One of the most confusing issues for beginning retailers is how best to pay for goods, especially when they have no credit history in the garment industry.

COD - Cash on Delivery: This is perhaps the worst way to pay for goods from the standpoint of both the retailer and the manufacturer. The manufacturer has to pay UPS for the cost of shipping up front as well as the $7 per box COD charge. Note: the $7 charge is per box. So for 3 boxes the recipient is paying an additional $21, not including the actual shipping charge.

Very often it is difficult for the manufacturer to call each and every customer awaiting COD shipments. The calling process involves an employee or the manufacturer making numerous and usually long distance attempts to reach the buyer. (This coincides with a busy time when the manufacturer is rushing to make completion dates.) If the retailer has not made arrangements to pay by leaving cash, check or a money order the shipment then goes back to the manufacturer. And when it is shipped again shipping and COD charges are applied once more.

Prepay: This form of payment is much better than COD for retailers. The buyer requests on the purchase order that the manufacturer call with the total amount due when the order is completed. The retailer then sends out payment and upon receipt of the payment the manufacturer ships the order. This gives the customer a chance to check the amount being billed against the original purchase order and any discrepancies can be discussed prior to shipment. (This is not the time for retailers to change their mind about these goods. The purchase order is a contract you have agreed to and based on that contract you are obligated to pay for the goods that were manufactured for your store.) Sometimes manufacturers will pay for shipping when customers are prepaying simply because they are getting paid faster - without the hassle of waiting for COD (which can take up to three weeks) or Net 30.

(Note: There are more and more manufacturers who are insisting on a prepayment of one-half the value of the order before they will begin to produce the goods. This protects their investment as there have been more and more incidents of retailers changing their minds and canceling orders well after the manufacturing process has started.)

Credit Card: This is the most recent form of payment and it is being requested by some manufacturers. The buyer and the manufacturer are protected by the credit card companies, and often the buyer can accrue airline miles while they are purchasing goods for their store. A deposit should be charged following a cancellation window of two weeks from the placing of the order, with the balance being charged when the order is shipped. 

How long must a retailer wait to establish credit? It used to be that retailers would pay up front for their first order and then on the subsequent orders manufacturers would offer terms. In today's marketplace, however, smaller manufacturers sometimes never offer terms to anyone - and for all eternity will insist on prepay, COD or credit card. If retailers want particular lines they must be prepared to deal with manufacturers who will never be willing to bend on their credit policies.

Manufacturers who are factored have no control over the decision as to how retailers must pay because it's based on the financial investigation of the factor. It is always to a retailer's advantage to establish a relationship with someone at their bank who is willing to recommend them for credit. Paying manufacturers who offer Net 30 quickly and on time is the best way to establish good credit history. If a retailer is anxious for terms sometimes she can offer to pay Net 15.

It is also may be a good idea for a new retailer to send photos of her store and provide a list of the lines that she is purchasing where terms have been extended. Meeting manufacturers at trade shows, introducing yourself and speaking with them about their lines and their importance to your store can do wonders when attempting to establish credit quickly. Just remember, once a retailer is late with paying, the chances are she will not be able to have Net 30 terms with that manufacturer again. It is a small industry and word that the retailer did not pay on time tends to travel through it very quickly.

A final note: It is the obligation of manufacturers to stand behind their goods and deliver product that is satisfactory. Any disputes that a retailer may have with a manufacturer does not give license to not pay the bill. The representative the retailer wrote the order with should be there to help the retailer settle any problems.

Mindy Gasteier was a multi line children's representative for over 25 years. Her company, Los Angeles-based Clothing the Boom, was known for pioneering lines that set the pace for the newest trends in the business. The showroom's innovative displays drew customers from all over the world and gave birth to another company, Fixture This, where she sold vintage furniture and display fixtures to retailers. Since selling her business in December 2002, her talent in merchandising and marketing had led her to working as a consultant in the garment industry.

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