Printers have spent the past 11 months debating the question: should the industry stop operating on credit? Here’s the debate so far…
It won’t work. The printing industry needs all the help with funding and finance it can get. Factoring or invoice purchasing can be another useful option for certain businesses and helps take the pressure off suppliers.
David Hunt, national credit manager, Fujifilm
Factoring or invoice finance won’t stop customers from not paying their bills and in fact it encourages customers to treat printers like a bank. There needs to be a national company credit check just like there is with personal credit, with a life-long register of directors who have filed for bankruptcy or liquidated their companies or a black mark for trading outside terms.
Lucas Eyre, consultant
Thanks for your comments Lucas. My comment regarding factoring was for print businesses not customers. Agree on your comment regarding improved credit reporting for the industry. We belong to the Trade Bureau Associations Print Suppliers group as do most of the big suppliers to the industry. We find this invaluable as a proactive reporting tool at individual business level.
David Hunt, national credit manager, Fujifilm
As an industry we definitely need to operate with credit. Business-to-business industries like ourselves mostly do. Stricter terms is a better way to do it in these times, though printers have to be more cautious of who they deal with, in relation to customers and suppliers.
Tony Perini, general manager, Intoprint
Credit cards are a common thing now. I think every business should have one. And every business should accept them. It would put the onus back on to businesses to use banks as credit providers and not other businesses. B2B credit is an old-fashioned concept and should be eliminated. If someone does not have a credit-worthy ability to get such a card they should not be trading.
Edward Congdon, managing director, Whites Law Bindery
Great point Edward. I know of one card that is actively promoting the use of credit card payments B2B with reduced merchant fees as well as the possibility of earlier payment to assist suppliers, a great points system as well as of course an extra avenue for finance to assist customers. Win, win, win with the card companies’ increased business.
David Hunt, national credit manager, Fujifilm
We only pay .07% or a little more on platinum or gold cards. Overseas ones are a different story however. B2B points suck in most cases. I find they are usually much less than personal ones. I prefer to use my personal card and get reimbursed by my business.
Edward Congdon, managing director, Whites Law Bindery
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Paper merchants have been way too lenient and greedy with companies that we all know were not travelling too good. They have relied on insurance to bail them out rather than walk away from dubious clients. We all talk in the print industry and it has been proven time and time and time again that certain companies will fall, but no, paper merchants keep on supplying these companies. And we all know that once the dust settles and the paper merchants lose more money and premiums go up, they conveniently put their prices up so the good guys can fix up their shortfall. The sooner insurance companies walk away, the better paper merchants will operate their companies and stop supply to the badly managed print companies. Go on, do it, maximum credit 60 days.
Geoff Drennan, managing director, FSG Design & Print
“Won’t work”. Interesting that was the first comment. Should we look outside the square for a solution or just accept what has been going on progressively over the past 30 years – an ever increasing tendency to string out creditors and who cares if they go broke in the meantime? Does a good relationship with your customer help?
Kieran May, director, Printing Industries Association of Australia
Congratulate your proactive attitude Kieran, trust me, we would be a whole lot better off from a cashflow and a costs perspective if we didn’t have to provide terms, which we manage very closely. Realistically, as you would be aware, a printer’s lead time – from job through the door to job out the door and payment received – requires some form of bridging to support their own cashflow. Factoring can be a good option in this scenario as mentioned above.
David Hunt, national credit manager, Fujifilm
Yes it can work and it should. Cashflow and bad debts kill business and if you could remove those two issues, why not? It is about your fear and doing things because, well, that’s how they are always done. I did not want to be the staff member doing the end-of-month call-around and so therefore if I am not going to do it, no one in my business should either. I am a small operator, about $2+million turnover a year, and we changed over to payment upfront on most orders, with a few multinationals and repeat customers on 30-day account. No bad debts and almost no overdue accounts and growth. Yep we have grown our business with a policy that my fellow industry operators said would cause me to go broke.
Kevin Rack, owner, Mabuzi
Kev, well put, my friend. Kopystop operates on the premise that all orders be paid at collection. Just like most purchases in our daily lives, retail or otherwise. Likewise as a smaller operation very similar to yours, we cannot sustain carrying bad debtors for 60 to 120 days, although the 30-day terms state so very clearly 30 days. We did this in the past for far too many years. Kopystop is not a bank. Kopystop is a professional print enterprise, owned and operated by a professional team of experts, with exceptional suppliers and much appreciated, highly valued clients. If we are to maintain the highest standards of quality and service, then we must be recompensed at point of sale, in order to meet our own never-ending payment of bills which sustain our daily business. Cash flow is critical; to enable Kopystop to pay its own bills and suppliers on time, we in turn must be paid on time at the time of point of sale.
Art Tchetchenian, managing director, Kopystop Digital Print Solutions
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To clarify, we are talking about different relationships here: 1. Terms provided to a printer by a supplier, and 2. Terms provided a customer by a printer.
