Blog/News

Competing Within Your Industry

Sadie Keljikian, Express Trade Capital

Standing out in your industry can be tricky, especially if you work in a competitive field. To get ahead of your competition, it’s important to develop and demonstrate the unique qualities you and your business can offer. Here are a few ways you can distinguish yourself from other players in your industry and break away from the crowd:

  • Price

It may be the most obvious point of comparison, but if you can distinguish yourself on pricing, you should do so and you should advertise as such. Compare yourself to businesses that provide similar or identical services/products and demonstrate your ability to fulfill the same need at a lower price.

Beware of competing with bigger businesses on price. Larger companies can generally underprice smaller ones because they typically have lower costs due to economies of scale. Moreover, although extremely low prices may bring a surge of new business, it is important to make sure your profits are sustainable.

However, lower prices are not always the answer. Sometimes, a higher price signals quality for which customers are willing, and even eager, to pay a premium especially if they believe those items are better in other ways . . .

  • Quality

If you can provide and demonstrate quality superior that of your competitors, it won’t necessarily matter if your prices are higher than your industry’s average. In fact, counterintuitively, higher prices may attract more purchases in the right circumstances. Many customers are willing to spend more for quality assurance. Whenever possible, use objective data to support your claims.

  • Speed/Efficiency

Some industries are notorious for taking a long time to process orders or engage services. If you have created an effective system to speed up your processes vis-à-vis competitors, let your prospects know! This is an especially attractive perk to offer when you sell products or services that your customers typically need upon demand. Customers want to know you can deliver quickly and efficiently.

  • Scope of Products

If you have a wide variety of goods or services, and/or if you offer a combination of goods/services that is rarely offered in your industry, you’re already ahead of the game. Business clients particularly love a one-stop shop. If they find a business they trust and with whom they like working, they’ll want to take full advantage of that business’s range of offerings rather than shop around for multiple providers.

Having a wide range of products also allows for sharper pricing through bundling, which can increase cross sales by enticing consumers to purchase other products in your line. For example, you can cut the price of one product if a consumer agrees to purchase an additional product.

  • Business Ethics/Values

Good policies and philosophies can be marketed to distinguish the quality of your business. Recently, advertising conscientious business practices has become a massive trend everywhere from independent retailers to international corporations. Whether you focus on helping the environment, meticulously sourcing your goods and labor to observe fair trade policies, charitable giving, or any other activities that demonstrate your business’s ethical beliefs, it’s a good idea to publicize your efforts.

  • Reputation/Client Loyalty

This is more relevant to businesses that have been in operation for a while and have developed a following. One of the most favorable things a customer can hear about your business is that your clients/customers stay on board with you after your initial transaction. It means that you treat your customers well and run your business ethically, so always strive to keep existing customers coming back for more.

  • Honesty

This is similar to business ethics and reputation. Unfortunately, many businesses stretch the truth in the sales process or pull bait and switch tactics to win clients. Many of your prospective customers have heard sales people make over the top claims and gloss over their disadvantages or imperfections. Fortunately, this creates an opportunity for good businesses to capitalize on the poor reputation of their less scrupulous peers.

While deceit sometimes seems like the best way get immediate sales in the short term, prospects will quickly discover the ruse and eagerly post poor reviews. Consumers respect you and your business more if you’re upfront about what they can expect from you, even if the truth is that you cannot deliver on certain requests. The more open your line of communication with them, the more inclined they’ll be to work with you long term. In the long run, it is often better to under-promise and overdeliver than vice versa.

  • Flexibility and Customization

If you can provide more hands-on services or otherwise offer flexibility or customization, many customers are willing to pay more or forego working with larger or more established companies whose operations are too large to accommodate those personalized specifications. Some larger companies deliver goods or services in set ways that have little flexibility because allowing for individualized customization may cost too much to implement on a wide scale.

In fact, many larger companies systematize their processes, which reduces costs and increases efficiency for their clients in many instances. However, systemization can also make larger companies unable to service more specific and specialized consumer demands. Smaller companies can take advantage of this by filling in the gaps where their larger competitors are not willing to venture.


