Pay Now, Or Pay Later?

[particle]

I'm curious to know when most people are billing their customers for holsters and related gear orders. Personally, I hate holding onto other people's money any longer than necessary, so I send an invoice a few days before the order is complete and ship the order once payment is received. Since it can take weeks or months to complete an order, depending on the queue, I'm more comfortable knowing the customer isn't really out anything financially if something happens to me or an order is abnormally delayed because life stepped in the way.

I'm working on updating my website with a whole new site, and the shopping cart system doesn't have an option for "Buy Now, Pay Later", so I'm sorta being pushed to collect the money up front since I don't know how to incorporate any other methods with a cart-based system. For what it's worth, my new site is using Wordpress and WooCommerce for the shopping cart.

So, let's hear it - when do you usually collect your money?

[Spinner]

I don't do holsters but with the motorcycle bibs & gear everything is pay up front. Main reason it's every piece I do is customized in some way, some more so than others and I can't guarantee that I'll be able to sell it if the client backs out or something happens to them. A minimum 50% deposit is required, although most folks prefer to simply pay all up front to get it out of the way. Any remainder is due prior to shipping. I send a final pic for job completion approval with the final invoice.

As for holding onto other people's money, I do keep a separate account for job deposits/payments just in case of a cancellation. It's only happened twice but it can happen especially with a wait time of 3 months or more like I'm running with now. A client can request a full deposit return up until the day before I cut the leather and they can request a refund after leather is cut but before any custom work (tooling, etc) is done of $80%. The 20% is a stock return fee I charge as it could be months before a piece for that specific bike is requested again so I have to store the raw bib separate from everything else due to their odd shape. Once the tooling begins, if it's a specific or client supplied artwork piece (versus a standard design I do a lot of like POW/MIA) then the bib is trash and they can request 50% back the other 50% covers materials and time wasted.

Chris

[Sixer]

Like Spinner said, each item is custom made... so the last thing I want, is to be stuck with a holster that someone decides they don't want or can't afford a few weeks down the road.

I ask for at least half of the total amount due before I start a project... then collect the remaining balance before it ships. Seems to be working great so far. Suprisingly, most customers I've dealt with prefer to pay the full amount up front... I have no problem with that either.

[cleveland]

I have been burned a number of times by a no payment customers, so I take full payment up front now. If the wait is a problem for them, they can always buy a Galco holster. :-)

[Chavez]

Hi!

I'm actually very interested in this topic.

How often do you get cutomers cancelling their orders and what do you do if you've already started the project or if you finished it and they did not like it (e.g. fishing for minor flaws, etc) and don't want it any more. The returns situation gets worse with distant selling regulations, where they can just return it to you within 7 days. As far as I remember DSR don't apply to custom items, but then once again, what if they just don't want the product? Probably easy thing to tackle for someone with good reputation, but it can give the beginners some hard times.

I was thinking that once I start trading, I would ask for payment upfront or at least semi-refundable deposits, however this is a tricky area.

[Spinner]

Hi!

I'm actually very interested in this topic.

How often do you get cutomers cancelling their orders and what do you do if you've already started the project or if you finished it and they did not like it (e.g. fishing for minor flaws, etc) and don't want it any more. The returns situation gets worse with distant selling regulations, where they can just return it to you within 7 days. As far as I remember DSR don't apply to custom items, but then once again, what if they just don't want the product? Probably easy thing to tackle for someone with good reputation, but it can give the beginners some hard times.

I was thinking that once I start trading, I would ask for payment upfront or at least semi-refundable deposits, however this is a tricky area.

If you "qualify" the client well enough you shouldn't have many returns/cancellations. When I'm talking to the client about the piece I'll ask them how much experience they have with leather, approaching it from a care perspective to make sure questions are answered. This allows me to gauge how well they understand that it's a natural product and will have some "proof of life" characteristics. Those that talk about "perfect", flawless, etc. I ask a few more questions of to determine if I just need to be pickier of where I cut their piece of hide from or if I should direct them to the local vinyl sewing upholstery shop. The fun part is, by asking the right questions I find that many bikers like to have some kind of authenticating mark (usually a very light and/or small scar or stretch mark) to show it's real handcrafted leather versus pleather or vinyl. We bikers tend to enjoy showing off a bit if you hadn't noticed.

As for them not liking it, that's one reason for the final picture being sent pre-shipping. Get them to sign off that the finished product is designed as agreed. Damages that come from shipping, etc. are a hazard of doing business and are dealt with separately (shipping insurance, etc.). If the returns are due to work quality then it's time to figure out if it's actually your work or their expectations, either way something wasn't managed 100% during the sales process. Funny thing is, the two times I have had to re make a client's item after it was all tooled, etc. was due to my opinion of it, not theirs. I had one client call me all dismayed that I wouldn't finish on time because I decided to retool a piece I had just finished the night before.

