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

modest.coffee

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

#211

Post by MuffinFlavored »

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…

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

Not exactly related but I see a lot of comments online from people usually saying "wow, this business is made up of a bunch of greedy profiteers gouging customers for doing _____ behavior" when in reality... aren't most businesses at most running at 10-20% net profit margin? Small, medium, and large?

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

#212

Post by Gibbon1 »

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…

After working at a small engineering firm whose owners were pretty open about the finances. Every time I read or hear someone ranting about how people with small time incomes and few assets have to 'pay their bills' I think back to the owners of that company bitching about this or that fortune 500 customer just up and not paying for stuff for months after it was delivered.

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

#213

Post by dtnewman »

monero-xmr wrote: post #176
dangero wrote: post #87

Earlier quoted context omitted.

Glad they actually paid. I've had similar situations where I'm still waiting for the money 5 years later (I know it's never coming)

Can you sue them? People pretend it’s impossible to sue a large company but that is absolutely false, even for a few thousand dollars.

I have a relative who runs a small business. He says that 95% of his clients pay on-time or at least something close to on-time. There's 5% who don't. As a younger man, he said he took a few of these customers to court for claims in the 10-20k range. He wanted the money but it was also the principle of it. After a few such cases, he realized that he was spending time and money in order to recover relatively small amounts. Most importantly, this was taking away from his time running the business. He found it was way more profitable to just let these cases go and focus on what he's good at.

Now, if you are chasing people down pretty regularly, maybe you have a department dedicated to handling these cases and it makes sense. But if it's a once in a while occurrence, a few thousand dollars probably isn't worth the time and effort for an otherwise successful business owner.

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

#214

Post by ABCLAW »

Waterluvian wrote: post #201
nlh wrote: post #188

Earlier quoted context omitted.

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…

I imagine there’s reasonably priced financial products like business lines of credit, especially if you’re demonstrating a revenue stream and your only issue is cash flow. Ie. You’re not borrowing money for big capex things like renovating a restaurant. Of course nothing is guaranteed. That second batch of coffee may not sell.

>I imagine there’s reasonably priced financial products like business lines of credit

So much so that there's names for various ways of cutting up the receivables risk. For example:

https://www.investopedia.com/terms/f/factor.asp

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

#215

Post by fbdab103 »

Ekaros wrote: post #95
analog31 wrote: post #89

Earlier quoted context omitted.

It's worse than that because they will drag out payment after the term has passed. My first job out of school was for a mom-and-pop manufacturing company. I got an inquiry one day from a very well known company, and mentioned it to the boss. He gave me a long lecture about why we didn't work with that industry. They were notorious for stringing their suppliers along and holding them in a sort of debt bondage. I remem…

That to me sounds like we might lose revenue, but at least we are unlikely to lose money.

Cash flow is the be-all end-all. If you cannot make rent, you are done. Big business does not care. Working for a big business, I have encountered other small companies who do not want to deal with us - getting $MEGACORP to pay their bills on time is a foreign concept.

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

#216

Post by Freestyler_3 »

sva_ wrote: post #54
asah wrote: post #21

It's 101 that wholesale buyers order by the case and for producers to specify the casecount and price, and for errors like this to be caught when the prices/etc don't line up. This is equivalent to not knowing that URLs can redirect, or that http:// and https:// aren't the same thing. Distributors work with 1000 brands each and don't have time (or margin) to babysit. Also, when a company gets a much larger and differ…

> It's 101 that wholesale buyers order by the case and for producers to specify the casecount and price, Not sure why you're being downvoted because thats standard in wolesale. Not sure how they couldn't catch that when looking at the price either. Maybe they thought they'd sell a lot less for the same price and aren't talking about this?

I don't understand either.

They sell for 50% off right now for 42 a case, meaning normal price was 84. 84 × 6000 = 504 000

This doesn't add up with the 250k they were hoping for and the 50% off. Or am I wrong? (too bad they only have decaf yet, wouldn't have minded to try.)

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

#217

Post by irjustin »

golem14 wrote: post #183
irjustin wrote: post #175

Earlier quoted context omitted.

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 UNI…

> 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.

If the price was listed per bag as $6.83/bag (assuming 6 bags/case) and the PO said 6,000-units, that's the "best light" scenario for the OP I can come up. There are literally zero other numbers (no totals, no total dollar value) and the only difference is in the "units" which could be overlooked.

But what kind of PO doesn't have some sort of total which shows how much money the contract is expected to be worth.

I don't believe this scenario exists.

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

#218

Post by lazide »

Waterluvian wrote: post #201
nlh wrote: post #188

Earlier quoted context omitted.

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…

I imagine there’s reasonably priced financial products like business lines of credit, especially if you’re demonstrating a revenue stream and your only issue is cash flow. Ie. You’re not borrowing money for big capex things like renovating a restaurant. Of course nothing is guaranteed. That second batch of coffee may not sell.

For a long time, those have been nearly free and easy to get. The temptation then is to continue doing more and more marginal business models, because they work and the competition does the same.

Those are getting harder to find and more expensive. Lack of those at the right time is what causes the liquidity traps the Fed is always talking about, when it happens at large scale.

Little risk of that happening now it seems, and a lot more ‘reaping’ of marginal business is likely before the Fed changes direction.

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

#219

Post by pkilgore »

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.

Reminds me of one of my favorite videos on the internet:

"F*ck you, pay me"[1]

In which Mike's lawyer makes the very good point that you should really put an attorney's fees provision in your contracts so that the purchaser pays your legal fees if you need to chase!

[1] https://www.youtube.com/watch?v=jVkLVRt6c1U

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

#220

Post by dangero »

monero-xmr wrote: post #176
dangero wrote: post #87

Earlier quoted context omitted.

Glad they actually paid. I've had similar situations where I'm still waiting for the money 5 years later (I know it's never coming)

Can you sue them? People pretend it’s impossible to sue a large company but that is absolutely false, even for a few thousand dollars.

Yes, but like others have said, I never thought it was worth it. I like to focus on moving forward.

I have a friend who worked for a large law firm and he told me that even they wrote off some unpaid bills or negotiated discounts. I was shocked to find that even when the lawyers could deal with the legal work themselves, they chose to pass.

That changed my thinking on the topic.

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