Ask the Readers: Collecting Payment

Reader “ang” left a good question in the comments of yesterday’s Small Farm Business post, regarding collecting payments from customers. This is a really important piece of direct marketing, so I thought I would throw it out to the SCF readers.

This isn’t a problem for us when selling meat retail. The customer comes to the farm, or the farmers market, tells us what they want, gives us money and we give them their meat.

But when we sell beef & pork on-the-hoof, our customers pick up their meat right at the locker. They pay the locker for the processing costs at that time. We let the customer know how much they owe us for the meat, and they either drop a check in the mail or come out and pay us in person. So there’s the potential there for things to get dicey. The locker only requires payment for the processing before letting them have their meat. They could pick up their meat and then stiff us.

It’s never happened, knock on wood. But there have been a couple of times when we’ve waited a long time for payment. In that case I usually just send them a reminder in the mail about once a month. That’s about as confrontational as I get. Once Matt made a phone call to somebody that hadn’t paid yet, a couple of months after getting their meat. They did pay, another month later.

We’re very willing to work with our customers that need special payment arrangements. If they need to wait on their income tax refund, or their end-of-the-month paycheck to pay us, we’re fine with that. Those customers that talk to us ahead of time about how and when they’re going to pay have never been a problem. It’s the ones that you don’t hear from, and don’t hear from, and don’t hear from that get worrisome.

What are some things we could do? I’ve considered having the customer leave a check for us at the locker when they pick up their meat. Or I could give the locker a list of those customers that have paid us, and ask them not to let meat go to those that haven’t paid. But I hate to inconvenience our locker folks. They’re busy enough.

One thing we probably should be doing is collecting a deposit when somebody places an order. When someone recently cancelled on us we were wishing we’d had a deposit from that person. It would presumably make people less likely to cancel, provide us a bit of “insurance” if they did, and give us a small advance to help cover the costs of raising the animal. Part of me thinks this is perfectly reasonable, part of me thinks I’m not placing enough trust in my fellow human, and part of me thinks the extra time keeping track of such things isn’t worth it.

So maybe I’m a lazy pushover.

How do you (or will you, for those just beginning) handle collecting payments from customers?

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14 Responses to Ask the Readers: Collecting Payment

  1. Laura says:

    Well, I’m a customer not a farmer, so I’m not sure if I count? I’ve bought from farmers that require a deposit and farmers that don’t. I actually prefer to be asked for a deposit than not. That way I’ve got a receipt for my pre-order and you’ve got a safety net if I cancel.The deposits have always been in the range of $50 for beef / pork and $5 / bird for poultry.

  2. karl says:

    i’d ask for a deposit, estimated at half the value of the portion of meat purchased. if possible i’d ask them to leave a check for the remaining amount with the butcher under the guise that you’ll be in later that day to pick up other checks anyway. if they aren’t willing to leave a check with the butcher then why would they want to pick up your meat? it the butcher won’t perform this service then minimally you’ll have half your money and getting the rest should be half the trouble. if they cancel. sell the meat as best you can if there are any losses the customer has to take the hit out of their deposit.you have a commodity. people want what you sell. if someone isn’t willing to pay the deposit then other people will. you have a family business. your products aren’t available at walmart. walmart is for people who don’t care about quality. these customers are already trusting you that you are delivering them a superior product. they should be willing to pay. on a much smaller scale we sell a few gallons of milk here and there. we have had people attempt to get better prices from us. i have told tabitha that under no circumstances is she to lower the price. she can give the first half gallon to the customer so they can try it but the price stands. i’d just as soon clabber the milk and feed it to the chickens or throw it on the garden for nutrients for the soil. i feel your pain. eventually the walmart clientèle will go back to walmart and you will find your perfect loyal customers.good luck

  3. Eliezer says:

    Our eggs and veggies are the same way – they give us the money, we give them the goods. :) I do require deposits on goats though, usually half the sale price. That way I feel much more comfortable taking them off the website and telling people we’re sold out, even if we still have kids on their dams. :) -Shannon

  4. Matt says:

    I think you should request a deposit. Definately.You could also offer a small discount for a prepaid order. Maybe 3% or something? Then you have your money upfront and you’ve created a big peace of mind and gotten rid of your payment risk.I agree with Karl on the negotiated price reductions. I’ve seen people do that at the market and it makes me sick. I usually step in and try to buy what they are trying to buy to drive the price up. It works sometimes and they pay full price! Other times I take it home. Either way the farmer gets their price.