#1 shop rule: If I wouldn't be proud to hang the piece on my bike, it doesn't ship out.

[Chavez]

Thank you for your reply Spinner, that was really helpful!

By the way, I'm a bit into bikes myself (would have been a lot into them if had some spare cash lol), so I know what you mean about showng off=)

[GrampaJoel]

I get my actual material cost up front, and the balance upon completion.

If something happens and I don't get the order done for some reason I offer a refund of the already paid deposit.

If the order gets canceled I finish the project and sell it for what I would have made for what the original price was. If the project is personalized I have a higher up front material cost.

Keeps things simple for me.

Joel

[ouchmyfinger]

depends on the item, if half up front will not pay for the materials (like exotics usually doesn't) make sure to get all that up front, I've been burned quite a few times with taking a deposit and then they can't afford the rest later and I'm stuck hanging onto it forever and losing the time spent. also you get into that uncomfortable area when they want their deposit back after the materials have been ordered and cut. I refuse to do anything where i need to come out of pocket unless i know enough about them and feel comfortable.

[Lobo]

I think your experience in this will depend largely upon how you are doing business.

For many years my customers were those I knew, those I worked with, and referals. I took the orders, produced the product, then delivered and collected. Never any problems.

When I started doing business on-line I continued the same way, completing each product (and even sending photos) prior to payment, and I offered a "no questions asked" return policy. That lasted for a year or so. Then I noticed that about 5% of customers did not complete the transaction for various reasons (found something elsewhere, traded handguns, etc). Finally, I experienced a couple of months during which dozens of orders were returned for refund (all from a cluster of zip codes, so I suspect it was either someone's idea of a joke, or intentional sabotage of my little business). So I changed both my payment and warranty policies.

Any order reaching production stage that has not been paid is placed on "hold" status, and if payment has not been received by the estimated completion date the order is considered as "cancelled". My warranty is limited to defects in materials or workmanship for a period of one year.

Last year I received about 1600 orders and 71 were never paid (4.4%), so they were never made. The 4.4% that were never made amount to two weeks of production, so I was able to produce those orders that customers actually wanted without unnecessary delays, and the profits of two weeks of my time were not just lost in the process.

I still have the occasional "leaker", an order that is completed before payment has been received. When that happens I contact the customer and find that nearly all of them have changed their minds, found something elsewhere, traded the pistol, or some other variation of the excuses. When this happens I put the product in a box, then hold a clearance sale a couple of times per year offering them at a good discount to make them go away.

There are a few names I see several times per year on new orders, those orders are never paid for and never get made. They keep placing orders again and again, so I don't know what their motives might be.

Your experience may vary, but I think mine is generally reflective of people in general. Some change their minds. Some place orders they may not be able to afford. Some change handguns more frequently than others change their socks.

11 holster designs, with or without 4 common options, in 4 finish colors, for 137 handgun models, results in over 24,000 possible variations (not counting left-hand versions). At my current rate of production the likelihood of receiving a duplicate order is something like once every 15 to 20 years, and that is for products that are more or less standardized. If you are doing custom, one-of-a-kind, special orders it could get real "iffy" to produce anything before payment has been received.

[husker]

I think your experience in this will depend largely upon how you are doing business.

For many years my customers were those I knew, those I worked with, and referals. I took the orders, produced the product, then delivered and collected. Never any problems.

When I started doing business on-line I continued the same way, completing each product (and even sending photos) prior to payment, and I offered a "no questions asked" return policy. That lasted for a year or so. Then I noticed that about 5% of customers did not complete the transaction for various reasons (found something elsewhere, traded handguns, etc). Finally, I experienced a couple of months during which dozens of orders were returned for refund (all from a cluster of zip codes, so I suspect it was either someone's idea of a joke, or intentional sabotage of my little business). So I changed both my payment and warranty policies.

Any order reaching production stage that has not been paid is placed on "hold" status, and if payment has not been received by the estimated completion date the order is considered as "cancelled". My warranty is limited to defects in materials or workmanship for a period of one year.

Last year I received about 1600 orders and 71 were never paid (4.4%), so they were never made. The 4.4% that were never made amount to two weeks of production, so I was able to produce those orders that customers actually wanted without unnecessary delays, and the profits of two weeks of my time were not just lost in the process.

I still have the occasional "leaker", an order that is completed before payment has been received. When that happens I contact the customer and find that nearly all of them have changed their minds, found something elsewhere, traded the pistol, or some other variation of the excuses. When this happens I put the product in a box, then hold a clearance sale a couple of times per year offering them at a good discount to make them go away.

There are a few names I see several times per year on new orders, those orders are never paid for and never get made. They keep placing orders again and again, so I don't know what their motives might be.

