When can I expect my printer to extend me credit terms?

Over the past 30 years I have heard the statement “We’re not the bank” used hundreds of time by various printers. This statement did not become crystal clear to me until I owned my own business.

Printers are their own worst enemy when it comes to extending credit. I don’t know of a single printer who does not complain about “slow pay” and “no pay” customers, yet they continue to extend credit to medium and large publishers. The feeling is “if we don’t give them credit, they won’t buy from us”. In the case of a large, well established publisher, that is true. The major collection problems don’t normally come from the large publishers. The problems come with the smaller publishers, no matter how long they have been around.

Printers must pay their paper suppliers in 30 days or risk being cut off. There are a fairly small number of paper mills so once a printer gets cut off from one, they tend to get cut off by all. It’s a little tough being a printer without paper. On the other hand there are literally thousands of printers scattered around the US and no central credit agency. The result is that the pressure on the publisher to pay the printer is not nearly as intense as it is for the printer to pay the paper mill. There are a dozen printers lined up to take the current printers place, questionable credit and all, if the potential dollar volume exists. Printers want to print and the competition is tough. If a salesperson brings a publishing account to the printer who is capable of buying several hundred thousand dollars in printing at the printers full price, even the toughest printer’s finance department is hard pressed to be as tough as they should be, short of the publisher being at the door of the bankruptcy court. (And even then it’s questionable.) I know a case of a Baltimore Publisher who was famous for not paying his printers’ way back in the early 70’s but continued in business, stiffing printer after printer, until just a couple of years ago.

Enter the small press publisher. The small press publisher, because of their size, is faced with having to exist in the real world of finance. The printer is not as “in awe” and is not going to take a chance on someone who can only give them $10,000 or even $100,000 worth of printing. It’s not that printers are overly tough on small press publishers, they are just realistic (as they should be with the larger publishers). A recent issue of the printing trade magazine Printing Impressions tells us that the average printer makes about 2.5 % profits. That’s not much by any business standard. If a small publisher fails to pay a $1000 printing bill, the printer has to sell $40,000 more in printing to make up for it.

You can’t take the ink off the paper once it’s on. Simple enough concept but without the ability to take the ink off and rerun, as ridiculous as this seems, the publisher’s inventory is worth the price of scrap paper, period. With most small to medium sized publishers, their only assets are their inventory which explains why their credit situations are so volatile. The printer is not the bank.

The good news is that there ARE banks. Now a day, anyone with any personal credit at all can get a $25,000 to $100,000 credit card or line of credit with a commercial bank. More and more printers are beginning to take credit cards as a service to their customers. Banks are in the money business, printers are in the printing business. If you pay your credit card bill in 30 days, the way you tell your printer you are going to pay them, if they give you credit, you’ll pay little, if any interest and get frequent flyer miles to boot. If you pay the way you will probably end up paying…60 days, 90 days, 120 days+… the bank will charge and collect interest. That’s what banks do. Also, a bank is not going to even think about giving your company a credit card or line of credit unless you sign a personal guarantee. That is unless you have over 20-30 million dollars in sales, which most of my readers do not. That means simply if there is a collection problem, the bank comes after you personally. If banks work like this, why would anyone think that a printer would want to work any differently? And remember, the printer is not the bank and he doesn’t want your house. He just wants to get paid for his printing service so he can make his 2.5 % and, maybe one day, retire to a nice “double-wide” in Delaware.

COD is credit. Let me repeat, COD is credit. Remember that statement about taking the ink off the paper? Once your books are printed and sitting on the printers loading dock, they are worthless to the printer, should you not come up with the money to pay. They are worthless to you too, sitting on the loading dock, but that’s a small consolation to the printer. At www.BooksJustBooks.com our terms used to be 50% payment with the order and the balance due before shipping the books. It made sense to me. What idiot would pay $2000-$3000 as a first half payment if they didn’t have the money to make the second payment? Well, in that particular year there were over $20,000 worth of “idiots”. Do the math, how much more did I have to sell to make up for that? A lot. We have since changed to 50% with the order and the balance prior to printing. If a problem arises with the second payment, the print quantity can be adjusted down to compensate and everyone sleeps better at night.

Will you ever get an open line of credit with the printer? Yes, eventually, as long as you meet the same credit profile expected by commercial banks. In the meantime, rack up those frequent flyer miles. If you need to take 90-120 days to pay your credit card off because that is how Amazon and the others are paying you, you just need to build it into your price. I started RJ Communications ten years ago with five credit cards and a good idea. I paid those cards off years ago as I knew I would. Have the confidence in yourself and your company to do the same. The printers will eventually wise up and put the “lid” on the credit situation with the many slow pay/no pay mid-sized publishers. If you run your company right, you’ll have nothing to worry about when that day comes.

Remember, the printer is not the bank.

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If you have a question pertaining to the publishing production process, please feel free to contact me at ron@rjcom.com.

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