Many of the above listed qualities bleed into each other.  For example, better quality allows for higher prices and honesty is directly related to business ethics and reputation which are both in turn facets of your quality.  Meanwhile, good customer service and sales practices can improve the perception of your business in virtually all areas.

The key is to see your business on a variety of dimensions which will allow you to distinguish yourself on multiple fronts. A competitor may be larger and have many more years’ experience but they may be set in their ways and inflexible when consumers require them to deviate from their standards and practices.  In short, dynamic businesses who stay vigilant can stay ahead of competitors by seeing and seizing on opportunities and gaps left by competitors.

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Pet Industry Booms

Sam Permutt, Express Trade Capital

Despite uncertainty in several consumer product industries, the pet product industry is not only surviving, but growing. Indeed, many would say it’s flourishing as sales of specialized pet services (including groomers, trainers, and boarders) and healthy food (non-GMO, organic, paleo) are on the rise. Last year, the pet food industry (close to $30 billion) grew three times as fast as the packaged food industry – and that doesn’t even account for the toys, Halloween costumes, and GPS tags we buy for our pets.

Here’s a snapshot by numbers of the industry as it currently stands:

  • The industry is now valued at $86 billion.
  • Sales have continually increased year over year, even during the 2007-2009 recession years; average annual growth since 2002 has been 5.4%.
  • 65% of all US households have a pet – up from 56% in the late 1980s.
  • There are more than 24 million millennial pet owners, the largest pet-owning population in the country.
  • Average household spending on pet products is $500 per year, more than spending on alcohol and men’s and boy’s clothing.
  • Total spending on pet products is growing about 50 percent faster than the retail sector as a whole.

76% of owners consider their pets “beloved members of the family,” so it’s no surprise that they spare no expense when it comes to their furry friends.

Happy International Pet Day!

Check out Lenedu’s guide for helping pet owners prepare for costs involved with owning a pet. Click here...


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US Import Tariff Updates

Sadie Keljikian, Express Trade Capital

The following is an update on recent tariff adjustments on steel, aluminum, and Chinese-made products.

Steel and Aluminum Products:

Several Presidential Proclamations signed in March 2018 have collectively implemented Section 232 of the Trade Expansion Act of 1962. The Proclamations primarily serve to adjust imports of aluminum and steel into the United States. The proclamations indicate that covered steel mill and aluminum product imports will be subject to additional tariffs of 25% ad valorem and 10% ad valorem respectively. The following products are covered:

  • Steel mill product HTSUS classifications:
    • 10 through 7216.50 including bars, rods, ingots and angles.
    • 99 through 7301.10 including wire, bars, rods, ingots and sheet piling.
    • 10 rails.
    • 40 through 7302.90 including sleepers and plates.
    • 11 through 7306.90 including pipes, hollow profiles and tubes.
  • Aluminum product HTS classifications:
    • 7601, unwrought aluminum.
    • 7604 including rods, profiles and bars.
    • 7605, aluminum wire.
    • 7606 and 7607 including flat rolled products like foil, sheet, strip and plate.
    • 7608 and 7609 including pipes, tubes, and pipe and tube fittings.
    • 99.51.60 and 7616.99.51.70, forgings and castings.

The newly implemented tariffs will be added to all existing duties and will apply to all countries of origin except for a specific list of exempted countries. Exempted countries include Argentina, Australia, Brazil, Canada, Mexico, South Korea and European Union members, which include Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

As of now, exemptions are limited through April 30th, 2018, but it is unclear whether they will be extended beyond that date. Extension of the exemptions may lead to a change in the rates applied to other countries and/or restraints on quotas for some, or all countries of origin.

Products from China:

On March 22, 2018, President Trump announced his plan of action to combat China’s unfair trade practices as addressed in the USTR Section 301 investigation of China’s Policies, Acts, and Practices pertaining to Intellectual Property, Innovation and Technology Transfer. As the president’s instructions, US Trade Representative Robert Lighthizer began the investigation in August of 2017.

