Payment Terms for artists and craft businesses.
Updates from Boris Bally

Net 30 Application for your accounts - with Interest Charges for Late Payment

The past three posts regarding late payments from galleries or stores hit a raw nerve.  This fourth post on the topic focuses on purchase orders on credit and an example of Net 30 terms. (This is not about consignment situations.)

CHECK in the MAIL BOX How bad can it be?  If a gallery or store delays payment for purchased work, it permanently strains the relationships with their artists and makers.  In purely financial terms, it is equivalent to forcing the artists (without their consent) to extend a loan to the retail location.  In broader terms, it undermines the long term business of the gallery or store due to the hard feelings generated.

I have empathy for the gallery and store owners who must maintain minimum cash flows during these tough economic times.  But artists and makers depend on cash flow also.  So when an agreement has been made and a transaction occurs, it is not only common decency but good business practice to pay the makers on time.    

Dollars in hand As an artist, your best approach is to be a better advocate for your art, craft and small business.  Your purchase order policies and Invoice should clearly state your terms for payment and consequences of late payment from the very beginning to avoid confusion and misunderstanding.

Devil Inside Pin FRONT close up by Harriete Estel Berman If a new account wants to order your work, I recommend that the first several transactions be handled as full payment in advance of shipping.  If these transactions proceed without incident and they request credit, Net 30, or extended payment, then you should be prepared with an Application for Net 30 or similar credit application form that spells out the terms.

Boris Bally has graciously allowed me to show his Application for Net 30 for his accounts. Download NET30_Application.  An image of his form is shown below my signature and a discussion of each term follows.  This form is specific to Boris, so you should create a form that applies to your particular circumstances.  

Creditcards Credit card alternative. To avoid the NET 30 Application Process and the uncertainty of prompt payment, you could have the store or gallery pay for orders on their credit card. They would get a "float" for about 30 days, and you receive payment immediately. The fee from the credit card company (usually 1% - 3%) may well be worth the certainty of being paid on time. You can call the store just before you ship the work and they pay with a credit card to complete the transaction.

It is also important to note that Boris states (in his Application for Net 30) that he will not send more work if the account is past due. 

Past Due Why do artists send more work to galleries if they are owed money? From what I hear, many artists think that selling some work and getting paid 3-4 months late is better than not selling work.  I don't agree with this line of thinking. It encourages bad behavior because there is no negative consequence.  Think about it, there are only two scenarios.  If the owners simply have a bad habit of paying late, then an interest charge would give them an incentive to pay on time or you would earn interest on your funds that are unavailable.  And if they are using your money to pay last month's rent, then you are risking loss of the entire amount when they go out of business.  Is that a risk work taking? 


Example Application for Net 30 as an image. Download NET30_ApplicationNET30_Application

The Application for Net 30 for his accounts is probably a pretty standard form except for the clause near the bottom. Boris Bally means "Business" with a capital B when he sends his work to a retail location. If a payment is late he expects the store/gallery to pay a late fee. I have copied and pasted this important clause below:

Credit policy and disclosures for NET30 Account:
All bills are due and payable, in full, thirty days after date on invoice. A finance charge will be imposed on any amount thirty days or more past due at a periodic rate of 1.75% per month. (annual percentage rate 21%) This rate is based on your past due balance at the end of each billing period. Please note: Orders placed on past due accounts will be held until account is current or may be sent COD at your request. No returns on orders unless prior written approval by Atelier Boris Bally. If your account is turned over to a collection agency or attorney for collection, or in the event of default, all collection, legal expenses and reasonable attorney fees will be paid by the debtor and be processed in and according to the laws of the State of Rhode Island.

You could copy this clause and add it to your invoice. The merit is that Boris Bally clearly states his payment expectations for payment within a specific period of time, interest rate per month, annual percentage rate, how the rate is established, returns, and what happens if the account is past due.   

Of course, you would want to check your state laws for legal compliance and change the final sentence to  "....according to the laws of the State of __(your state name)__.)

Boris Bally CoastersThank you Boris Bally from ASK Harriete and all the readers for sharing your insight, invoice examples, and personal experience.

If the readers of ASK Harriete have terms that they would like to share with this audience, they may paste it below in the comments or send it to me directly. It might be useful to compare terms and create momentum for prompt payment and appropriate interest payments if payment is past due.