The message below was sent out to retailers yesterday by the linens brand Sferra. I was intrigued by how open they were about their credit line. Excerpt: "...We have over $3 million outstanding on our line and an interest charge of $15,000 per month falls right to the bottom line. Our "affordable luxury" pricing policy affords no financing of past due amounts."
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March 31, 2009
Dear Client:
As you probably have noticed during the first three months of 2009, SFERRA is truly committed to supporting you through exceptional deals that help improve your margins and profitability. So far, we have offered: - Free shipping and extended payment terms on orders placed at trade shows.
- SILOs (Special In-Line Offers) providing 25% discounts on styles that would normally be stocked in stores.
- An unprecedented 10% off our top 10 best-selling items in white and ivory.
And now, something we have never done before - 50% off selected in-line table linens just in time for the holidays. And we plan to do even more, so watch for our emails with "SFERRA" being the first word in the subject line.
What you may not know is that SFERRA carries a significant line of credit to maintain the stock levels you have come to enjoy over the years. This line of credit is secured by "eligible" accounts receivable balances, which are less than a certain number of days outstanding. Once an account ages past a certain point, we can no longer use it as collateral. Therefore, it is imperative that we remain diligent in our collection practices. Presently, we have over $3 million outstanding on our line and an interest charge of $15,000 per month falls right to the bottom line. Our "affordable luxury" pricing policy affords no financing of past due amounts.
The extension of credit on accounts can be costly in financial terms, human resources expended in collection efforts, and in maintaining good customer relations and, to that end, we want to share our policy so there are no misunderstandings. Here are SFERRA's updated collection procedures effective immediately for all customers: - If an account becomes past due (invoices age beyond the net terms) the account is placed "on hold" and no orders will be released.
- If an account becomes 15 days past due (45 days from invoice date in Net 30 Days accounts) a non-reversible late fee of $35 is posted to the account. Of course, it is not our desire to collect any fees. We are only asking that all customers comply with their agreed upon payment terms and this policy will help to enforce that.
- If an account becomes 30 days past due, a non-reversible 1% monthly (12% annually) interest assessment is posted to the account.
- If an account becomes 60 days past due, an additional non-reversible 1% monthly (12% annually) interest assessment is posted to the account. Interest expenses will continue to be charged at 30-day intervals until the past due amount, late fee charge, any service charges, and accumulated assessments are paid in full. Payments must be in our hands (not in mail and not post-dated) on the dates noted. Customers with an "on hold" status may still get necessary orders released by making a credit card payment for the current order, plus a minimum of 15% of the past due balances. Nancy Kowalski will do everything she can to work with our valued customers, as the goal is not to stop anyone from doing business; it's to ensure that we both remain healthy during these challenging times.
We trust that you will appreciate our concerns. We want to be able to help our customers going forward, but we need for everyone to be fair with us.
In the event you have any questions or comments, please do not hesitate to contact me at 732-225-6290 (x1026) or [email protected]. Thank you for your support.