President Trump has indicated that action against China will be taken in three stages:

  • Tariffs. Representative Lighthizer will propose a list of products with corresponding tariff increases within 15 days of the announcement on March 22, 2018. The final list will be published after a brief period for notice and comment.
  • WTO dispute settlement. Representative Lighthizer will attempt to settle the dispute in the World Trade Organization, or WTO to address discriminatory practices in China’s technology licensing.
  • Restricted investments. The Secretary of the Treasury will address concerns about investors in China or investments facilitated in China in US industries or technologies deemed important to the US.

On the bright side, President Trump signed an omnibus budget bill into law which aims to end the ongoing cycle of resolutions and government shutdowns. It also renews the General System of Preferences, or GSP, which seeks to ensure fair trade practices among WTO countries. The bill will extend GSP through December 31st, 2020 and retroactively renew it to the previous expiration on December 31st, 2017. Goods that arrive in between will be eligible for a refund, if indicated properly. The GSP will officially go back into effect on April 22, 2018.


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Indian Onion Prices Peak

Sadie Keljikian, Express Trade Capital

Bangladeshi importers and consumers have recently suffered extreme price hikes in one of its most voluminous imports: onions from India.

Regional demand for onions is remarkable in general, since they are a dietary staple in several southeast Asian countries. This year’s underwhelming harvest, caused by excessive rainfall in the summer months, has driven Indian onion prices seven times higher than they were just five months ago. These prices are unprecedented and have caused significant disruption in the regional market. The effect has also spread, since several countries in the region rely on Indian onion exports to supplement their own domestic supplies and meet demand. Importers in Bangladesh, Malaysia, United Arab Emirates and other surrounding countries are scrambling to meet demand while Indian officials are limiting exports in an attempt to take care of domestic demand first.

Although the shortage and price hike are complicating things for many consumers across southeast Asia, some importers are taking advantage of the remarkably high profit margin they stand to earn until the next crop of onions hits the market and lowers prices again. Even some importers who normally don’t deal in food are taking the opportunity to make some extra money by shipping and distributing the precious onions.

We at ETC have entered the equation, issuing documentary letters of credit for onion orders from India. We also ship the produce on behalf of importers, primarily in Bangladesh, and assist them in securing both the onions themselves and a piece of the massive potential profit from this unique situation. ETC is uniquely situated, given the breadth and flexibility of our financing and logistical options, to enter such a frantic and volatile market and help our clients make the most of a difficult situation.

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Creative Sales Techniques

Sadie Keljikian, Express Trade Capital

Selling a product or service is complex and delicate. It often takes sales professionals years to master the subtle balancing act of emphasizing the value of their product or service without overselling. To this end, businesses should consider creative, less obvious approaches to intrigue prospects and attract a wider variety of clients.

If you struggle to modernize and optimize your sales process, here are a few creative tactics you may not have tried:

Build Relationships in Your Industry

Although it may feel like sleeping with the enemy, so to speak, there are numerous benefits to building a community within your industry. The most direct benefit is the ability to exchange referrals. Since most businesses across an industry offer slightly different products or services, prospects often run into suppliers that offer a product/service that is in the same ballpark, but not quite what they’re looking for.

If the supplier in question has good relationships within their industry, they can refer the prospect to one of their friends in the industry, who might be better equipped to meet the prospect’s needs.

Eventually, every business can develop a network of associates that generate a consistent flow of referrals in all directions, giving all parties optimal exposure to interested leads (and potential referral fees). Familiarizing yourself with competitors who provide services related to, but different from your own also allows you to get a broader scope of industry insights and expand the services you can offer clients and prospects.

Attend Your Customers’ Events

This may sound like a dubious networking move, but your customers’ events and gatherings give you the opportunity to take advantage of their network while supporting your existing clientele. As mentioned above, it is highly advantageous to build relationships with other businesses in your industry.  In the same spirit, your customers probably also have a rich network of similar businesses, so why not take advantage of the exposure and the positive experience your existing customers have had with you?