David Hunt, national credit manager, Fujifilm
David, I reckon the terms should be the same both ways. Credit terms should be built into your pricing structure. Good payers get better pricing. Bad payers can pay a higher price or be priced out of your business. I have a view that if any business can’t or won’t pay their bills on time, then they should not be in business. They either can’t be trusted or they can’t afford it. The supply of credit is a part of a relationship. It only works if both sides respect the relationship. We have recently seen what happens when suppliers try too hard to maintain market share by cutting prices and kowtowing to slow payers. Who ends up paying?
Kieran May, director, Printing Industries Association of Australia
This was always going to be a lively debate, which is of course always healthy to the industry. Kieran, you’ve ignored the issue around a printer’s production timeframe. Our product is one of the first in the production line, meaning it can be a couple of months, or more, before the job is completed and paid for. That gap has to be funded from a cashflow point of view.
David Hunt, national credit manager, Fujifilm
No, David, I haven’t forgotten that. I just think that everyone should negotiate their terms to suit their business and their customer and then stick with it. That way, things like interest costs can be built in to the pricing. Suppliers of any sort are not a bank, and if extended credit is necessary to operate a particular business, then proper use of an overdraft facility will meet the needs. I am old enough to remember that is why credit cards were introduced. The problem we face – and not just in the print industry – is that terms are negotiated and accepted up front, and then ignored by far too many. Whether we are first or last in the production line should make no difference. We all know it is not a simple fix, but when the extension of credit is abused for any reason, the system breaks down. In the end someone has to pay the price, and it seems that it is always the good payers who subsidise the inconsistent and bad. I’ll throw it out there again – if you can’t pay your bills on time, you are probably not making money and should think about doing something else. If you just won’t pay on time, you should probably be drummed out.
Kieran May, director, Printing Industries Association of Australia
When dealing with larger companies, specifically multinationals, we offer different pricing for 60 and 90 days, to encourage them to pay on time. The issue we had was the larger the company, the greater the payment delay, with a few even changing the terms we offered after the approval to proceed. There is a certain large Australian shopping centre chain we don’t even do business with and it was their very poor attitude to paying that we never did business with them again and take payment upfront. So thank you for the lesson learned. There are certain sectors whose turnaround is over a few months and there is not a lot one can do there. Our turnaround times can be between five working days and one month for indent. Another trend we spotted was the revolving door customer who used various companies for their orders and strung us all out as they struggled with their cashflow. Cash up front! I can only pay you once my customer pays after their campaign in three months. So we take payment upfront on 85% of all orders and kept the few very good payers and dropped customers who always failed to pay on time. It paid off for us.
Kevin Rack, owner, Mabuzi
I am a strong believer if you can’t pay for services today, you most likely can’t in 30, 60 or 120 days. If you are giving a customer credit terms, who is giving their customer credit terms, you are not only risking not getting paid you are risking your own business and security for your employees. At Juergens & Co we offer 50% payment with order and balance on completion and prior to collection. This is working and has so for the last three years, and yes, I pay my suppliers in the same way, as if I haven’t the money I am not a really a client. If you don’t have the money and you wish to purchase you are welcome to take the risk and use a credit card to solve the issue. I have seen over my 20 years in the industry there is no such thing as a ‘good payer’ when giving credit no matter how many years they have been as a good customer to you. As we are all well aware even the biggest business can come tumbling down without notice, and the day they do it hurts, all because of the credit you offered. Once you start refusing credit your business will change for the better.
Peter Juergens, creative director, Juergens & Co
The printing industry is notorious for late payment, both from printer to supplier and customer to printer perspectives. Printers who run into cashflow issues often resort to factoring and invoice discounting. This in my opinion is the rocky road to failure, and very hard to get out of once you start. The printer is then duped into thinking all is well because they start living on turnover and cashflow, not profits. This is the classic three credit-card trick… you pay one card off with another, then another and are able to because of the billing dates of each of the cards. The saying ‘turnover is vanity, profit is sanity’ is so true in this industry. Many printers believe if the presses are rolling and the invoices are getting paid they are making money. Those that have MIS systems will know this is not necessarily the case, and often because of poor management reporting they find out too late. How many failures have we all read about whereby poorly managed printing companies have failed because their clients don’t pay them, or they can’t pay their suppliers on time. Then the very next week they re-emerge under a new name in the same premises and, unbelievably, the paper merchants extend new lines of credit to them. None of this would happen if credit was not offered so freely at either end of the sale. New clients should pay upfront, then ‘earn’ the right to apply for a credit account. Credit should be strictly enforced to 30 days maximum throughout. Why would anyone need more time than that? I think all the paper merchants and suppliers should unite and enforce 30-day terms. They and only they have the power to do this.
Trevor Cocks, managing director, Accura MIS
Very valid arguments from all responders. The Chinese market runs on COD or upfront payments and they do very well with this. In Australia it is about cashflow and prioritising payments. If you give your client 30 days, then you will not see your money for 30 days, you have already purchased your paper supply and it could be 10 days before you send out the goods, thus you need 40 days with your supplier. The trick here is to get COD or low terms with end users and pass this time saving down the line. We all then gain cash flow. As our business is a direct service to the industry we have now come up with a flexible plan for our clients – the quicker you pay the better the discount, or in return the longer you want the more you pay. It has worked very well and has been well received.
Mark Whorlow, business manager, Logical Recruitment
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