# I'm a bit scared of purchase orders...



## terzdesign (Mar 8, 2010)

Hello all-

I've got a pretty decent sized client base and some of them use P.O's on orders. 

I know what a P.O is but I don't necessarily understand how it is binding. I base my company off of great designs which is what sets me apart from the competition. That means I send alot of e-proofs out with what the clients apparel will look like. Also, most of my new clients I require half down, older ones I usually trust if they want to do a P.O.

Now this has never thankfully happened, but what if I get a client who happens to be extremely particular who orders a bunch of stuff on P.O and when I deliver they decide that the blue (for example) isn't quite the right shade or something and now doesn't want to pay? How do you hold them to it/get them to pay/not piss them off?


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## JeridHill (Feb 8, 2006)

jcterzin said:


> Hello all-
> 
> I've got a pretty decent sized client base and some of them use P.O's on orders.
> 
> ...


You get everything in writing with signatures at the beginning of the order. When someone orders something, you write it out with specifics, including a design, size and placement. Then you have them sign it, so there are no questions. That combined with a PO will guarantee a payment if you delivered what was ordered.


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## PositiveDave (Dec 1, 2008)

A PO is for them, it just links the incoming goods to whoever ordered it, plus it might require a directors signature etc. It doesn't affect your responsibility to give them what they ordered.


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## Riph (Jan 11, 2011)

Disclaimer - I'm not a lawyer. 

In the U.S., most commercial transactions are governed by state's implementation of the Uniform Commercial Code. Both the buyer and seller have rights and obligations under the Code.

From Wikipedia: (Purchase order - Wikipedia, the free encyclopedia)

"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 purchase order to a supplier constitutes a legal offer to buy products or services. Acceptance of a purchase order by a seller usually forms a one-off contract between the buyer and seller, so no contract exists until the purchase order is accepted.[1]"

​


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## Louie2010 (Feb 26, 2010)

> Now this has never thankfully happened, but what if I get a client who happens to be extremely particular who orders a bunch of stuff on P.O and when I deliver they decide that the blue (for example) isn't quite the right shade or something and now doesn't want to pay? How do you hold them to it/get them to pay/not piss them off?


It is quite possible this could happen, and then they would have all the leverage. You could of course take them to court and then it would be up to the judge. He would decide if in fact the agreement (PO) was worded in such a way it was binding, and if so that you in fact reasonably fulfilled the agreement, and were owed the money.

You need to weigh the pluses and minuses, make your best decision and then move forward.

1)_ If you made a strict policy requiring 50% down would you lose business, and if so how much?_

2)_ How to best explain that policy in order to not lose too much business?_ As a small business you can always use the tried and true explanation that being a small business as you are you can offer better service in these ways.... Then have a long list of all the benefits you offer. Then explain that unfortunately being small while ables you to offer these benefits doesn't allow you to carry any accounts receivable. Explain you need the 50% down and the balance on delivery to afford to order the raw materials and pay your bills.

3) Once you determine the above you have to decide if the lost business would be worth it in order to keep the stronger leverage and security of having 50% down on all business. Nobody can answer this question but yourself.

A few things to consider while contemplating the decision:

You should make a policy that you feel the most comfortable with, it is *your *business. That is one advantage of being self employed, you can do what is right for you personally. If you decide you are not comfortable extending credit with no money down, don't do it, and then concentrate on building your business from there. You don't want to build your business on a model you are not happy with and that will keep you up at night.

That said you may prefer to get as much business as possible and move forward using PO's. If so you then would have to look at that extra business (providing you would do less the other way) as a trade off for taking a little more risk. On the odd chance it comes back to bite you, it could so rarely occur that you could easily afford it, even if you did lose money on a deal.

Even if someone gave you 50% down and weren't happy, if they were a good customer, what would you end up doing anyway? If you would end up eating it anyway in order to keep them happy, the 50% down really didn't offer you anything except better cash flow (which could be reason alone to require it, but wasn't your original question in the OP)

Maybe you could create a policy that for any new customers, and for at least the first six months you require a down payment, and then once you get to know them allow them to move towards using a PO instead. You just need to come up with whatever is the best business model that financially makes sense, *and* compliments you personally in order to feel good about it and not pressured or stressed.

All that being said, once you make your decision, then don't look back and keep worrying over it. If you sit down with all the facts and make a sound decision using sound logic then allow yourself to move forward with no regrets, good or bad. It is a business decision and you will always have some bumps in the road regardless of which decision you make. Deal with them (those problems) just as you would placing an order, answering the phone, working on a job, etc, just part of the cost of doing business, and nothing more. 

Good luck moving forward, I am sure you will make the best decision, as nobody knows your business as well as you do. 

PS: If you are going to use PO's often you might want to have them sign a written agreement and have your attorney prepare or review the wording beforehand.


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## binki (Jul 16, 2006)

If you question their ability to pay then run a DnB on them. It will cost a few bux but you won't need to worry after that.


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