Your experience may vary, but I think mine is generally reflective of people in general. Some change their minds. Some place orders they may not be able to afford. Some change handguns more frequently than others change their socks.

11 holster designs, with or without 4 common options, in 4 finish colors, for 137 handgun models, results in over 24,000 possible variations (not counting left-hand versions). At my current rate of production the likelihood of receiving a duplicate order is something like once every 15 to 20 years, and that is for products that are more or less standardized. If you are doing custom, one-of-a-kind, special orders it could get real "iffy" to produce anything before payment has been received.

That was a great response Lobo. Thanks.

[particle]

Agreed - thank you Lobo, and thanks to everyone else as well. I started this thread thinking I was going to be in the minority, but it looks pretty evenly split so far! My wife and family have been pushing me to take payment up front, but cancellations haven't been a big problem for me so far. I always email the current batch of customers right before I begin their orders to make sure they still want their holster and to confirm they don't have any changes to the order. There is almost always tweaks to orders!

I will say the only reason I am even debating taking payment up front is because I'm building a new website, and the shopping cart system doesn't have an option for buy-now, pay later. I won't get into the nitty gritty of how it works (partly because I don't understand some of it), but in an effort to simplify the ordering process for my customers and the invoicing process for my wife (she handles the billing), I'm almost forced to accept payment up front unless I want to pay someone to develop another option for my site which I can't afford right now. But at least I know I won't be in the minority if I start requesting payment up front!

Spinner - that's a good idea about a separate account for deposits. We debated keeping it in PayPal, but it's probably better to create a new savings account at my bank... Good idea!

[Spinner]

Agreed - thank you Lobo, and thanks to everyone else as well. I started this thread thinking I was going to be in the minority, but it looks pretty evenly split so far! My wife and family have been pushing me to take payment up front, but cancellations haven't been a big problem for me so far. I always email the current batch of customers right before I begin their orders to make sure they still want their holster and to confirm they don't have any changes to the order. There is almost always tweaks to orders!

I will say the only reason I am even debating taking payment up front is because I'm building a new website, and the shopping cart system doesn't have an option for buy-now, pay later. I won't get into the nitty gritty of how it works (partly because I don't understand some of it), but in an effort to simplify the ordering process for my customers and the invoicing process for my wife (she handles the billing), I'm almost forced to accept payment up front unless I want to pay someone to develop another option for my site which I can't afford right now. But at least I know I won't be in the minority if I start requesting payment up front!

Spinner - that's a good idea about a separate account for deposits. We debated keeping it in PayPal, but it's probably better to create a new savings account at my bank... Good idea!

Something else that helps with avoiding cancellations, especially with a long backlog is communication. I've made myself a good reputation for communication with my clients but I've been trying to figure out how to improve it during the 'blackout period' between the order and job construction. Figuring that typically I'll have a good discussion on the project specifics, invoice the client & confirm payment and then the wait...then once the job starts we begin communicating regularly again but in the middle there could be 1-2 months of them not hearing from me. For most this is fine, they understand the wait for custom items but I personally want to improve my review marks so starting next week I'm going to be putting together a newsletter of sorts that will go out to clients that have confirmed orders that aren't in process (in process orders get pics of the major construction steps so they are already hearing from me) just to let them know I haven't forgotten about them. I'm still working out what to include to keep it short & concise.

As for accounts, I struggled with it for awhile thinking multiple accounts would be a pain but it has worked out well. I actually have 3 bank accounts for the business. I also use paypal but it's linked to the main bank account and I simply transfer funds each time I get paid to keep the records easier to manage and to be able to use their shipping service (not to mention Paypal's sales reports suck, my bank's are much better so putting it all there makes my life easier).

Working Capital: this account has all confirmed/completed order payments and is used for buying supplies, etc.

Deposits: This account is for payments received but are held until the job start. Once the job begins, the related funds are transferred to working capital

Taxes & Fees: this account gets a 10% cut from all completed jobs and is used as a backup source for paying taxes, business fees/licenses, etc.

Why the third account? It's simply a safety net in case I don't have enough in the main business account to cover when Uncle Sam comes calling. At the end of the year, once everything is paid the remaining funds move to the working capital account - kind of like a year end bonus or tax refund.

[Reaper]

Up front, though I meet most of my customers face to face and it keeps me busy enough without doing on line sales.

I learned a long time ago working on peoples homes, that you never build anything for anyone with your dime. Take a deposit that covers the materials at least, and the labor upon completion.

You could not imagine how many people loved the Job being done while it was being done, bragging it up to friends and such only to get poor and think it was time to haggle when it was time to pay.

So I quit operating on my money to do peoples jobs and I quit eating $$$$ a year by doing so.