CREDIT

Offering goods on credit is one way of increasing business.

I have also been involved with business to the electrical industry for many years. The payment from electrical industry is very poor.

What you see as ALSTOM in Pallavaram was years back known as The English Electric Company of India Limited. We offered to supply them hylam (Formica - electrical grade) components to them. It is a simple job of buying hylam sheets and cutting and turning them to different sizes.

They said payment will be made in 90 days and we agreed. But.... there was a catch. You have to submit the bill after 90 days.So, the credit period offered is actually 90 + 90 = 180 days! (six months).

Still we agreed because it is a very reputed company and payment will be made as promised. We decided, we will have to provide working capital for six months and after that we will get payment regularly every month.

Today, in the AC and other business which mainly involves supply (no value addition) credit cannot be given. Even Government bodies which used to pay in 30 to 40 days began to approach retailers to buy air-conditioners against advance payment!  (Retailers don't give any credit).

Recently a very reputed paint company with a yearly turnover of more than 2500 crores approached me to buy a water dispenser. They said payment will be made in 15 days cycle. I refused to the terms and told them that as per our policy they have to make either advance payment or if payment against delivery they should first send us a scan copy of the payment cheque so that we can be certain that payment is obtained against delivery.

After two months they came back and send a copy of the cheque, which we collected against delivery.

As my friend often says: "No money - no honey".

Dear friends, it is better these days to supply only against payment.

Happy selling!