Create Urgency Wherever Appropriate

Unfortunately, many of us unintentionally drag out transactional proceedings, particularly when there’s no built-in urgency. If you find that you have a lot of genuinely interested prospects who lose track partway through negotiations, create a degree of urgency. Obviously, you shouldn’t put unnecessary pressure on your prospects, but when closing a deal, it’s useful to give prospects a reason to respond quickly. For example, if you’re a wholesaler with a range of handbags, you may want to tell your prospect that you can offer them samples of your latest designs at a discounted rate if they confirm the order within a limited time.

This prompts your prospect to weigh their interest and, if they are genuinely excited about your products, they will probably take advantage of the special offer. This method offers you the opportunity to gauge a (relatively inactive) prospect’s interest and see if further pursuit is worth your time. It also gives you another tool to help move the transaction forward now. Often, the longer a transaction takes to close, the more likely it is that a prospect will lose interest or find reasons to delay.

Offer Added Value Through Additional Support

Depending on your industry, sometimes your customers will want you to sweeten the deal a bit. If you have experience or knowledge that could be useful to your customers, you might want to offer complimentary counseling once the company is signed on with you as a customer. This feeds into a more general practice: always show interest in your customers’ continued success, since their success usually means your success. Showing clients that you are willing to help them beyond simply providing the core services you already offer builds loyalty and customer confidence, making it easier to close the sale and start your professional relationship on the right foot. Overdelivering on services is also likely to turn clients and potential clients into good references and referral sources.

Give Them an Out

Although self-deprecation isn’t usually a good sales technique, sometimes taking the pressure off is the best way to win a customer or, at least, to develop a good business contact. If you’ve been pursuing a prospect for a while and still aren’t sure how genuine their interest is, make a point of giving them an out on your next email. Something like “I understand if this is not the right fit…” is a friendly way of saying that you don’t plan to put excessive pressure on them and will back off if they aren’t interested. Not only will this give them peace of mind, it’ll improve their impression of you, especially if they are, in fact, interested.

Conclusion

Making a sale is always going to be a challenge, but employing a few unusual methods can surprise your prospects and keep your sales team sharp. The more sales-related tools you have at your disposal, the more sales you are likely to make. The key is to stay hungry, keep an open mind, and never stop exploring new ways to improve.


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Finding Your Nerds

Sadie Keljikian, Express Trade Capital

Trade shows are a useful resource for designers and wholesalers, but they can be difficult to navigate successfully. They provide the opportunity to interact with retailers and pitch products face-to-face, which is extremely valuable. However, the attendees are almost exclusively buyers looking for products to meet specific commercial requirements. Selling to buyers who focus solely on how profitable a product will be can leave less-than-ample opportunity for vendors to express the thought, care, and love that they’ve put into their products.

While some trade shows will attract people with a passion for a given industry, few offer the kind of audience one will encounter at fan-based conventions. Events like these present a unique opportunity for vendors: the ability to interact directly with consumers whose interests align directly with their goods. The beauty of these interactions is that they have the potential to build a brand’s equity by taking the goods directly to the consumers from all over the world who will appreciate them most.

Below are a few tips to getting the most out of a convention as an exhibitor:

Choose Your Con Wisely

Many people (even non-fans) are aware of large-scale events like SDCC (San Diego Comic Con) or the D23 Expo (Disney’s fan club convention), both of which host tens of thousands of people, but there are dozens of similar events that take place year-round all over the world. Many are much smaller and more specifically focused: Leaky Con in the UK is focused on JK Rowling’s Harry Potter universe, Anime Con in New York is entirely about Japanese anime and manga, etc. All events, regardless of size, share the same structure: a gathering of vendors, entertainers, and industry leaders at an event that is 100% designed for the fans.

Unless you sell products that fit into an obvious genre or subgenre (ex: if you make Cowboy Bebop figurines, you’re likely to do well at Anime Con), you should find your fans before you choose an event. This will require some rudimentary market research but, ultimately, it’ll not only help you find events to exhibit your goods, it’ll narrow down your search for retail leads.

