Cash Flow: New Kid in Town

OK so I just finished a conversation with my husband that feels a bit like groundhog day. Once again it’s time for stores to take delivery of their orders and wholesale customers are falling off the radar or making excuses to not take the order.

OK I have to get this off my chest.
Rant: If you place an order for something you are committed to buying that item in any other case it seems but wholesale fashion. I don’t understand how stores can place an order, allow a manufacturer to pay to make a product and then just not pay for an order.
Thank you I feel better.

Reality 1: There will always be a percentage of stores that don’t take an order. Stores will close or not ever open. Those you have to factor in and if you have a good sales rep you will almost always be well aware before starting production.

Reality 2: Stores will over order at market. They get excited and place lots of orders optimistic about the next season. However when sales are down and cash flow is low for them they don’t take orders. And guess what orders they don’t take? It’s not the established lines they have been selling for years. it’s the new line they wrote. Yours. So now you have merchandise that you paid to produce and no payment. Hardly fair.

Reality 3: Your showroom reps will not take any financial responsibility for the orders stores don’t take. And they will still want full showroom fees.

Solution 1: You have to protect yourself from what I like to call the “New Kid In Town Shaft”. Your orders should look like contracts that customers must sign. Your showroom reps need to be on your side and clearly communicate that writing an order is a contract to take delivery and that there are consequences for not taking orders. You need a good follow up plan with stores that place orders as you go into production. These are just a few things I assumed were in place when I hired a rep but now I realize I should have clarified these things up front. I love my reps but I now realize I need to have a meeting about how exactly their order writing and follow up procedures are set up so I know where I need to step in or ask for more.

Solution 2: Reacting quickly to sell undeliverable merchandise (canceled orders) is key. Call your good wholesale customers you have already delivered to to see if they can use more inventory. Post a sale online for your retail customers. Move the product!

I just wanted you all to know you are not alone if you are experiencing this and if you are considering wholesale production you need to factor this into you financial planning. This happens to everyone and it is one of the biggest cash flow setbacks for a small fashion business.


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Filed under business finance, Business Planning

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