Check your Customers’ Purchase Orders
Many companies accept their customers’ Purchase Orders and contract terms without question, but these are naturally designed to favour them! These can also be very broad and not always applicable to your specific circumstances.
So check these carefully before you accept them and say if there any matters you don’t like or can’t accept – especially for larger and more critical orders.
Ask for the Terms you want – at the start!
Many customers ‘insist’ on 60 days credit or more – but you do not have to accept this, especially if you have a product or service they really need. But if you don’t ask, you won’t get (and it is no good asking for better terms after the contract is signed!).
Routine ploys that buyers use to defend their ‘Standard Terms’ can include the following, but you don’t have to fall for them.
- “These are our standard terms; everyone accepts them” – but so what? You aren’t ‘everyone’. ‘Standard Terms’ are designed for ‘standard situations’ and yours may not be.
- “I am not empowered to change them” (that old chestnut! – ‘The Power of Limited Authority’). If you need a change their terms, talk to whoever does have the authority!
- “It will take ages to get higher authority” – but if true, does that mean it will take ages for invoices to be approved for payment too?
- “Our computer doesn’t allow any changes/quicker payments/pre-payments” – but if your customer is a serious buyer, be assured there is always a way!
Most negotiations are a game, with each side wanting their own way until both sides realise they actually need each other. (If they don’t really need you, maybe you shouldn’t be selling to them?) But do be firm about key matters of principle, including prompt and reliable payment.
Counter arguments you might use for quicker payment can include:
- “Our proposal is based on our payment terms.” (What can they offer to help mitigate the extra costs of accepting theirs?)
- “Our business is smaller than yours.” (The cost to us of extended payment terms is far greater than any benefit you may gain.)
- “We firmly believe in honest long-term trading relationships with all our customers.” (We may not be able to sustain a long-term relationship with you if we can’t agree a fair price, paid promptly.)
- “It is against our policy to accept extended payment terms – my boss/bank/board would fire me!” (The ‘Power of Limited Authority’ reversed!)
- “If extended payment terms are so important to you“ (like your Buyer’s bonus? – quite possible!), “what can you offer us in return?” (Eg: pre-payment, phased payment, more business (if you can afford it!), longer-term contracts, penalties for their delayed payment or failure to meet agreed volume targets, technical support, use of their name in your advertising, an introduction to their R&D team to find out how their needs may be changing, use of their sports facilities – whatever you can think of!)
These may seem ‘cheeky’ – but be assured your customers’ sales teams probably use much the same approach!
Before accepting any order from a new client, ask some key questions. These can save so much time and grief later on!
- Please confirm you accept our payment terms? – we don’t want to upset our relationship by having to chase over-due payments;
- What is the process of getting paid once we invoice you? – who has to sign what paperwork, when; when do you run cheque/BACS payments; when do our invoices need to arrive to ensure prompt payment?;
- What could possibly stop us being paid on time, assuming we have played our part; how can we help avoid this?
- In case of any payment delays, can you help us?; who else can we talk to if payment is delayed and you aren’t available; who has authority to raise and sign cheques?
By Jeremy Thorn
Jeremy Thorn is the founding President of QED Consulting, a qualified Executive Leadership Coach and also Non-Executive Director of several fast-growing businesses. He is also the author of several prize-winning business books and a frequent speaker on management topics internationally.
First published by The Telegraph Online Business Club