It’s also important to consider your budget and any locational preferences. If you can’t afford to travel a long distance or pay the exorbitant exhibitor fees at a large-scale convention, you should research cons in your local area that are smaller in scale and thus, more accessible to local businesses.

Work Out Your Pitch and Get Behind Your Products

One of the perks of exhibiting at a convention is that usually you don’t have to convince attendees the way you would with buyers, since they’re already fans and aren’t concerned with selling your goods to others. Fans are much more moved by your passion. This means that rather than focusing on the potential value your products might have to a retailer, you can focus on the hard work and love you put into creating them!

While this difference in dynamic is, in many ways, an advantage, it also means that you need to reconsider the way you pitch to attendees. Avoid the proverbial “hard sell” with convention goers. As mentioned, they aren’t going to sell your goods again, so the only convincing they need from you is that your product is high quality and relates to subjects or genres that interest them. If you’re an independent publisher selling comic books or novels, give the attendees your elevator pitch. Think about what you would want to hear in a movie trailer or read on the back of a book and remember that if you are passionate about your product, consumers are far more likely to jump in and, ultimately, share your passion.

 Plan Scrupulously and Be Flexible

This goes for any trade show, but even smaller conventions can be surprisingly popular and therefore logistically complex. Plan your booth carefully and make sure you’re prepared for the space and layout to be different from your expectations. Make sure any displays are adaptable and bring additional materials if necessary. If you find that your booth’s position isn’t as “central” as you were hoping, don’t be afraid to send someone to the trade floor with flyers, an arrow sign, or just a brief spiel to bring up your traffic. Flexibility is the name of the game.

Bring a Team

One of the best ways to make sure you get your money’s worth when exhibiting at a convention is to bring a group of people to man your booth. There are a few reasons for this: 1. The booth should never be unattended, 2. It’s always a good idea to put someone out on the floor to bring interested attendees back to your booth, and 3. Conventions are typically held over 3-5 days and each day is at least 7-8 hours long. Ideally, you should have around five individuals for a small booth, but three is the bare minimum to ensure that everyone gets a break and doesn’t lose energy early in the con.

Cast a Wide Net

You may have found that, historically, your product appeals to a certain kind of person. If you sell comic books or toys, you may have found that children, teenagers, and parents are your niche market. Again, you must remember that at a convention, almost everyone is a fan. This means that ages, genders, and “types” are functionally irrelevant. So, if you see a variety of ages, genders etc. looking at your products, all the better! Give everyone who shows interest equal attention at your booth and you may be surprised by the diverse fans you acquire.


While conventions aren’t necessarily best suited to every kind of business, they certainly provide an ample platform for small businesses with a “nerdy” following to increase that following and build a formidable brand and audience. Get out there and find your nerds!

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Fighting the Factoring Stigma

Sadie Keljikian, Express Trade Capital

There are numerous varieties of business financing, some of which are better understood than others. Everyone’s heard of commercial bank loans and most people are familiar with popular debt financing methods like credit cards and mortgages, but less well known financing vehicles like factoring receivables are often met with either blank stares or immediate suspicion.

At its core, factoring is a simple process. When a wholesaler sells goods on open terms, a financial institution can buy the right to collect from the customer, which is called a receivable, at a discount (to account for factoring fees). The original holder of the receivable gets their money immediately and the financial institution (usually called a “factor”) collects their fees from the debtor’s payment.

Although the process of factoring is straightforward, as in any industry, some lenders will take advantage of less savvy clients with confusing language and hidden charges in their contracts, which have given factors a justifiably bad name. Over the years, the industry’s ethical practices and common standards have evolved and reduced the dodgiest lending practices, though some still persist among less scrupulous lenders.

Here’s a few reasons why the stigma associated with factoring has persisted and how to avoid the tricks:

Opaque Sales Practices

One of the most common ways in which less reputable factors take advantage of their clients is to simply avoid explaining the details of the arrangement. Although the basic factoring process is simple and the upfront costs are usually easy to understand, small, recurring charges can add up to substantial costs of which the client may be unaware until it’s too late.

