Payment Option

[joei3316]

This is my first time starting a Business. I am selling construction materials as an agent. I do not buy inventory from manufacturers. I simply set my own price based on the price that the manufacturer gave me, and I earn the difference.

My question is, what kind of payment options do I have for my customers. Since I will be targeting customers from outside my local area, face to face payment(either cash or cheque) is probably not a good option.

Does anybody know how they usually take care of the payment for B2B construction materials? More specifically, when do they pay? Do they pay before or after the material arrives? Or they paid some deposit first, and then the rest when the material arrives?

I've done some research and came up with a view option.

- Setting up an account with my customers. (In another word, become their supplier and business partner)
- online payment/ Bank electronic transfers.
- Or let the manufacturer handle the payment, and then the manufacturer pays me a certain amount?

Please let me know When and How I should take care of this payment issue. Thanks in advance.

[Fulcrum]

Talk to the manufacturer and see what they recommend. I've got no experience with drop shipping so I can't help beyond this.

[huggytree]

as a plumber I buy materials daily

I get the materials and then get a invoice at the end of each month with 30 days from there to pay..many offer 1-2% off for quick payment

your getting into a field where you need millions..

when I do a job I pay for all my materials and then sit and wait for 30 days to collect my $$ back along with the profit........your going to be doing a similar thing....problem is most wont pay in 7 days like I do...and some will go under and never pay you.

the profit margin doesn't seem very high for my suppliers....especially for all the returns/mistakes/issues......id pick a business with a higher profit margin

[billbenson]

I don't inventory. Everything is drop shipped. It's going to depend on every supplier. They are all going to have different policies.

For me, I walked up with 20k in orders, paid by credit card, and they both drop shipped and put me on as a distributor.

[joei3316]

I think you have a very good point here.... most people would request a month to pay and yes, some people would never pay.

However, like I like said on my original post, I am only operating as an agent to the manufacturer. I do not purchase inventory from the them. My job is to simply find the customer and help these guys get into the market here in North America.

As far as making a deal with the manufacturer, they initial request full payment before they ship out the materials. After I explain the situation to them in North America, telling them how we do things differently than in China, the payment option with them are still under discussion.

Questions:
1. Do you think I can just talk to them and ask them to handle the payment directly from the customers?
2. Do you think that I still need tons of money even though I am not buying from the manufacturer?

[joei3316]

as a plumber I buy materials daily

I get the materials and then get a invoice at the end of each month with 30 days from there to pay..many offer 1-2% off for quick payment

your getting into a field where you need millions..

when I do a job I pay for all my materials and then sit and wait for 30 days to collect my $$ back along with the profit........your going to be doing a similar thing....problem is most wont pay in 7 days like I do...and some will go under and never pay you.

the profit margin doesn't seem very high for my suppliers....especially for all the returns/mistakes/issues......id pick a business with a higher profit margin

I think you have a very good point here.... most people would request a month to pay and yes, some people would never pay.

However, like I like said on my original post, I am only operating as an agent to the manufacturer. I do not purchase inventory from the them. My job is to simply find the customer and help these guys get into the market here in North America.

As far as making a deal with the manufacturer, they initial request full payment before they ship out the materials. After I explain the situation to them in North America, telling them how we do things differently than in China, the payment option with them are still under discussion.

Questions:
1. Do you think I can just talk to them and ask them to handle the payment directly from the customers?
2. Do you think that I still need tons of money even though I am not buying from the manufacturer?

[joei3316]

I don't inventory. Everything is drop shipped. It's going to depend on every supplier. They are all going to have different policies.

For me, I walked up with 20k in orders, paid by credit card, and they both drop shipped and put me on as a distributor.

So basically, I have to negotiate different terms with different customers right? Is that what you mean?

[Sean_DeSilva]

See if you can get your customers to pay upfront until you feel comfortable extending payment terms. Depending on your industry it may or may not be seen as acceptable.

[dewitzMEDIA]

By not stocking supplies and working as a middle man you are really putting your self at a disadvantage. Having any kind of card processing for $1k's of dollars will eat heavily into your profits, and as most have mentioned you likely will be dealing with clients who want some type of credit (net 30) The only thing I can see is trying to collect your difference up front (your mark up) and have the MFG pick up the balance for what they are owed. Hope that you don't have many non pays because your suppliers may not want to offer you the front (your the sales contact) and wait for non payment. That is a tough one there. Good luck and let us know what you figured out!

[Bob]

I do not know a lot about your particular industry but if this is a typical drop shipment relationship then your clients would pay you and you would put in the order with the company that is drop shipping. This is the advantage and the point of drop shipping, that you do not need to have inventory. You will pay the drop shipper a reduced fee and you make the difference. You need to keep into account shipping, merchant account fees and other costs to figure out if it is worthwhile. Most people in your place would get a merchant account of some kind to process payment. Many people start their business using a drop shipment method and grow into a supplier themselves, beginning to warehouse, because there ultimately is more money in that, but you often need to get to a place to be able to start that. Anyway, that's my thoughts. Good luck!

[Russ in Vancouver]

Heres my 2 pessimist cents.

When I was at the Canton fair in 2013 what I discovered .....

99/100 will claim they are the manufacturer but what they really are is just a few steps ahead of you. They are just a re seller as well.
So getting paid if you find a buyer........ good luck unless your buyer is some newb to business and just got an inheritance or some other type of easy money.

Payment terms, look up FOB and the seller will usually have terms like FOB Shanghai.

What method of compensation did your supplier mention they would use?
Be careful before you invest any money or too much time into it. Be prepared to let it go and move onto a better opportunity. These guys you are dealing with probably have dozens if not more of hungry people like you.

[joei3316]

Heres my 2 pessimist cents.

When I was at the Canton fair in 2013 what I discovered .....

99/100 will claim they are the manufacturer but what they really are is just a few steps ahead of you. They are just a re seller as well.
So getting paid if you find a buyer........ good luck unless your buyer is some newb to business and just got an inheritance or some other type of easy money.

Payment terms, look up FOB and the seller will usually have terms like FOB Shanghai.

What method of compensation did your supplier mention they would use?
Be careful before you invest any money or too much time into it. Be prepared to let it go and move onto a better opportunity. These guys you are dealing with probably have dozens if not more of hungry people like you.

The manufacturer gave me a quote saying FOB Guangzhou. So yeah, Buyers or even I have to pay for shipping.

That is why I marked up the price including the shipping cost, potential Tariff and marketing fee(my cut).