The payment term of Net 30 (payment made 30 days from shipment date) is the minimum required term we want from every vendor. However, if we have a vendor who gives us a cash discount for fast payment or a domestic vendor, we can pay via credit card with no penalty; that is a different story.
Advantus realizes that some vendors may ask for a deposit or prepay of some kind. Due to the complexity and growth of Advantus, and the issues these payments create for accounting, not the least of which is multiple payments against the same PO, we are not going to allow vendors to get set up for deposits or prepays. The time we have the most leverage with a vendor is before we become a customer and they become a vendor. Let the vendor understand that terms are a critical element along with price, quality, and service in setting up the relationship. Any terms less than Net 30 Days present a tremendous drain on our cash flow and our ability to grow. This is especially true since our customers pay with extended terms. When you add transit time, the time the goods will sit in our warehouse prior to sale, and the time to collect on our invoices, it can be six months or more before we can turn an inventory expense into a paid for sale. Advantus needs terms to grow and the best time to get the best terms, is as we are setting up with the vendor.
Here are the options for ANY new vendor setup (Domestic or International):
Best –Option 1: We provide a list, if needed, of 3 existing vendors (International) or credit references (Domestic) to a potential new vendor; the new vendor can talk to our existing suppliers (we will make sure they are in unrelated products) and learn that we pay our bills. The new vendor grants Net 30 terms.
Next Best—Option 2: We agree with the vendor to do the following before the first order. These terms must be approved by Charlie Frohman in writing prior to submitting the request to Accounting.
- First order—100% upon shipment
- Second order and after — Net 30 Days
- An email from the vendor must be provided to Accounting to file during setup so use in case there are any issues with payment changes from shipment 1 to 2.
Worst option – Option 3: If the vendor refuses 1 or 2 above, any other terms must be approved by Charlie Frohman in writing prior to submitting the request to Accounting.
Why is this process so important?
Charlie maintains a full list of deposit acceptable vendors that goes to Kevin and Import prior to payments being made. With the amount of payments to approve each week, we cannot expect Kevin to research why one vendor is set up outside of the rules and is not on the approved list. If the vendor is not set up correctly using the methods described, they will be denied payment.