If you’re signing on with a factor, don’t be afraid to ask them to walk you through exactly how much they will charge you, when, and why. If your factor is trustworthy, they will have no problem holding your hand and explaining how the process works and what fees and interest you will accrue.

Hidden Fees

Here are some of the most common terms that salespeople might leave out in an attempt to paint a rosy picture and omit the gritty (but important) details:

  • Annual minimums
  • Monthly minimums
  • Per-invoice minimums
  • Termination fees
  • Misdirected payment fees
  • Substantial default provisions

Impact on Customer Relationships

One of the benefits (or sometimes drawbacks) of signing on with a traditional factor is that they will take over your collections process for all factored invoices. Outsourcing collections can certainly free up your time and even speed up the process when you employ a good factor. However, not all collections departments are equal and things can get ugly if the factor’s collections department is brusque or unprofessional, thereby straining the buyer-seller relationship.

Too many wholesalers avoid discussing the collections process with their customers. Though it may feel unpleasant, hashing out payment details is crucial to the professional relationship. A proper factoring collections department must be personable and know how to express urgency to collect payment without insulting, annoying, or harassing the customer. To get a sense of whether a potential factor conducts collections well, ask them about their methods and whether they consistently collect from larger debtors. Chances are, if a factor has been around for a while and they consistently deal with larger accounts, they have likely figured out the basics of collections.

MYTH DEBUNKED: Only Struggling Businesses Use Factoring

Some circles hold generalized stigma against businesses that choose to factor their receivables. Since many businesses who choose to factor their receivables can’t get the financing they need from a bank, some people hold an outdated notion that factoring is a business’s death rattle. However, this is a misconception driven by misunderstanding of how banks make lending decisions.

Banks are notoriously risk-averse and typically have extensive requirements and burdensome regulations for businesses that wish to secure financing. Since the money banks lend comes from deposits, legal regulations limit bank loan approvals to only the safest transactions. As a result, businesses that bankers often reject as “high-risk” are usually not failing at all. On the contrary, many businesses grow too fast for bank lines to keep apace. Others might have cash flow gaps that banks are simply unable to fill due to the limits of their charter, internal lending formulas, or balance sheet requirements. Still other businesses are simply too new to qualify or are not bankable for otherwise unimportant reasons that put them outside the bank’s comfort zone.

As mentioned above, most businesses who utilize factoring lines are in no way failing. Many businesses actually factor their receivables because they are growing faster than their current cash flow and/or bank lines can accommodate. In such cases, businesses must supplement their cash flow with financing to ensure that they have enough capital to meet overhead and fulfill their customers’ orders. In such situations, factors and their counterparts (purchase order funders, and other asset based lenders), can offer ideal solutions.

Most of the stigma of factoring receivables comes from misunderstanding, a few shady factors, and the persistence of archaic notions. A few bad apples do not spoil the bunch, but rather should encourage businesses to educate themselves on good lending practices and seek out a reputable financier. If you have an opportunity to ramp up your sales volume and grow your business, factoring your receivables is often the most effective solution. If operational funds are tight and the orders keep coming in, don’t fret. Find potential providers, ask the right questions, trust your gut, and make the move.


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Effective Invoicing

Sadie Keljikian, Express Trade Capital

Careful and effective invoicing is crucial to any B2B business, but especially so if you are a wholesaler.

Chances are, you already know the basics: you should audit your invoices for accuracy and send them to your customers promptly. However, many businesses aren’t sure which details to include, what terms should be applied, or even how to create and process invoices. Wholesalers and vendors who sell to big box retailers must also contend with bureaucratic accounts payable departments that do not respond well to improper invoicing, which often results in payment disputes and delays. Remember that operational funds are your business’s paramount resource and efficient invoicing clears the path to that resource.

