Pay as you go or account?

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Pay as you go or account?

Postby GeoSpectrum » Fri Sep 25, 2015 1:18 pm

Ive been asked a couple of times in the last week if I would like to open an account with my suppliers. So I was wondering, other than managing cash flow what are the benefits of running accounts with suppliers? Cash flow is not a real issue for me so I can't realy see any benefit.
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Re: Pay as you go or account?

Postby Whitewater Gallery » Fri Sep 25, 2015 2:11 pm

The only advantage for me is that I do not have to have the credit card to hand when I place an order, otherwise as I pay the monthly account by card it makes no real difference day to day. One possible advantage is that if you build good relationships with suppliers on an account basis you build a good credit rating (for want of a better term) should you ever have need to give trade references in the future. On that basis alone I would say open a couple of accounts and it covers all the bases.
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Re: Pay as you go or account?

Postby Jamesnkr » Fri Sep 25, 2015 2:29 pm

Whitewater Gallery wrote:should you ever have need to give trade references in the future.


If all you're doing is ordering moulding etc. it's difficult to see why you would ever need trade references if "Cash flow is not a real issue" as for OP. Indeed, for a high-margin business such as picture framing, if you're having to buy your moulding on credit then you're quite likely rapidly heading in the wrong direction...
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Re: Pay as you go or account?

Postby Roboframer » Fri Sep 25, 2015 2:42 pm

There's many reasons for having a credit account not least of all it may actually suit the suppliers. One reason for me, bar convenience, is less bank transactions, I order at least once a week from at least three suppliers.

If you don't want/or need an account though, ask what discount they give for Payment up front or COD.
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Re: Pay as you go or account?

Postby Tudor Rose » Fri Sep 25, 2015 2:46 pm

Agree with Whitewater Gallery and Robo's views. Really the way I see it, why NOT open accounts? You build up a recognized history with the supplier, you get time to pay your bills so it can help with cashflow as you grow and you are also in a better position to negotiate discounts and deals. When we set up our businesses we just opened accounts automatically, didn't occur to us not to.
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Re: Pay as you go or account?

Postby Graysalchemy » Fri Sep 25, 2015 2:58 pm

I agree with Robo, though it probably depends on the size of your business and growth of your business.

I think to say " if you're having to buy your moulding on credit then you're quite likely rapidly heading in the wrong direction..." is a pile of tosh.
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Re: Pay as you go or account?

Postby Jamesnkr » Fri Sep 25, 2015 3:20 pm

Graysalchemy wrote:I think to say " if you're having to buy your moulding on credit then you're quite likely rapidly heading in the wrong direction..." is a pile of tosh.


It's certainly helpful to have somebody else finance your business's cashflow. I just suspect that for a picture framer the amount of money tied up in stock isn't very high (or shouldn't be... just because that pink moulding was cheap was no reason to order 1000 feet of it) and therefore the benefit of credit terms is quite low. Picture framing is generally a high margin business, so the cost of stock isn't very significant relative to the other costs of the business (the owner's time). This is particularly true if you're hand-finishing. If you're selling frames where you turn £35 of moulding into £350 of frame after half a day's work, then the cost of your raw materials is relatively inconsequential compared with your turnover. And if your cashflow is that tight that you need your supplier to finance these raw materials, then your business is struggling.

Now, obviously if you are making huge quantities of cheap frames using Romanian labour in Bradford, and selling them wholesale and cheaply and your customers are being given 30 day terms, then what I wrote is a pile of tosh. Because under these circumstances it's a low-margin and capital-intensive business (by which I mean you're carrying high levels of stock that you don't get paid for).
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Re: Pay as you go or account?

Postby Whitewater Gallery » Fri Sep 25, 2015 4:24 pm

Jamesnkr wrote:If all you're doing is ordering moulding etc.


I did not bother with accounts to start with as it is easier to know where you stand each month, but once we opened our Gallery we became much busier and it was frustrating having to type in card details 2 or 3 times a day during our summer season so I applied for trade accounts. 3 years later I decided to upgrade our machines and they were all shipped on account. It all happened at the time to pay the tax man so 30 days on account followed by 30 days on the card was not essential but very helpful.

As Robo mentioned many suppliers prefer accounts as a monthly payment is less work for the accounts dept, and I am sure that they hope you will pay by bank transfer saving on the card processing fee.
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Re: Pay as you go or account?

Postby Not your average framer » Fri Sep 25, 2015 5:50 pm

Open accounts with as many suppliers as you can. If you haven't got an account the company won't usually send you new catalogues when they come out and the reps won't come to see you and you won't know about the new mouldings.

If you don't like the idea of 30 day accounts you can still pay the bill when the invoice arrives. Usually the invoice arrives not long after the goods.
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Re: Pay as you go or account?

Postby IFGL » Fri Sep 25, 2015 6:33 pm

Definitely account for us, not everyone has the same business James, we have several boxes of moulding sent each month without having to order them, they never even go into the suppliers online stock, just comes straight out + everything Roboframer said, I beginning to think that boy may know a thing or two.
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Re: Pay as you go or account?

