The way that wholesale customers pay is changing; and we can prove it.

December 5, 2021Invoicing , Late Payments

Getting paid for the work you do is usually a given, however, in the world of wholesale product supply, things work differently. Providing delayed payment terms means trying to get paid can be time-consuming, annoying and dangerous.

Why dangerous?

Because when buyers don’t pay, suppliers hound them. This is fair enough.

However, when communication between the two parties is nothing but “your invoice is late” the relationship is slowly eroded and get’s dangerously close to disappearing. Loyalty goes out the window and the buyer might skip out on the bill because they have other options.

This is how it used to be.

Think back ten years ago in 2011/12.

A customer might read out their credit card details over the phone. Younger consumers were just starting to pick up e-commerce and 40+ year old consumers with disposable income were still buying 90% retail. Fast forward to today and this is vastly different.

Those 40+ consumers with all the disposable income are now confident purchasing online and trust the process. They also represent a large portion of the wholesale customers who own the small and medium retail shops, pharmacies and licensed venues that buy from wholesalers every day.

They’re confident with entering their card details into websites and trust the process almost universally.

So why do wholesale product suppliers think behaviour as a business person is going to be any different to behaviour as a consumer?

Because they are stuck in their ways.

Why are product sellers handing over products to small businesses they barely know, on 30-day payment terms without security or any guarantee of payment, let alone payment on the due date?

Because they haven’t bothered to ask.

Why are product suppliers not doing what lenders do, which is identifying an account that all repayments are debited from?

Because they don’t feel like they can.

Why aren’t product suppliers following energy and telco providers who have increased Direct Debit payments by over 10% YoY since 2019?

Because they haven’t looked.

They say politics is downstream from culture and by the same token, business behaviour is downstream from consumer behaviour. So what does all this mean?

For those product suppliers who supply:

· alcohol, health products, food & beverage and fashion;
· to retailers, venues, service providers and pharmacies;
· on a recurring basis every week, fortnight or month;
· to a value of under $2,000 per order….

Your customers want to give you their bank or credit card details to bill when the due date hits.

For those of you who don’t like the empirical data I’ve just presented, here is some anecdotal evidence from a company that we work with at PencilPay. They are a manufacturer of Vitamins who sell to pharmacies and allied health professionals.

They went from an informal, paper-based process that led to account applications coming back slowly, double data entry, time spent chasing late payments and the resulting negative cashflow implications.

They bit the bullet and moved to a best practice solution where used the tried and tested method of traditional lenders. They asked all customers (new and existing) to complete a proper account application and direct debit form. 330 out of 408 pharmacies complied.

This allows them to provide goods on 30-day credit terms to their wholesale customers with the type of confidence that only comes from guaranteed payment.

Can you say that you trade with the same confidence every day? If you answered NO, book a time below.