CiNoRi Posted 15 Jan 2012 , 2:32am
post #1 of

Hi all,

So I have been talking with a client for a while now. We finally nailed everything down and I sent over the contract to be signed and returned with a 50% deposit (Which reserves her date & the remainder balance is then due 2 weeks before). The event is not till the second week of February . The client told me early on that another family member would be paying for the order. Throughout our planning I had hoped that the client had been in good contact with the person paying due to the fact that the final cost wasn't your typical order icon_wink.gif

Soooo today I get a message from the client saying that after looking over the contract (Which BTW states everything we have talked about before/ nothing new) and talking with the person paying - That the payer wants to know if they can send in the check for the full amount post dated for 2 days prior to the date of my "payment in full due2 weeks before" deadline.

I of course want to give the whole thing the benefit of the doubt, but of course we all have to be skeptical & protect ourselves. I mean this is our business, right?! icon_wink.gif

I responded telling her that I could work with them if they chose to do it that way... however their date would not be reserved officially till the check clears. I also reiterated that it was a better scenario to pay half now/ half later so that their date will be locked in, as well as so that I can order materials.

Thankfully, right now, I do not HAVE to have this order, and I think that if the order did fall though, it still would be early enough where I wouldn't be out anything. I'm not going to stress over it, but I wanted to see what you all thought, did I handle it OK? Should I have done anything differently? How would you respond?

Thanks so much for your thoughts!

38 replies
jason_kraft Posted 15 Jan 2012 , 3:17am
post #2 of

Sounds like a good response on your part. I would have done the same thing, making sure to clearly illustrate the potential scenario where someone else books their date before their check clears and they end up scrambling to find someone else who will make the cake with 2 weeks notice.

msthang1224 Posted 15 Jan 2012 , 4:55am
post #3 of

I agree, you did the right thing and Im reading this and am also skeptical about the check business. but, thats just me. i dont accept checks for this reason. everything is done in cash so that I can asure that im covered if, i get supplies and they cancel. you always have to cover yourself bc ppl will try to take advantage when they can.

QTCakes1 Posted 15 Jan 2012 , 4:59am
post #4 of

I am sorry, but as long as we have been on here and have heard similiar situations with bad outcomes (bounced check, still waiting on check 2 days before event), why do we still insist on playing with fire?

jason_kraft Posted 15 Jan 2012 , 5:00am
post #5 of

To provide a different perspective, we've accepted a few hundred personal checks over the years we've been in business. There have been 3 bounced checks, and we were able to recover all the funds owed (plus the NSF fee) by simply contacting the customer and letting them know what happened.

QTCakes1 Posted 15 Jan 2012 , 5:01am
post #6 of
Quote:
Originally Posted by msthang1224

I agree, you did the right thing and Im reading this and am also skeptical about the check business. but, thats just me. i dont accept checks for this reason. everything is done in cash so that I can asure that im covered if, i get supplies and they cancel. you always have to cover yourself bc ppl will try to take advantage when they can.




And you are so right, that late of payment requires CASH ONLY.

jason_kraft Posted 15 Jan 2012 , 5:04am
post #7 of
Quote:
Originally Posted by QTCakes1

I am sorry, but as long as we have been on here and have heard similiar situations with bad outcomes (bounced check, still waiting on check 2 days before event), why do we still insist on playing with fire?



The check would be post-dated 2 weeks and 2 days before the event, still enough time to cancel the order before work starts if the check bounces and the customer doesn't make up the payment in cash.

CiNoRi Posted 15 Jan 2012 , 12:39pm
post #8 of
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by QTCakes1

I am sorry, but as long as we have been on here and have heard similiar situations with bad outcomes (bounced check, still waiting on check 2 days before event), why do we still insist on playing with fire?


The check would be post-dated 2 weeks and 2 days before the event, still enough time to cancel the order before work starts if the check bounces and the customer doesn't make up the payment in cash.




Exactly! If she would have said 2 days before... I would have said heeeeeck no, and good bye!
icon_biggrin.gif

cakesdivine Posted 15 Jan 2012 , 4:56pm
post #9 of

Jason many individual cakers don't have a bunch of liquid capital available to purchase product for a large wedding cake. Usually you need that deposit to order things that might and most likely take more than 2 weeks to arrive. I would hate to order something specific for their order and they not come through with payment or bounce the check and you chase funds when you should be working on their order. I don't agree with ever accepting checks especially since every bank account now comes with a visa/mc check card. People who pay for goods with checks are generally trying to rob Peter to pay Paul because the funds aren't available at the time they try to write the check. Check writing is passe' with the exception of paying rent on your home or retail space. Even utilities now have online payment option. Now if a caker doesn't accept credit cards then I guess checks and cash are the only options. But now days it is easy for anyone to accept credit cards and debit cards. The OP has already gone against her own contract which tells the client they can push and push. If you give people an inch they will take a mile! Don't play with fire!

costumeczar Posted 15 Jan 2012 , 5:57pm

I have to disagree somewhat with the arguments against checks...Personally I require payment three weeks before because that's a little safer in terms of anything bouncing, but it's also true that in 16 years of doing cakes in a small home-based business I've only had one bounced check. I've had people try to push the due date for payments, but three weeks is pretty firm.