  5. Funny you should mention this. For the first time in 8 years this fall we had someone not pay for a 1/2 (YIKES) of a beef steer. It was an unusual situation where I have a “friend” who arranges friends of hers to buy the meat, I let them know what the price is, they pick it up at the meat locker, but they are supposed to pay me before they pick it up. This guy said he sent a check directly to me, then picked up his meat, and no check. He finally said he didn’t like the price of the meat, didn’t like the way the processing was done and he was not paying. I just got done taking him to small claims court and won when he didn’t show up. I received a judgment, obviously, and have a lien on his house at the present time, and the sheriff actually hauled him into court to give us information on his assets, which we are in the process of garnishing his bank account and wages (this is a person who can easily afford to buy 3 steers, and is just being stupid). While I have had to outlay to date $115 to collect, I will get that amount back plus some as my judgment includes costs and interest.Next year, we aren’t selling to this friend or any of hers – while she usually sells 2 steers for us easy, it’s just not worth the headache, although, if the individual buyers from previous years calls me directly and gives a deposit of $100 for a half of a half or $200 for a half, I might consider it, as most of the buyers have been very good.Guess it’s just a chance you take – and most people, when receiving a summons from court because they didn’t pay, would up and pay before actually getting to the hearing date (in Ohio, its $25 to file in small claims – which is not bad). I just happen to have a person that thought we would drop it. You just need to make sure in the Complaint you fill out that you ask for court costs, fees and interest.Sorry this was so long, but… we learned a valuable lesson this past fall.Kris

  6. I think you are definitely justified in wanting to require a deposit. It safeguards you as well as your customer guaranteeing that you will sell your meet and they will receive it. It is a win win situation. What gets me is why on earth would someone even think it would be acceptable to even pick up a product without paying? They wouldn’t do that at the grocery store, now would they?”Thanks for the whole cow. I’ll just pay you later.”I really don’t think that people do this on purpose on intentionally. They just either forget or aren’t forced to like we all do when we go to a ‘normal’ store. I’d say that you make them pay you first before they go and pick up their meat by either mailing you a check or however you collect payment. Then you could just give your butcherer a list of all who have paid. This way you will no longer have to rely on a third party to collect your payment for you.I think when you make people pay after the fact, it opens the doors for all kinds of stuff.I’ve experienced this first-hand in the photography world of not collecting payment before on on the day of service. I have a harder time collecting from my clients if I wait until after to mention it.I know that buying locally from a farm is supposed to feel somewhat informal and un-business like (for lack of a better description), but it is still a business. And people/clients like the appearance that things are together running smoothly and orderly.I think I’ve rambled on enough. Great post! It gets all of us newbie farmers to thinking about the business side of things.

  7. We would definately ask for a deposit. We think for the sale of the larger animals it would be in our best interest, as well as the customers to have them sign a sales agreement. In that sales agreement you could state the amount of the deposit, and how the remainder is due before you pick up meat at the locker. It would really depend on how much work you would be willing to do. We would be willing to draft up this type of agreement. Sometime’s when you get to know your customers then you can get a feel for how they will treat you as a business. When you work with customers from the outside you are really taking a gamble. If you had them sign a basic sales agreement then you are more apt to have them follow through. Why? Because they remember signing it (they get a copy) and they know if they do not pay, then they will know what happens next whethere it be small claims court or not. The Sales agreement would give you a sound mind somewhat too hopefully;) If you are on a small scale then this may prove to be to much work, however, it could save you lots of headaches.

  8. Haymaker says:

    I’d favor a modest deposit. If customers had to pick up the harvest at your farm, it could be cash and carry and no risk. But that’s not an option now, so we must mitigate the risk. From the consumer perspective, I’d balk at prepaying the entire order, since then I’m just a unsecured creditor to the farm. However a small deposit secures my name in your database as a solid customer, and mitigates financial risk for you. Keep in mind it sounds like my fellow blog readers “are with the program” and know the value of what you provide. It’s hard enough asking a new customer to buy a freezer of beef with one big check instead of by the cut. Asking for a deposit with the order might cut into sales. What are the locker’s carry/inventory charges? At what price is it cheaper to stop feeding the steer/hog and send it to the locker even without a ready buyer?

