In the past few weeks my company has taken two fairly large orders for our merchandise totally approximately $40,000. Although these orders are great for us, they have brought big headaches to Sand Shack.
After getting over my excitement of making some fantastic sales, I quickly realized the apparent difficulties with handling large orders for a small business. One reason these orders have been troublesome is that these accounts don’t pay until 30 days after delivery (net30). Large orders take a week to prepare and a few days to be delivered to the customer. Therefore, it may take up to 6 weeks from the time I take an order to the time I get paid.
Another reason that large orders deliver big headaches is that occasionally I have to invest a sizable amount of money in order to make the product that I sold. For one of these orders I did not have the product on hand, and therefore, needed to make it. This required a sizable investment in product that I will have to wait 6 weeks to be paid for. Luckily, I had the needed inventory on hand for the other large order.
In essence, these large orders have drained me of cash. I run a high expense business and having to wait so long for such large payments spells big trouble. I personally have not paid myself for the past month, and some larger bill payments have also needed to be delayed.
These large orders would be ok if I had a line of credit or a lot of cash on hand, but this economy has allowed neither. The good news is that these large orders will allow me to show a bank a solid source of revenue for my business and a decent profit for a turbulent 2009. These two things will hopefully allow me to secure a sizable line of credit in 2010, which will help alleviate some of the problems that come with large orders in the future.
| Entrepreneurial advice Be wary of large orders until you are sure you have developed the infrastructure to be able to flawlessly fulfill them without your company running out of money. This infrastructure would include a solid supply chain and the cash flow needed to survive for at least 6 weeks without receiving payment. To develop this, consider pursuing smaller accounts at first for a steady and reliable source of revenue before taking any large orders. |
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