I would have told the client the same thing...Postdated for two days before the due date is fine, but that means that the cake isn't booked until the check clears even if I'm holding the check. If someone comes along and hands me cash for that date in the meantime, the postdated check is going to be voided out and sent back if I can't do both cakes. It's up to the client to decide whether they want to take that risk.

And now for the lecture...I also have to add that if you're running a business you should have a business account with money in it to buy supplies, and you shouldn't have to wait to get deposits in order to have the money to buy supplies. I'm currently writing a series on my blog about money management for wedding busiensses, since I seem to be seeing a lot of people these days saying they don't have the money for this or that. It's not just cake people, it's all kinds of small business owners. It's one thing to tell clients that you need deposits to buy supplies (sometimes they understand that to be a good reason for a deposit), but another to really have to

Anyway. The first part of the series was last Monday, here it is http://www.acaketorememberva.blogspot.com/2012/01/money-management-for-wedding-businesses.html

The next part will be up tomorrow...I thnk that I have it scheduled for every Monday for the next month. It's not hard to build up a balance in a business account, just don't take any salary money out of it for a few months. Only use it to pay expenses, just don't go buy things that aren't business-related. If you're home-based that shouldn't be too terribly difficult, then once you get up and running you won't be desperate for deposits to pay your expenses.

cakesdivine Posted 15 Jan 2012 , 9:36pm

You never know what someone's personal finances are like. And especially in today's economy you have alot of cakers who just don't have extra funds available to float in an account. To tell them that they are being unprofessional because they are finacially challenged is just wrong.

The caker who allows the client to run their business is the one being unprofessional. Not all cakers have a spouse to pay the bills while they build their business. And some families are dealing with both parents being currently unemployed. Everyone's situation is unique. You cannot unilaterally say that if someone shouldn't start a custom cake business if they don't have any capital. The reason so many people fight to have cottage food laws is so they can do this to make money and build enough of a business to move to the next level, owning a store front.

costumeczar Posted 15 Jan 2012 , 11:18pm

I have to disagree...Even if you have to build it up slowly, I think that everyone needs to have a separate business account with cash in it so that you don't have to affect your family's finances with your business expenses. When you keep them separate it makes things so much easier. And if you haven't made and delivered the cake you shouldn't be spending any of the money that you collected for it yet. That way if something happens and you have to refund all of the money, you won't have to dip into your personal finances to do it. I always use the extreme example of if I drop dead tomorrow and my husband has to refund every bit of money that I've collected in deposits and payments, he'll be able to do it because it's all in the bank until the cake is delivered. It won't affect my family's finances at all.

Too many people get into trouble with their business finances because they treat their business account like a piggybank. It's not just cake people, like I said, I hear about it all over. If it means that you just leave $20 from each cake that you make in your business account and don't spend it right away, it will build up over time and you'll have that cushion.

DDiva Posted 15 Jan 2012 , 11:41pm

Wow--these topics do get prickly, don't they icon_smile.gif .
Here's my take--you have a policy in place. Why even consider altering it? If you don't follow your policies, why should anyone else? I think you handled it just fine. No need for second guessing.

cakestyles Posted 15 Jan 2012 , 11:48pm

Costumeczar I agree with you 100%. You need a cushion in the bank, not just in your business account but in your personal one as well. My client's deposit money isn't used to pay for my family's groceries or to pay for my kid's karate class. It's not even my money yet. I think this is why so many small businesses fail in the first year or two of being open. Money management is a HUGE problem nowadays.

And no, people shouldn't start a business without ANY capital...that's not unprofessional, it's irresponsible.

OP I think you handled it perfectly. You're being very understanding and fair with this client and she knows that her date isn't carved in stone until that check clears the bank. That's exactly what I would have told her.

kellertur Posted 16 Jan 2012 , 1:23am
Quote:
Originally Posted by cakesdivine

People who pay for goods with checks are generally trying to rob Peter to pay Paul because the funds aren't available at the time they try to write the check.




