What is the PO process like?

[imaginerobots]

I plan to market my robot kits to research labs and universities. How do you process a PO? What are the normal terms of payment? Do most people pay on time and what do you do if they don't? Any other pointers is much appreciated.

[franklin97355]

I plan to market my robot kits to research labs and universities. How do you process a PO?

A PO is a written promise to pay and probably handled like an unpaid asset.

What are the normal terms of payment?

That is decided between you and the company you accepted the PO from, it can be 30, 60, or 90 days or anything else you work out.

Do most people pay on time and what do you do if they don't?

If you deal with reputable companies they usually pay on time if they don't it's the same (or similar) to getting a bounced check

[imaginerobots]

I was thinking of going through resellers but they too probably pay with POs. It's that 30,60,90 day payment terms that make this payment inferior to other means like credit card.

[mitpatterson]

to add to what franklin said, in regards to if they pay and what you do if they don't. and also just a disclaimer first IANAL(I am not a Lawyer).

with that out of the way, if i was going to consider accepting a P.O. from a company, the first thing i would do is do a google search, see what info there is on them, how long have they been in buisness, what type of company are they(Partnership, LLC, Corporation ect.). And if you are really concerrned you could consider looking up what info Dun & Bradstreet Credibility Corp(http://www.dnb.com/ ) has on the company(they are basically the equivalent of Transunion, eqafax, experian and the like, but for business) I'm not sure what D & B will give you for free, i think you have to pay to find out very much on the company.

And regarding non-payment, depending on the exact wording of the P.O. there may be a specific clause in it regarding YOUR recourse for non-payment, otherwise, I believe the method of recourse would to take them to small claims court. The biggest thing is don't go giving a company you have done business with the ability to send you a P.O. for thousands of dollars, limit how much they can spend until you have built a relationship, then you can raise their "limit"

*****Disclaimer****** I am not a lawyer, the above should not be taken as legal advice, if you need to know 100% fact, please consult a licensed legal professional. I have taken a business law course(last semester) that is what I am basing most of what I have said on

[/end Disclaimer]

[westfw]

Something to be aware of: It is relatively common that if you get a PO on "90 day" terms, the company WILL take pretty darn close to 90 days to pay you. Large companies will have entire accounting departments dedicated to keeping as much money as they can for as long as they can... (this has nothing to do with their ability or their willingness to pay. It's just what makes THEIR books look the best.)

[adafruit_support_bill]

It's just what makes THEIR books look the best

Near the end of a slow quarter, 90 days can easily become 120. Oh, and the 90 day clock usually stops ticking when payment is 'approved', so they will take their 3% discount - even if it takes them another month to actually cut the check.

I've never been 'stiffed' by a large multinational. But they can really make a mess of your cash-flow.

[imaginerobots]

Man that sucks. My idea of racking up credit card bills and then paying the balance back quickly won't work if I have to accept lots of POs. Also, going to court might be impossible if it's out of state. I'm thinking the plan now would be to go through a credible reseller at first.

[macegr]

Do not start a business on credit cards.

Borrow money from an investor or even friends if you have to, or apply for a loan, but don't do it on cards.

When you do get a business credit card, don't spend more than you have in the bank. It can really help your cash flow on a short term basis but you cannot allow yourself to get into a situation where you cannot pay off the card at the end of the month.

[imaginerobots]

Conclusion: I think I need at least a 90 day buffer to cover costs while waiting for any PO payment.

Thanks All.

[fussylizard]

I work at a small software consulting company so it is not the same sort of business, but here's a few comments you might find helpful:
- As mentioned by others, the bigger they are the slower they pay.
- You can write 30 days, 90 days, whatever on the invoice, but customers will still pay late. As long as you are working with reputable companies, they will pay eventually.
- Don't be shy about calling customer accounting departments and asking them to track down a late payment. Invoices get lost, stuck in the system, etc., etc., etc. It is always something, so pick up that phone. Be polite but firm and follow up, hopefully with the same person so you have continuity.
- Sometimes you can get your immediate customer (whoever is actually using your products/services) involved to help push things through accounting departments, esp. if you refuse to take new orders until late invoices are paid.
- Avoid early payment discounts. It sounds good to encourage customers to pay early (e.g. 3% off if paid within 30 days of the invoice date instead of the agreed-upon net-90), but accounting departments will often apply the discount and not pay on time and it is difficult to sort that out.
- If customers are paying too slowly you can sometimes get a loan against the amount due to you (this is called "factoring receivables"). It is expensive as far as loans go, but it might be useful. Business lines of credit are similarly useful (we only use ours to "float" receivables) but again, it's basically money out of your pocket since you are paying interest on a loan.
- Your final recourse it to sue the customer for payment, but (1) court is expensive and a huge time investment, and (2) do you really want to be suing your customers?

The bottom line: Only give credit to reputable customers and require up-front payment for everyone else.