Here are a few tips to ensure that your invoices are as clear, accurate, and effective as possible:

USE A TEMPLATE

To those with some experience in the consumer goods wholesale industry, this is a no-brainer. Using a template is essential to creating invoices that look professional and consistently convey the required information. Aside from the obvious aesthetic advantage, templates allow for greater accuracy, speed, and organizational efficiency. Consequently, the wholesaler is far less likely to leave out important information, create duplicate invoices, or give incorrect details in error. Since properly formatted invoices are easier to read, your customers are also less likely to overlook or misunderstand anything. With good templates, your team won’t waste time building each invoice from scratch every time you make a sale, and your customers won’t have as many questions and will probably pay you more quickly.

INCLUDE ALL PERTINENT DETAILS

Most businesses are aware that each invoice should be itemized, numbered, and dated, but those aren’t the only important details.

Here is a brief list of the most important information to include on an invoice:

Invoice Date: should be the date on which you create the invoice. It’s important to note that this date should never precede the date on which the goods were sent. Invoicing customers before the goods have shipped is called prebilling.

Invoice Number: must be accurate and unique. Be careful to avoid duplicate invoice numbers.

Itemized List of Goods or Services: must be clear and complete, including number of items delivered or time spent on services rendered, description of items or services provided, cost per unit, and total cost.

Bill to” and “Ship to”:  Businesses often don’t overlook the significance of, and distinction between, their customers’ “bill to” and “ship to” information.

Basically, billing address and shipping address might be different and failing to include both addresses in such cases can result in incorrect shipments, payment oversights, delays, and other administrative issues that cause delays.

Payment Terms: (e.g. COD, Net 30, EOM Net 60, etc.) must be in accordance with any established contractual agreements with the customer.

Purchase Order Details:  to ensure accuracy, indicate the PO number on the corresponding invoice and make sure the all details of the PO match any and all details listed in the corresponding invoice.

Shipment Date: most open payment terms relate back to the ship date so it’s important to know and indicate this date accurately. This is also important to prevent chargebacks and returns for late shipments. If goods are shipped after the cancel date indicated on the customers’ PO, vendors should ask for confirmation of extension from their customers.

SYSTEMIZE INVOICE NUMBERS

A system of organization for invoice numbers isn’t revolutionary, but mistakes are common enough that it bears mentioning. The easiest way to manage this issue, is to either use one numerical system for all customers (i.e. first order is 001, second is 002, and so on) or, use a combination of letters and numbers to create a sort of code (e.g. the first invoice for Marc Jacobs could be MJ001).

Standardizing your invoice numbering policy is important first and foremost because you must avoid duplicate invoice numbers to the best of your ability. Unique invoice numbers allow your customers to better organize their accounts payable and pay you more quickly. For example, if you distribute two invoices identified as “123”, your customer might pay only one invoice and insist that their payment obligations are satisfied. If you plan to finance your receivables, this is even more important, as institutions will not finance duplicate invoice numbers and, in fact, such oversights can trigger draconian default and fraud provisions found in most financing agreements.

AUTOMATE AS THOROUGHLY AS YOU CAN

Once you know how to create invoices effectively, the final step in developing a fool proof invoicing system is to automate as much of the process as possible. Fortunately, accounting software like QuickBooks usually includes invoicing capabilities. These programs make filling in details quick and easy. If you make certain fields mandatory, you can avoid distributing incomplete or incorrect invoices. Systems can thus reduce the margin for human error, which means businesses can spend less time, money, and energy invoicing, and more on their core competencies.

IN CONCLUSION…

Invoicing and other back-office concerns can feel like a nuisance, but if you create a system and stick to it, your transactions will move much more quickly and smoothly. Whether issues occur in invoicing, collections, or shipping, the more quickly and clearly you communicate with your customers, the better your relationship with that customer will be.


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Combining Factoring and Purchase Order Financing

Sadie Keljikian, Express Trade Capital

The tools of trade finance are frequently misunderstood individually, but even people who are familiar with the inner-workings of factoring, purchase order financing, or letters of credit are often unaware of how they work together. Without a full understanding of how these tools combine, one may not realize the full range of options and solutions available to them.