EXCUSE ME? I've never bounced a check in my life, and I STILL write checks. I keep my check book ballanced with EVERY check! I find this highly offensive and a somehow ignorant statement. We're a "pay as we go" kind of family, so yeah...I write checks. I don't like using credit cards except for necessities that I can pay off immediately. My off-line suppliers have no problem accepting checks (from my business account) ...but maybe I should inform them that I'm just "robbing Peter to pay Paul. Check writing in and of itself is not a crime. None of my clients have ever given me a bad check either...if they do, I'll know where to find them.

jason_kraft Posted 16 Jan 2012 , 1:52am
Quote:
Originally Posted by cakesdivine

But now days it is easy for anyone to accept credit cards and debit cards.



Of course it's easy, but it's also expensive. Thanks to fees, accepting credit cards is equivalent to guaranteeing that 2-3 out of every 100 checks will bounce with no possibility of recovering the funds.

I'm not even going to touch the generalization about people who write checks.

kellertur Posted 16 Jan 2012 , 2:09am

...yeah, and we all know credit cards NEVER get declined. LOL

Evoir Posted 16 Jan 2012 , 2:23am

Geez...this comes up a lot doesn't it?

Kara (costumeczar) is correct. Read her blog and learn. These are basic business principles. Lets all grow up and start treating our businesses with the gravity we should! (NB: not directed at anyone in particular, so please don't get all defensive on me).

I am in Australia, and as a microbusiness, I have to say I much prefer our way of doing business. My clients pay me cash. They do it online or in person using their OWN bank account and transfer the money electronically directly into my account. Its called 'direct transfer'.

Its very simple. If the money is not in my account (one month before for weddings, two weeks before for other cakes) then nobody gets a cake. I can check my account ANY time to see in almost real time what has been put into my account by the client (who has their own reference number of words). Best of all, I have a copy of the transaction, and the CLIENT has an instant copy of the transaction. So IF there is some kind of dispute, we have the records. The client can choose their savings, cheque OR credit card (cash withdrawal) to pay me. Its all cash in my account and it costs me nothing.

I've asked this before, but why in the USA is this sort of business payment model not used?

I also have a Paypal account if the client wants to definitely pay me that way - usually using their CC - but I am yet to have a client use that option. Hearing what I have heard about Paypal practices of late, I am not keen to be on the 'seller' side of any transaction, so I might stop offering that!!

cakestyles Posted 16 Jan 2012 , 2:51am

Evoir, it can be done here, and it is. I think some people aren't comfortable giving out bank account information. Even though it's on the front of every check that is written. lol

But, yes we can do that here in the USA as well.

jason_kraft Posted 16 Jan 2012 , 3:03am
Quote:
Originally Posted by kellertur

...yeah, and we all know credit cards NEVER get declined. LOL



The problem is not credit cards getting declined, it is customers disputing charges. It is trivially easy (and free) for a customer to dispute a credit card charge, and the credit card companies tend to give customers the benefit of the doubt in these disputes.

jason_kraft Posted 16 Jan 2012 , 3:14am
Quote:
Originally Posted by Evoir

I've asked this before, but why in the USA is this sort of business payment model not used?



Probably because banks in the US make so much money from credit and debit cards (especially debit cards).

There is a multi-bank P2P ACH solution called Clearxchange scheduled to be rolled out this year. Chase has its own solution called QuickPay, only one party needs a Chase account and your account info is secure.

http://clearxchange.com/
https://www.chase.com/online/services/quickpay.htm

FromScratchSF Posted 16 Jan 2012 , 4:15am

Evoir, it should be easier for people to transfer funds from person to person here in the US but it's not. Every bank has their own little rules about it, so if you are with one bank and I'm with another, it gets tricky to set up.

I have preached the Gospel of Google before, but I'll say it again... I use Google Merchant for everything. Everything. All I need is a client's email address and I send an invoice thru Google with a link. Customers click on the link and pay with a credit card. Every transaction. 2 days later Google deposits into my business account. It's not that hard and it costs me nothing. Zip. Zero. Nada. Takes me less then 5 minutes. No payment, no cake.

I have zero fear of chargebacks because Google has merchant protection. So even if someone claims fraud, I still get to keep the money I earned as long as I maintain proof that product was delivered. Hence I have my clients sign for every order. (This makes them a billion times better then Paypal, who makes it hard to send invoices, then holds onto your money until you transfer it, and has no seller protection).

If I take a check from a customer I take it to the customer's bank and cash it, then then deposit it in my business account if I think they are being shady. If someone is trying to float a check then I'll know right away.

