Net terms for fashion labels
Seasonal pre-orders are big, and boutiques expect longer terms. Terms Due keeps an eye on every account so one late payer does not sink your season.
Bigger orders, bigger risk
A single boutique season order can be worth thousands. On Net 60, that is two months of your cash sitting in someone else's shop. Credit limits and a clear hold rule mean you know exactly how much each account can owe before the next drop ships.
Fashion wholesale also runs on a calendar. Orders land in two or three waves a year, so the receivables book swells after each delivery window and should empty before the next. The aging report shows which boutiques are paying late across seasons, so you can adjust terms before the next round of orders rather than after.
What goes wrong
- Terms agreed at the trade show, in a hurry, with no limit.
- A boutique that has not paid for spring placing its autumn order.
- Reminders by email to a shop that is closed two days a week.
- Deposits taken on paper and never reconciled against the balance.
- One large stockist making up a third of the book.
Before and after
Before
- Net 60 for anyone who asks at the show.
- No idea of total exposure until the spreadsheet is rebuilt.
- The autumn order ships while spring is unpaid.
- A big account's slow payment discovered at year end.
With Terms Due
- Net 30 by default, Net 60 earned with a limit and a review date.
- Exposure per boutique and in total, live.
- Autumn order held at checkout until spring is paid.
- Concentration visible on the aging report every Monday.
Suggested starting settings
| Setting | Suggested | Why |
|---|---|---|
| Terms | Net 30; Net 60 for proven accounts | Shorter terms for a seasonal book keep each season's cash separate |
| Default limit | One season order | A boutique should pay for one drop before receiving the next |
| Large stockists | Credit report, limit of one order, quarterly review | Concentration is the real risk in fashion wholesale |
| Grace period | 14 to 21 days | Boutiques pay in batches; allow one |
| Reminders | Email at -5, 0, 7; text from 7 | Owners are on the shop floor |
| Statements | Monthly, and after each delivery window | Lines up with how boutiques reconcile |
Worked example
The boutique that ordered autumn before paying for spring
A label ships a $6,800 spring order to a boutique on Net 60 with a limit of $7,000. Day 60 passes unpaid. On day 75 the boutique places a $7,400 autumn pre-order. Checkout stops: over the limit and past the grace period. The owner calls, pays spring in full by card on the phone, and the autumn order goes through with the limit intact. Without the hold, the label would have shipped $14,200 of stock to a shop that had paid for none of it.
| Spring order | $6,800, 15 days overdue |
|---|---|
| Autumn order attempted | $7,400 |
| Exposure without hold | $14,200 |
| Exposure with hold | $6,800, then $7,400 after payment |
Questions
We take deposits on pre-orders. Does Terms Due handle those?
Terms Due tracks the balance outstanding on each order. For deposits and part payments at checkout, our sister app Balance Due handles the deposit and Terms Due chases the balance.
Can limits change by season?
Yes, at any time. Many labels raise limits before a delivery window and lower them after.
What about showroom and agency orders?
Orders your agent places through your storefront are checked like any other. Orders you create in admin are flagged rather than blocked, so you keep control.
Related
Reading an aging report
What an accounts receivable aging report is, how the aging buckets work, how to read it and what to do about each bucket, with a worked example.
Read moreNet 30 vs Net 60 vs Net 90
The real cost of Net 30, Net 60 and Net 90 payment terms for a wholesale business, with worked figures, when each makes sense and how to negotiate.
Read morePricing
Terms Due pricing: free for up to three trade accounts, then Starter $49, Growth $99 and Scale $199 a month with a 14-day trial, billed through Shopify.
Read moreStop chasing wholesale invoices by hand
Install Terms Due, set a credit limit for each buyer and let the app hold, remind and collect.
Install on Shopify