One of the main reasons embroidery businesses fail is the lack of cash to run their business! Managing cash flow in your embroidery business when you are first starting or trying to grow your apparel decorating business can be a challenge. Most new embroiderers are new to embroidery and do not have the business education that teaches you about cash low or even now to run a business.
When I first started by embroidery business I did not have any business training at all and I was extremely naive when it came to business. I trusted everyone and I knew without a shadow of a doubt that I would not have any trouble trying to collect my money.
When a customer placed an order with me, I did not even ask my customer for any money up front. I was so excited about getting the order and I knew that my customers were just as excited about placing an order and would be very anxious to come back to pick up their finished products with money in hand of course.
I used my money to purchase their items, embroidered them and then waited for them to come back to pick up their finished products. I was actually afraid to open my mouth and ask for any money when they placed their order. After being taken advantage of a few times, I discovered that this was a wrong approach and if I was going to survive, I would have to be a little braver and speak up!
Let me ask you some questions.
-
- Do you fail to ask for money up front?
- Do your customers always pay you on time?
- Do you have Accounts Receivables higher than you would like to see it?
- Do you ever have a time when money is tight in your business?
If someone asked me those questions when I was first starting to grow my business, I would have had to answer YES to every single one of them. My bank account was very rapidly dwindling instead of growing and I had to make some changes quickly or I would have to go out of business!
I learned very quickly that I needed to ask for a down payment or deposit on their order as soon as they placed it. The next question was, how much should I ask for? I started out by asking for 50% down and soon discovered that it was not always enough. You need enough to pay for the products when you place your order so that you are not using your own money to fund their order. Many times the total order for their garments is higher than the 50%, so I started asking for the full payment of the products that they were ordering. This gave me enough money to order their products, and it would help me to have some money to work with for their embroidery as well.
When you have an order that your added embroidery or other embellishment is more than the price of the garment, the 50% down would be adequate, but when you are ordering expensive items such as leather jackets, the 50% is not enough. Quickly figure out what it is going to cost you to order the customers products and ask for that amount of money. You cannot run a successful business using your money to purchase your customers products.
When it is time for the customer to pick up the order, call him or her and tell them their order is ready and they will need the remainder of money that is due when they come in to pick it up. If you are delivering the products, let them know that they must be paid in full before you can leave their order. If you are shipping out the order, then you must be paid the remainder before the order can be shipped.
I have had customers get upset with me when I told them this because they were planning on not paying in full upon receipt. When that happens, they are not a good customer and it is questionable whether or not you should continue to do business with them.
A small apparel decorating business cannot survive if they are working with accounts receivables and are always waiting for their money to come in or hoping that it will come in. It does not always happen or happen on time and you end up with a cash flow problem.
The number 1 way to manage cash flow in your embroidery business or apparel decorating business is to ask for at least 50% down for each sale and collect the remainder on delivery or pickup of the finished product!
Do not allow yourself to have to answer YES to any of those questions! There is no need to deal with issues of cash flow in your embroidery or apparel decorating business!