How and when does a distributor or manufacturer get paid by a retailer?

[Manufacturer]

So here is the scenario: Let's say a manufacturer is offering a new brand of shampoo to a retailer. The retailer, just a small individual store, is interested in purchasing a small amount of the new shampoo, such as 20 items to test in their store. Here are my questions about what to do next:

Does the manufacturer send a blank purchase order to the retailer before the order is shipped?
Or does the manufacturer send the product along with a bill "To be paid upon receiving the product"?
Do retailers place orders online and should a manufacturer refer the retailer to place a PO online?
When does the retailer pay for the product, before they receive the product or after?
And what is the most common payment option of retailers for their goods from distributor/manufactures?

In short I would like to know what is the best way to get a product/money exchange underway that benefits both parties and that is most common practice. Thank you for your patience.

[Harold Mansfield]

As a bar manager I purchased solely from distributors. In some states it's illegal not to.
You pay when you order or when it arrives.

Sometimes depending on your history they'll give you deals or specials on new items that they want you to carry that can vary in unlimited ways including some free product for a certain order amount.

But for the most part, you pay when you order.

However, some retailers like Walmart pay based on their terms which is like 90 days or whatever they set.
You can only do this if you're Walmart or large enough that people are chomping at the bit to be in your store, or be carried in your bar.
If you're a nobody, whether or not you can get credit to pay net 30/60/90/120 or whatever is really up to the distributor. There are no hard fast rules.

Maybe you have good credit or good standing, or a very busy store and they set you up with terms.
But one thing for sure, the minute you burn them...you'll be paying cash for everything.

[krymson]

I've worked in large restaurant environments and small retail shops, and just like Harold stated, it's really up to the distributor on their payment terms. When I worked at this small computer repair/retail shop, our primary vendor gave us 30 days to pay, where as all of our other vendors we had to pay upon purchase before an item was shipped. I fell paying upon purchase is the best way for both parties, for the retailer it's done and out of the way, and for the vendor, you know you're not at risk for losing money and product.

Now the flip side to that coin from the retailer aspect. You might not have all the necessary funds available to pay for everything you need and you know you'll have the money after you sell some of the product. But there's never a guarantee that you'll sell what to need to make the payment, so it's a sketchy situation for both parties at that point.

[billbenson]

Wellllllllllll, I'm going to differ slightly in my opinion. A small quantity of shampoo will almost always be by credit card. You may be directed to charge the card at the time of order, shipment, or delivery. On rare occasions they may want to put it on a PO. The charge is made on the credit card and you send the customer a receipt. Similar to going to the grocery store, buying stuff, paying with a cc and getting a receipt.

Companies large and small may prefer to do business on terms. The most common is Net 30 which usually ends up being Net 45 or Net 60 but some companies actually pay early.

If you aren't set up in a companies system, particularly with larger bureaucratic companies, its a pain in the butt process for them to set you up in their system. They may choose to pay by cc. Even on large orders. The largest credit card order I've had was $19k. I did a $4500 order on a credit card today.

I try to get companies to do terms orders on a PO. Usually Net 30. The down side of this is you don't get paid for 30 plus days. The upside is you force the manufacturer / supplier to put you in their system.

Bottom line: Little orders will usually be on a cc and big orders will be on a PO.

[Manufacturer]

Thank you all for your insight!

[olgascherbakan]

I have been working in a retailer as a lead manager in Ukraine. If you are interested, I can share how this process is taken place here. I am working in computer company, we have deals with large manufacturers of software/hardware.
When we have deal with manufacturer we know for a long time - we make all the operations via Internet. And it does not depend on the amount of goods. We ask the manufacturer or distributor to send the goods, then our acountant pays money. Sometimes, if we are in good relations with manufacturer, they give us some weeks without paying, or even we can pay after we sell product. It is very convinient for us, because in such a case, we don't lose anything - if the product is not sold, we just send it back.
It happens, however, that we first pay, than the manufacturer gives us product. It concerns mostly software. For example, we ordered the software for the accountants here 1C: ERP - and we should pay beforehand, as we were dealing for the first time with tis company. The same happens, when we buy some antiviruses etc.
Some of the companies demand such practice: we pay, when we come to take the product. They don't give us some days and don't want to send product before. And as we don't want to pay money for small unknown companies - we just paying cash at a time.
As you probably know, in Ukraine there is a wave of crisis - so, small companies prefer to count of at once in order not to have problems with currency exhange. But large manufacturers located abroad can give different options for us to choose.
I hope, I gave you the full answer, but if you have some questions, I'll gladly help you)