Postby prospero » Fri Sep 25, 2015 8:00 pm

One thing is that if you order say, 100ft of moulding you might get sent 108 ft. Which is standard practice. It might be in 9ft lengths. So the bill might vary a tad. Waiting until it's picked and packed and then ringing you back for the payment would be an extra hassle for the supplier.

Open accounts if you can. It's sound business practice. Even huge conglomerations worth billions buy their supplies on account. If they are really big they usually negotiate longer credit periods. Basically, the longer you can keep money in your business account the better. Why do you think banks take three (working) days to clear a cheque? It doesn't physically take that long to verify if it's pukka or not. They don't put it in a shoe box and see if it behaves itself. It means in effect they have millions of pounds in their pockets for a few days. Or a few pounds for millions of years. :P
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Re: Pay as you go or account?

Postby Whitewater Gallery » Sat Sep 26, 2015 10:35 am

Many hears ago in one of my previous existences we were chasing money from one of the Maxwell group of companies only to be told by the accounts department had been told not to pay anyone for another 60 days as they were raising finance to buy another company! Allot of money easily raised, though I seem to remember it ultimately caused the boss a bit of stress!
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Re: Pay as you go or account?

Postby prospero » Sat Sep 26, 2015 10:47 am

Whitewater Gallery wrote:Many hears ago in one of my previous existences we were chasing money from one of the Maxwell group of companies only to be told by the accounts department had been told not to pay anyone for another 60 days as they were raising finance to buy another company! Allot of money easily raised, though I seem to remember it ultimately caused the boss a bit of stress!



This is reminiscent of the days when big aristocratic families ruled the roost. They would run up huge bills from local shops and never pay them. Local businesses would be very reluctant to chase the bills out of some outdated sense of feudalism. They didn't want to lose the custom of the 'big house'. :? To some extent this attitude persists.

How do you think rich folks got rich in the first place? :lol:
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Re: Pay as you go or account?

Postby Steve N » Sun Sep 27, 2015 12:02 pm

Another reason for account is that if you are sent carp moulding, you are likely to a credit quicker than if you have paid upfront, if the supplier is a bit slow with the credit, don't pay the invoice
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Re: Pay as you go or account?

Postby Graysalchemy » Sun Sep 27, 2015 2:58 pm

Jamesnkr wrote "Now, obviously if you are making huge quantities of cheap frames using Romanian labour in Bradford, and selling them wholesale and cheaply and your customers are being given 30 day terms, then what I wrote is a pile of tosh. Because under these circumstances it's a low-margin and capital-intensive business (by which I mean you're carrying high levels of stock that you don't get paid for)."

How wrong you are.

My problem with you original post is that you made the assumption that everyone is a bespoke framer with a exceptionally high return on investment, and customers paying either up front or on collection.

As a framer who deals mostly business to business I have to give 30 Days credit which usually means 60 days, so you can see regardless of the profitability of the job I will need credit from my suppliers. If your business is expanding then you will also need to utilise credit unless you have private funds to bankroll the venture.

Far from heading in the wrong direction my business is experiencing healthy growth and profits despite using the credit facilities of Arqadia etal

Not everyone is a bespoke framer dealing with the general public, some of us actually tap into the rather large commercial interiors market and make a healthy profit from it.
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Re: Pay as you go or account?

Postby Whitewater Gallery » Sun Sep 27, 2015 3:32 pm

We spend allot of time sitting in the Gallery waiting for the £350 framed print to sell, time that Graysalchemy spends framing for the volume orders - at the end of the day to probably each make a similar profit if the business model is correct.

I think it is fair to say that a credit account is sensible business practice if you are on top of your book keeping, and therefore always know where you stand, and paying up front is probably best if you are not as looking at the bank account will instantly let you see the state of play.
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Re: Pay as you go or account?

Postby Jamesnkr » Mon Sep 28, 2015 10:54 am

Graysalchemy wrote:How wrong you are.

My problem with you original post is that you made the assumption that everyone is a bespoke framer with a exceptionally high return on investment, and customers paying either up front or on collection.


I don't think I made that assumption as my original post was in response to GeoSpectrum who specifically stated that cash flow was not an issue! Obviously for a large commercial outfit the answer is unlikely to be the same. Though I suspect that if your suppliers withdrew their credit terms it wouldn't have that much impact on your business; the added value in picture framing comes from charging for the framers' hours, not from holding large quantities of stock. Unlike Tesco.
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Re: Pay as you go or account?

Postby GeoSpectrum » Mon Sep 28, 2015 11:15 am

many thanks for all of your inputs, very informative. I may reconsider my thinking. :clap:
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Re: Pay as you go or account?

Postby Kwik Picture Framing » Sun Oct 18, 2015 9:22 pm

I would do pay as you go for bulk buying to get max discount from suppliers and for regular smaller orders on account
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