Many businesses combine different financing methods to maintain and improve their working capital and liquidity. Although banks have characteristically risk averse and rigid collateral requirements, many trade financiers have a more expansive view of collateral, which allows them to take on clients and transactions most banks would reject outright. Receivables factoring, for example, involves small, usually recurring advances, provided against existing invoices. Unlike a bank loan, the lender, or “factor” will collect payment from retail customers. With this method, the borrower doesn’t have to pay back the advance unless a customer defaults or returns the order on the corresponding invoice. Even in those cases, non-recourse factors insure the receivables against payment default by the customer, so the borrower still usually doesn’t have to pay back the factor if the invoice is not paid.

While some banks will lend against receivables, no bank will categorize purchase orders as assets. This means POs cannot be used as collateral to obtain or secure bank loans. Thus, banks will not finance the cost of fulfilling purchase orders based solely on the merit of the purchase orders alone. Purchase order funders will.

Purchase order financing (or “PO funding”) is a form of lending in which clients with confirmed purchase orders receive funding to bolster or, in some cases, fully cover manufacturing and shipping costs. PO funding is ideal for creating enough cash flow to take on more sales, especially for vendors who sell to customers on open payment terms. Without PO funding, the lag between paying for production and receiving payment from customers can take months and drastically deplete a business’s operational funds. By employing purchase order funding, companies can obtain sufficient cash flow to pay for shipping and production and take on more orders, while deploying any remaining operational funds elsewhere.

What’s truly remarkable, however, is how much cash flow a company can accrue when they combine purchase order financing with factoring. In these cases, the client typically receives both funding varieties from the same institution. The money initially advanced against the purchase orders then translates to an advance against associated invoices and the lender collects repayment from the client’s customers. This means that clients receive funds more quickly and don’t have to pay their lender back.

The result is a simple, continuous system. Here’s an example:

Let’s say a wholesaler, we’ll call her “Jane,” receives purchase order for $1 million from a big box retailer. Her customers’ payment terms are net 30. The manufacture of her goods costs $500,000 and shipping is another $100,000. A purchase order funder will typically pay Jane’s supplier the total amount owed or a substantial portion of it, and Jane will supply any remaining balance. Purchase order funders prefer to pay suppliers directly to ensure that funds are used to purchase the goods specified in the customer’s PO. Payments are commonly wired directly or else paid under a letter of credit or document payment facility.

In this case, the PO funder can open a letter of credit for $500,000 and then pay the supplier and shipper the full amount when the goods are ready. In this case, the PO funder laid out $600,000 ($500,000 to the supplier and $100,000 for shipping costs).

Once Jane receives and ships the goods to her customer according to the terms of the PO, she has fulfilled her obligations and can proceed to bill her customer for $1 million. Jane can assign the resulting invoices to her factor who can typically advance up to 80% of the $1 million invoice value. However, the factor must first pay off the purchase order funder who already advanced 60% of the $1 million when it was still just a purchase order.

In this case, the factor should send $600,000 (plus interest) to the PO funder and another $200,000 to Jane, adding up to a total of $800,000 ($600,000 to pay off the PO funder and $200,000 to Jane, which adds up to 80% of the $1 million invoice). Unlike PO funding advances which are earmarked for cost of goods and shipping, Jane can use the $200,000 she received from the factor however she wants.

If Jane’s factor and purchase order funder are the same entity, the process is simpler, less costly, and altogether more efficient. In such instances, the factor/PO funder will collect payment on Jane’s invoice and pay themselves back for funds advanced at both the PO funding stage and the factoring portion.

When a vendor combines their factoring and PO funding services, they receive all their financing under one roof which means fewer calls and less hassle and complex coordination. The vendor also gets a resource of enhanced expertise – a competent factor/PO funder will be highly experienced in all aspects of trade and supply chain finance. A factor/PO funder is optimally positioned to help clients navigate the rough and choppy waters of commercial transactions, from advising on transaction structure and mitigating risk, to controlling the flow of goods and collecting payment on accounts receivable.


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