  9. frugalmom says:

    Consumer here, not farm owner. All of my purchasing experiences with our local farmers have required a deposit. The beef, we usually get 1/4 share and they asked for 100 down and then the rest when we picked it up. We picked it up at the farm. The family we get our eggs from also has payment up front on a quarterly basis. Her turkeys she asks that we deposit 20 per bird and then the rest on pick up. I think that a deposit is quite fair. It safeguards you to a certain extent. I kinda feel like not letting them pick up from the butcher until they pay is a good idea, but puts the butcher in an awkward position. I mean, its not really his responsibility to collect your payment. Just his payment. Could it be that you dont let him process the meat till you have gotten payment. Let the customer know that until payment is received in full the meat will not be processed. That way they take all the timing into play and know that if they havent paid then they will have to wait longer to have it processed. Of course, I dont know how long it can be at the locker before it has to be processed. Just an idea.

  10. Becky says:

    Go for the deposite. I agree with karl in that you are not Walmart. In fact for us that would make things easier. Part of the reason Tim was freaked out about getting meat from you guys is that it is such a huge chunk of money to put down at once. To divide that ammount in two makes things easier for us. But then I’d like to hope that most people are more fiscaly resposnsible than we are :)

  11. We are asking for deposits on beef and pork this year for the first year. One of our “rules” we made ourselves stick to, when we began direct marketing, was that if we had to ask for payment (after sending an invoice and not receiving payment promptly – we would take this person off of our list. We felt that we should be compensated fairly, and quickly for our hardwork. We sell our beef as grass finished 2 year olds. These are calves we have raised ourselves. We only wanted customers that realized that for 2 years or more we had taken care of that particular animal for them. As Joel Salatin says, “go for the 10′s not the 1′s and 2′s.”We have never been stiffed – but the people that we have had a hard time collecting from surprised us.One was our former dentist, who lied about ordering (we had the form in their handwriting), one was a restaurant in our VERY local area, and the most surprising, a CSA that we provided an egg share for. They sold our pork to other people, collected the money and then didn’t want to pay us. I don’t bad mouth people in our small farming network, but you can be sure if someone asks what I think about that particular business – I steer them towards other CSAs’ that we know.

  12. Peter comly says:

    We take deposits, which I think works well. I think we are going to increase our deposit percentage this year to help with operating costs and to lessen the sticker shock at butchering time. Once in a while we have the same kind of trouble that you are having with beef and pork. I had a couple of customers this year that anounced they would be paying in installments after they had picked up their meat from the butcher. We ended up getting it all but it was a hassle. Luckily we aren’t living as hand to mouth as we had in the past so it wasn’t really a problem. It does sometimes seem like people pick who they pay first by the likelyhood of involvement with bill collectors or interest payments. Poultry is not a problem for us because they have to come here to get it, so it is cash on the barrelhead.I try to be understanding of other people situations before I get too excited about the slow paying people. Life has gotten expensive for everyone lately, and by the time these customers add the processing and the bill for the meat together it is a pretty big chunk of change. And I have always liked the idea that not all of our customers drive BMW’s.I guess my advise is to charge an up front deposit. That way you know that they really want it and at least if you don’t get paid for the final amount you will have gotten something. It should also tend to eliminate the people who can’t come up with that kind of money. The down side is that it is harder to get people to send in their order forms if they have to write a check to do it. But I think its worth it anyway.

  13. Andrea says:

    we raise organic hogs and sell most directly to our customers. we charge a $50 deposit. our customers pay for package weight (i know, win some, lose some) instead of having to pay their own processing costs, so there is never any money exchanged at the locker plant. most of our meat is delivered by myself, so the balance due is exchanged with the meat.I would say – demand (from yourself) a deposit from EVERY customer who wants meat reserved. that includes friends, family, neighbors, far away customers, EVERYONE! We just had a whole hog reserved (without deposit) and the customer claims they never ordered from us. i returned their original order email with an apology if it wasn’t their intent to order (it was, clearly). i never heard anything back. we are also starting to require a deposit for all individual cuts orders – $50 or half down if the order total will be less than $50. this helps us to pay our processing costs before we get payment for the balance of the orders.

  14. Andrea says:

    we raise organic hogs and sell most directly to our customers. we charge a $50 deposit. our customers pay for package weight (i know, win some, lose some) instead of having to pay their own processing costs, so there is never any money exchanged at the locker plant. most of our meat is delivered by myself, so the balance due is exchanged with the meat.I would say – demand (from yourself) a deposit from EVERY customer who wants meat reserved. that includes friends, family, neighbors, far away customers, EVERYONE! We just had a whole hog reserved (without deposit) and the customer claims they never ordered from us. i returned their original order email with an apology if it wasn’t their intent to order (it was, clearly). i never heard anything back. we are also starting to require a deposit for all individual cuts orders – $50 or half down if the order total will be less than $50. this helps us to pay our processing costs before we get payment for the balance of the orders.