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Distributor cancelled an order and we need to move 30k bags of coffee [updated]

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Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#181

Post by bombcar »

ryoshu wrote: post #171
chasd00 wrote: post #129

Earlier quoted context omitted.

i've read comments like this before on hackernews. Are the payment terms not on the contract signed? It seems like something you'd really want to understand before starting a project...

They generally are, but if you say net 30 and set a % penalty for not paying in net 30 (common), when a multi-billion dollar corporation decides to do net 90 and won't pay the penalty, what are you going to do as a freelancer? Sue them? The amount of money you spend on legal fees would likely be multiples of the penalty fees. And it would delay payment further. Big corporations rely on this power imbalance.

I wonder how you could word the contract such that failure to pay on time would be onerous enough that the big company would actually move on it. Something like penalties + legal fees + treble damages or something.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#182

Post by JulianWasTaken »

golem14 wrote: post #173
irjustin wrote: post #159

The coffee producer was expecting a retail chain to pay $41/bag ($250k/6000) I'm glad that they were able to move the bags and save their business and themselves from all this debt, but this red flag needs to be addressed and owned up.

$41 per CASE, not per bag.

The point is they are claiming they understood "unit" to initially mean "bag". That seems incomprehensible, it'd mean indeed that they originally thought they were being paid $41 per bag, not case, and then realized it was $41 per case only when they realized "unit" meant case.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#183

Post by golem14 »

irjustin wrote: post #175
golem14 wrote: post #173

Earlier quoted context omitted.

$41 per CASE, not per bag.

That's what it ended up being, but they thought they landed a 250k contract to do 6,000 "units" and they were surprised when those units ended up being cases mid-way through production/ordering. So, initially, they believed $41/bag....

Yes, that is right.

I'm not saying that the OP was blameless. I don't understand why the first thing they did after the discovering the issue was to hound the distributor and try to renegotiate payment terms. I believe the worst would have been to loose 6000 bags, which wouldn't have been too traumatic.

Edit: I haven't seen the specific order. Maybe it was written in a way that priced by bag but somehow requested UNITS in a way that the total order volume in USD wasn't clear.

The story surely paints OP in a better light than the other side would, so maybe there is more to this than meets the eye.

For sure, a good learning experience for those guys.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#184

Post by Ekaros »

interactivecode wrote: post #166
caseysoftware wrote: post #147

Earlier quoted context omitted.

> they should also offer net 30 terms for their customers. Consumers already have Net 30 terms via credit cards. The difference is that the shop isn't waiting for you to pay and the credit card company takes on the risk.

quite a significant difference for the complete population of Europe where basically no everyday purchases are made by credit card

That is very country specific. I could do almost all of my purchases with credit card if I wished. Or with buy now pay later. I don't really care, I pay my full balance on the CC at the end of the month anyway.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#185

Post by jfranche »

SkipperCat wrote: post #27
davidmurdoch wrote: post #19

Earlier quoted context omitted.

It probably went something like "we can do $5.00 per unit, sold in cases of 6" "Ok, we'll order 6000 at that price"

Yes, but at some point a purchase order has to be drafted and a contract has to be signed. Those things should be spelled out in detail. I'd think the big company would almost demand that or else the coffee roaster could ship 6000 zip lock baggies with 10 coffee beans in each. I know that's an absurd example but a PO and contract protects everyone against that and that's why any reasonable company doesn't proceed wit…

Possibly this is the real reason the order was cancelled. Once the unit/case thing was figured out, the distributor realized they’d have to pay 6x more or the seller realized they were getting paid 6x less. The deal fell apart.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#186

Post by maritimus_bear »

manv1 wrote: post #161

Inventory financing is a severe pain in the ass for small businesses. It makes moving up to the next level incredibly difficult. Math example: You sell something for $20, and it costs you $5. You have free shipping, which costs you $3. Shop and CC fees are maybe $2, so you're netting $10. Then taxes means you net $6. So if you sell 10,000 units you've netted $60k. But to make that $60k you need to spend $50k up front…

[dead]

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#187

Post by NavinF »

interactivecode wrote: post #166
caseysoftware wrote: post #147

Earlier quoted context omitted.

> they should also offer net 30 terms for their customers. Consumers already have Net 30 terms via credit cards. The difference is that the shop isn't waiting for you to pay and the credit card company takes on the risk.

quite a significant difference for the complete population of Europe where basically no everyday purchases are made by credit card

That's on them. If they want net 30, they can get it.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#188

Post by nlh »

manv1 wrote: post #161

Inventory financing is a severe pain in the ass for small businesses. It makes moving up to the next level incredibly difficult. Math example: You sell something for $20, and it costs you $5. You have free shipping, which costs you $3. Shop and CC fees are maybe $2, so you're netting $10. Then taxes means you net $6. So if you sell 10,000 units you've netted $60k. But to make that $60k you need to spend $50k up front…

The realities are brutal indeed BUT we should all be using the right terminology here: This is all about cashflow. When you say:

> So you use money from the 60k in "profit" to buy inventory, leaving you no profit.

That is incorrect. The business still has made a $60k profit, but they have no CASH since they had to redeploy that cash toward additional inventory (which leads to additional profits).

> At that point you haven't made anything. It looks like you're making money, but you aren't.

Again, sorry: You have made $60k in profits, but you're short on cash. Your business is making money -- you now have the next batch of inventory paid for and you were able to afford that with the profits from the previous batch. Those are real assets, But your business is indeed short on cash -- this is where revolving credit lines and similar financings come into play (which carry a cost and complexity of their own).

It's definitely a challenge!

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#189

Post by c22 »

autotune wrote: post #33
drewcoo wrote: post #23

Earlier quoted context omitted.

> people don't use the right words and terms Your examples are people "being helpful" by "figuring it out for you" when they don't understand all the specifics. Yes, that's an annoying problem any specialist deals with. The article is about something that should have had clarity in a contract. It's the kind if situation that should involve lawyers.

If you read TFA it explains that they did consult their lawyer before and after, but that fighting them on it would cost more time and money than they could afford.

It does not say that they consulted their lawyer "before and after". They say:

"...yes, we do have a lawyer and we are currently following the advice of our lawyer in everything we are doing. We can challenge the contract but legal fees could run over $30,000 and take years."

Which kind of sounds like they might have hired a lawyer after the fact in an attempt to 'fix' the situation.

Re: Distributor cancelled an order and we need to move 30k bags of coffee [updated]

#190

Post by Dylan16807 »

brookst wrote: post #10
georgeburdell wrote: post #3

One thing that irks me about dealing with big businesses, that the post touches on, is payment terms. If I buy an item, I pay for it immediately (or if it’s large enough, a creditor pays for me). Big companies pay with IOUs that say they’ll give you cash later, say 30-90 days from now or after criterion X is fulfilled. They do not care if you’re a small company with poor liquidity. I think it’s absolutely abusive beh…

And yet, if you’re a big company, transactions are expensive. If small companies need frequent payments and won’t float AP, why would you buy from them? Would you rent an apartment that insisted on daily payments? (Ok, bad analogy, but you get the idea). I don’t have a good answer, but this isn’t a one-sided thing where the big guys are taking advantage of small companies. This is also small companies agreeing to ope…

By my reading of the story, upfront payment wouldn't have changed the number of payments.

And forget about daily. It's very reasonable to want monthly pay, and should not be a burden at all. And monthly pay would need at most a month of float, on average probably less. That's not where the real payment issues are.

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