I 100% agree with Kara, you must run your business like a business. If you have terms in your contract you need to stick to it, and if you don't have a separate business account at your bank you are asking for trouble!

KoryAK Posted 16 Jan 2012 , 6:01am

1) Costumeczar is completely right

2) as a small business, I prefer checks and cash to credit cards because of the fees. I pay about $450 a month in cc fees - that's an Audi payment icon_sad.gif

3) if you are worried about it, just take the check right to the bank it's drawn on and get the cash immediately.

4) I also try to write checks for small businesses when they will let me (even though I can get miles or whatever by running it through a credit card) because I want to try to save them the fees too - NOT because I don't have money.

jason_kraft Posted 16 Jan 2012 , 6:54am
Quote:
Originally Posted by FromScratchSF

I have preached the Gospel of Google before, but I'll say it again... I use Google Merchant for everything. Everything. All I need is a client's email address and I send an invoice thru Google with a link. Customers click on the link and pay with a credit card. Every transaction. 2 days later Google deposits into my business account. It's not that hard and it costs me nothing. Zip. Zero. Nada.



Do you mean Google Checkout? If so, they charge 2-3% of each transaction depending on volume.

http://checkout.google.com/seller/fees.html

AnnieCahill Posted 16 Jan 2012 , 12:17pm
Quote:
Quote:

Jason many individual cakers don't have a bunch of liquid capital available to purchase product for a large wedding cake.




Quote:
Quote:

People who pay for goods with checks are generally trying to rob Peter to pay Paul because the funds aren't available at the time they try to write the check.




Quote:
Quote:

And especially in today's economy you have alot of cakers who just don't have extra funds available to float in an account.




Wow. Statements like these make me wonder...

Kara is 100% correct.

costumeczar Posted 16 Jan 2012 , 1:34pm

Thanks.

Part two is up today, and ironically is about this exact topic even though I wrote it about two weeks ago. So I guess it does come up a lot icon_rolleyes.gif

If this topic makes people get heated (I don't know why it should, though) wait until the guest post I got from the former IRS agent about paying your sales tax goes up, hahaha!

Im going to look into Google merchant...I'm not against paying 2-3%, that's just the price of taking electronic payment through a third party, but I do like the idea of google not being so stupid about the pullbacks like paypal does. I hate that. The only time that I've ever had paypal pull anything back was when they did it on their own, no complaints from the client, they just decided that something looked strange. It didn't make any sense and neither I nor the client ever got a good explanation about why they put a hold on it.

AnnieCahill Posted 16 Jan 2012 , 2:23pm

Kara,

You did a great job with the article, but the whole time I read it I was thinking...this is common sense. No wonder why most businesses fail within the first five years. Some more good reading:

http://usgovinfo.about.com/od/smallbusiness/a/whybusfail.htm

http://www.businessknowhow.com/startup/business-failure.htm

http://www.home-business-expo.com/wiki/SmallBusinessesFail.asp

This reading will also address the commonly asked question of "I just watched Cake Boss and took a cake decorating class and now I want to open a cupcake shop. What should I do?"

costumeczar Posted 16 Jan 2012 , 2:41pm
Quote:
Originally Posted by AnnieCahill

Kara,

You did a great job with the article, but the whole time I read it I was thinking...this is common sense. No wonder why most businesses fail within the first five years. ?"




You're absolutely right. Half the time when I write blog articles I'm thinking to myself "this is pretty basic" but then I remember the number of businesses that I personally know who complain about the basic stuff like this. I can think of four or five businesses (wedding-related, not all cake) that have either gone out of business or that have owners who constantly complain that they don't have any money to pay for this or that. It's rather amazing.

cakestyles Posted 16 Jan 2012 , 3:03pm
Quote:
Originally Posted by AnnieCahill

Quote:
Quote:

Jason many individual cakers don't have a bunch of liquid capital available to purchase product for a large wedding cake.



Quote:
Quote:

People who pay for goods with checks are generally trying to rob Peter to pay Paul because the funds aren't available at the time they try to write the check.



Quote:
Quote:

And especially in today's economy you have alot of cakers who just don't have extra funds available to float in an account.



Wow. Statements like these make me wonder...

Kara is 100% correct.





They make me wonder too...but they don't surprise me. icon_rolleyes.gif

fcakes Posted 16 Jan 2012 , 3:31pm

I accept cash and checks and sometimes Paypal but don't want to pay the fees so as of now, cash and checks work well for me. It would be great if there was a fee-free option to accept credit cards!

FromScratch, Google checkout does charge fees and it is the same as Paypal's - 2.9%+$0.30 per transaction under $3000. Look it up.. you might be paying fees unknowingly!

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