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Working with University / Large Business Re: Payment

post #1 of 6
5/11/11 at 9:33am
Thread Starter 
(This is a repost from the business section as I thought the cookiers might not be looking in the cake decorating business forum...)

I have a home-based (fully inspected/licensed/insured) cookie business. Recently I had an inquiry for a very large cookie order ($2000+) from a university. Normally, I would require a non-refundable 50% deposit to hold the date (it is a full week's work for me), and payment of the balance 10 days prior to the event. The university required me to do a bunch of paperwork to become a vendor which included agreeing to their NET30 payment terms. Fortunately for a variety of reasons, it turned out that the order was significantly reduced and down to a level that I feel comfortable doing on NET30 terms.

For the future, I'm wondering how to handle orders for large businesses/universities that require net30 payment terms. Do I get a signed contract for the order in lieu of the 50% deposit and 100% prepayment? How has anyone else handled this issue?
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post #2 of 6
5/11/11 at 9:51am
I would try the contract route, but they may not agree to that. What most large corporations, universities, etc, do have in place is a purchase order system. You could require that they issue a purchase order for exactly what they want after you've issued a written quote.
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post #3 of 6
5/11/11 at 12:08pm
Thread Starter 
Is a PO contractually obligating for them to buy my cookies? I'm afraid of the situation where someone in a department contacts me to set up an order and at the last minute the "higher ups" decide not to proceed with the order. Would a PO solve this problem?
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post #4 of 6
5/11/11 at 12:10pm
Thread Starter 
Oops! Should have done my google search before posting my question! It appears that the PO would solve the problem of the client walking away from the order - the exact reason a deposit is required.

Although I recognize Wikipedia for what it is, it had a good definition of Purchase Order in case anyone else needed it like I did: "A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. Acceptance of a PO by a seller usually forms a one-off contract between the buyer and seller, so no contract exists until the PO is accepted.[1]"
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post #5 of 6
5/11/11 at 12:32pm
Correct - the approved PO is the "contract". It is approved, the expenditure is allocated and not available for any other use unless the PO is voided for legal reasons. I am a government employee (who is a hobby baker) who deals with this daily. Our policy has guidelines in place where we have to request a PO for purchases over $5000. Once the invoice and product are received then payment is issued, usually within the week, depending on what day the invoice is received. I can recall only one time in the last 20 years or so that we had to prepay or put down a deposit for a purchase we made. Of course there are businesses out there we can't do business with simply because they require payment at time of purchase. It's just something we deal with.
Ranae
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Ranae
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post #6 of 6
5/11/11 at 1:27pm
Thread Starter 
Quote:
Originally Posted by ranae5463

Correct - the approved PO is the "contract". It is approved, the expenditure is allocated and not available for any other use unless the PO is voided for legal reasons. I am a government employee (who is a hobby baker) who deals with this daily. Our policy has guidelines in place where we have to request a PO for purchases over $5000. Once the invoice and product are received then payment is issued, usually within the week, depending on what day the invoice is received. I can recall only one time in the last 20 years or so that we had to prepay or put down a deposit for a purchase we made. Of course there are businesses out there we can't do business with simply because they require payment at time of purchase. It's just something we deal with.



Thanks so much for this explaination...quite helpful for someone (me!!) who has very limited experience with POs! I don't mind the delay in payment, I just wanted to make sure that there was some guarantee that the order wouldn't be voided at the last minute.
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