket can reap the rewards as the cost of products and services get slashed more and more in an attempt to win business and remain competitive in a depressed market. In today’s market, cash is king.
The problem is actually getting the money from the customer into your bank account. My company - as most other companies - asks for a deposit with order on significant projects. This can be 10 or 20% of the full purchase price but at least should cover the cost of materials or bought in items. However, we have all heard the excuse “can I pay you at the end of the month?” when the customer comes to collect the goods or, for 30-day accounts, “sorry, your invoice wasn’t processed this month but I’ll make sure it gets processed at the end of next month”.
Here is the dilemma. Do I upset the pay-on-collection customer by withholding the goods until the money appears or with the 30-day account customer, do I immediately issue a claim to the small claims court for non-payment of debts? Neither of these two options is viable as, in both cases, you will probably lose the customer for good and, as a theorist once proclaimed, a happy customer will tell four people but an unhappy customer will tell ten!
The reality is that you can’t win. In this marketplace the supplier will never be able to dominate or dictate to the customer as without customers, we will be all queuing at the job centre.
So what does English law say about contracts? It seems that the principles were designed with two people haggling to buy a pig in a market in mind, yet they have remained statute law for hundreds of years. It goes like this:
- A customer approaches a supplier with a request for a product.
- The supplier provides a quotation and terms and conditions which is termed “an offer”
- The customer accepts the quotation.
- You deliver the goods.
- The customer accepts the goods.
In this example the terms and conditions of the transaction are deemed to be the suppliers so if you stated cash on delivery in your T&Cs then the law will find in your favour.
Now look at this example:
- A customer approaches a supplier with a request for a product.
- The supplier provides a quotation and terms and conditions.
- The customer responds with acceptance but includes their T&Cs, which differ from yours.
- You deliver the goods.
- The customer accepts the goods.
In this example the terms and conditions of the transaction are deemed to be those of the customer as you delivered the goods on the basis of acceptance of their T&Cs. To enforce your T&Cs on the contract, it is necessary for you to counter their acceptance with another “offer” reiterating that the delivery of the goods will be subject to their acceptance of your T&Cs. If they respond with acceptance, the contract is governed by your T&Cs if they respond saying that their acceptance is subject to their T&Cs, it will be theirs that govern the contract if you deliver the goods. This situation must now be settled by negotiation to agree between the parties as to which terms and conditions will govern the contract.
What about if you have sent your quotation, the customer has accepted it, you deliver the goods on your normal 30 day account terms, but the customer doesn’t pay on time? What do you do now? You can ask for the goods back, keep pestering accounts payable or you can threaten to issue a claim in the court, all of which is a sure way of losing customers and not really what a small sign business can afford to do. The supplier can string you along for as long as it suits him and there is precious little you can do – and he knows it.
I have known of companies that arrange for their bank to process payments. This is normally a way the bank can manage receipts against a loan or overdraft by hauling in your money, taking their share and passing the remainder to you. If you have ever been on the other end of one of these calls from a bank collecting money you will know that it is not a pleasant experience and they can be abrupt - another sure way of losing your customer.
So, is there anything you can do to protect your business? Well, yes and no. Firstly make sure your T&Cs are enclosed with your quotation and that they state that the quotation and delivery of the goods or services is subject to these T&Cs. In the unlikely event of a dispute, you must also make sure the paper trail supports your position.
Secondly, you don’t have to provide anything if the customer doesn’t accept your terms and counters them with his own. You can simply withdraw your quotation bringing attention to the fact that the quote was subject to the customer’s acceptance of your T&Cs.
Thirdly, work in partnership with your customer, understand his business and make sure he understands yours – and in particular, the importance of prompt payment to you and your business.
However, if you are a small business and a very large business places £100,000 of work with you every year – are you going to try and impose your terms on them or just accept theirs?
The answer is obvious: the small guy will always have to give way to the big guy – and that’s just business.
A final word of warning though: A small sign maker had a contract for some health and safety signs for a building site. He knew the delivery date as it was stated in the quotation request. The customer accepted the quotation and included their terms in writing, which the sign maker failed to read. Because of one reason or another, the sign maker was two days late delivering the signs. In the customers T&Cs it stated that failure to deliver on time could render the supplier liable for penalties. In this case the penalty was that the building company couldn’t start work on site without the mandatory safety boards and the sign maker was issued with a claim for £30,000 that he could not legally defend and win. The moral of this story is both the importance of T&Cs in one respect, but the impotence of them in others.
About Peter French
Peter has been working in the sign industry for 9 years having spent a lifetime in IT. Specialising in kick-starting businesses, Peter worked in many diverse business sectors. For most of the time at Signtec he has been at the forefront of large format printing with both solvent and UV technologies.
