Marshall Atkinson explains why asking for payment upfront could transform your business

Historically, shops in the decorated apparel industry have faced a challenge with managing money. Your business absolutely needs it to survive; cash is always king. Without it, you can’t pay your staff, your bills, and most of all, yourself as profit. Yet we give away a lot of financial power by routinely going into debt at the request of our customers. That’s right: when you invoice at Net30 or go the 50% upfront route, or any other payment method, you are essentially the bank for your customer. You take on all the work, create the art, order the shirts, get it set up, and run the order. Even ship it! All with the hope that the customer will pay up. Most do. But some don’t. Some types of client are the absolute worst at paying you. You may even have orders that are sitting in your customer pick area from a few weeks or even months. Those customers ordered stuff and yet they never returned to claim it. The chances are that they didn’t pay for it completely, either.

Rethink how you structure your payments

Let’s make things simple. When someone places an order, before you do anything, they pay 100% of the bill. Think how easily your business could run if it had all of the financial fuel in the tank on a constant basis. Remember this: a customer that doesn’t pay you isn’t really a good customer. When you have to fight tooth and nail for every pound, it makes the struggle to stay in business all that much harder. Now imagine that you had money sitting in the bank before you started work. That seems almost dreamlike, doesn’t it?

You might think that your customers won’t stand for that. But are you sure? Mega-giant Custom Ink doesn’t have a problem with this. Their sales are tops in our industry at over $300 million dollars in 2018. They are 100% upfront on payments. Amazon, who everyone in any industry is absolutely terrified of, runs the same way. 100% upfront on payments. $232 billion dollars in sales for 2018. “Yeah, that’s great,” you say, “but we’re not Custom Ink or Amazon.” I know. But I’ll bet they employ some pretty smart people. Sometime, somewhere, one of those geniuses declared that all orders needed to be cash upfront. No purchase orders. Don’t take Net30. We aren’t going to do 50% down, 50% when it ships. They drew a line in the sand and stuck to it.

The breakdown

Here’s why cash in the bank matters to your business more than anything: it’s all about timing. Money in the bank is the lifeblood of your business. You can have hundreds of orders in your system, but without the cash on hand to produce them your shop may be financially starving while you are waiting for the money to come in. Are you experiencing that stress right now? On paper, your shop P&L may even look great. Except when you start paying out to the groups with their hands out. 

Debt repayment, equipment payments, inventory purchases, consumable purchases, employee salaries, and expenses, plus taxes to the government. All of that is flowing out on a constant basis, while you are squeaking by, staring forlornly at the letterbox for cheques, or bank account statements for electronic payments. I’ve talked to plenty of shop owners with over six figures of outstanding money owed to them past 30 days. Some are almost numb to it. The struggle is real.

Why not change?

So, what are you waiting for? Why not make the change to 100% upfront for payments? Sure, I’ll admit it might be scary. Change is difficult. However, let me tell you about my friend and coaching client Bobby. A few months ago he attended one of our Shirt Lab events. At that event, he met another friend and coaching client, Darryl. Bobby runs a contract decorator shop in Texas, and Darryl runs a direct-to-consumer shop in California. Even though they both screen print shirts, they have completely dierent business models.

During a few of the networking slots at Shirt Lab, Darryl told Bobby the merits of going 100% upfront on payments. That’s how he runs his shop, and he’s seen tremendous financial stability since he implemented that platform. This has allowed him to scale and be more financially independent than ever before. Driving home from Shirt Lab that’s all Bobby could think about. On Monday morning, he changed his policy. He had his graphic designer create some signs to place on the wall. In his system, he changed some wording on the invoices.

It’s been about three months since that Shirt Lab, and I talked to Bobby a few days ago about the switch and the reaction from his customers. Here’s what he told me: “It’s going great. I only had two customers really complain about it. It is surprising the traction it has had with my customers. What’s great is that everybody has adopted it, and it hasn’t been a big deal at all. In fact, because I’m a contract printer, even some of my clients have told me they wish they could go that route too. It’s amazing.”

You can do it too

One hundred percent upfront payment isn’t an isolated thing. Tons of shops do this. Just check out any Facebook group, and you will see many people in those groups talking about it. If you’re interested in changing to this policy here are a few things to think about:

  • Talk to your financial team or accountant. What would this change mean to the company? Imagine the impact it would have if your accounts receivable amount was always zero.
  • You can’t go halfway. It would confuse your customers and your staon who is exempt. Just make the switch and go. Don’t look back.
  • For existing customers that are sending orders in, let them know what’s going on and give them some space to adjust. Bobby told me he sent out notices and let each customer have one order ‘the old way’ before they were required to switch. But after a cut-off date, every order that came in was the new 100% upfront on payment.
  • Put a sign on the wall and include wording in any customer-facing notice about the requirement – if it isn’t written it doesn’t exist.
  • Train your staff. You need them to not only get involved but to be a part of the process. Ask them to help.
  • Talk to a few key customers. Let them know about the expected change and ask them to review your materials for their opinions. Get their feedback.
  • Some customers might take exception. Have a plan to deal with this. Instead of a purchase order, ask them to place their order with a credit card. That company, organisation, school, or group probably buys from Amazon too. Discuss your change and help them understand what you are doing. Ask them: “Do you make purchases with a credit card?”

Financial stability is what we are after here. It doesn’t matter how great your business model is, how wonderfully your website works, how many orders are in the system, or how profitable you are. You can’t survive if you can’t manage your company’s cash. As my Uncle Bill has always famously said, “Money greases the skids of life.” Who can argue with that? Get paid! 

Marshall Atkinson is a production and efficiency expert for the decorated apparel industry, and the owner of Atkinson Consulting and co-founder of Shirt Lab, a sales and marketing education company, with Tom Rauen. He focuses on operational efficiency, continuous improvement, workflow strategy, business planning, employee motivation, management and sustainability.