Business Terms and Definitions

Following is an explanation of the certain business terms and standard business forms that you probably will encounter in the wholesale market.

  • MARKUP: This is the percentage or amount a retail outlet adds to the price it pay for any item. For example, if you wholesale and item for $25, the store will probably mark it up 100 percent to arrive at a retail price of $50.

  • QUANTITY DISCOUNT: The percentage that applies to the price if a purchase exceeds a certain amount. When you buy raw materials, you may get a discount by ordering more than a specified amount, and when you sell your jewelry, you may wish to give your buyer a special discount for ordering your work in substantial quantity.

  • MINIMUM QUANTITIES: This is the minimum quantity of each item that a buyer may order. Some jewelry designers have received an order for one of everything with no repeat orders. They tend to believe that the shop has either copied the designer's designs themselves or even possibly purchased one of each item for their personal use. If you do decide to set minimum limits, try to keep it around three to six of an item depending on the wholesale price; if you ask for too high of a minimum the buyer may be reluctant to order from you in fear that he or she may not be able to sell that many of one item.

  • NO MINIMUM INITIAL ORDER, $200 MINIMUM REPEAT ORDER: This allows the wholesale buyer to test market your work in his or her store to make sure that your products will sell before they take a chance on you with a larger investment. This will often make the difference between a sale and a no sale. The $200 minimum repeat order protects you from being harassed by $20 and $30 orders.

  • CASH FOR FIRST ORDER, 30 DAYS NET ON REPEAT ORDERS: The buyer is required to pay in full upon receipt of the first order. If everything works out well (the cheque clears the bank) the customer is assumed to have established a good credit rating and is offered 30 days net on all repeat orders, which means full payment is due within 30 days from date of invoice.

  • 2/10/30 or 2% 10 DAYS, NET 30: What this means is that if the bill is paid within ten days, the shop can take a 2 percent discount. After ten days the full amount must be paid within thirty days. Designers generally request full payment within 30 days, but some do offer the 2 percent discount in order to get their money in hand as soon as possible.

  • C.O.D.: C.O.D. is similar to pro-forma but the payment is collected upon delivery of the order. The delivery person collects the cost of the order plus shipping plus C.O.D. charges; keeps the C.O.D. charges and shipping costs for himself and sends you a cheque for the C.O.D. specified by you.

  • F.O.B.: This means "Freight, or free, on board." These initials, and the name of a place immediately after them indicate the point to which the seller will pay freight. If the buyer is to pay all shipping charges, you would indicate on your invoice, F.O.B. followed by the name of your town or city. If you have to pay the freight, however, this notation would read F.O.B. and the name of your customer's town or city.

  • EXCLUSIVE RIGHTS: The buyer may ask you for an "Exclusive"--or the right to be the only store selling a specific item or line of items within a certain geographic area. Before you agree to an exclusive make sure that it is in your best interest. If the shop is not in your immediate area, you may wish to give them a six month trial period with a substantial initial order to determine how sales are. In giving an exclusive, be sure to stipulate its geographic limits and which items are included. If sales are good and the shop has placed several large re-orders, then you could decide to extend the six month period. If there are a number of excellent outlets for your work in the local area you would be unwise to accept an exclusive with one shop as you would lose sales from others. Always make sure that an exclusive is in the best deal for you.

  • ORDER FORM: The first form used in the selling process is the order form, which you will be filling out as the buyer tells you what he or she wants. An all-purpose sales form can be obtained from a business supplies store, or you may design your own. Whether you purchase your order forms or produce your own, make sure you make a carbon copy. You keep one copy and give one to the buyer.

  • INVOICE: Whenever you send out an order you should keep track of it by making out a form called an invoice. It is not only the bill you send to retailers who have purchased from you; it is also a statement of what the agreed upon terms of the sale are, protecting you from claims above and beyond what you spell out on the invoice. You can buy simple three-part invoices from a business supplies store, or produce your own. Send the first two copies of the invoice to your customer, who should return one of them back to you along with a cheque. Keep the third copy for your files. The invoice is usually mailed separately from the shipment, and sent out the same day you ship the order so it will arrive before the order and alert your customer to its arrival. Your invoice should contain the following information:

    1. Your name and address, your customer's name and address, and the ship-to address (if it is different from the sold-to-address).

    2. The date of the invoice, and the date merchandise is being shipped.

    3. Method of shipment (parcel post, UPS, Fedex, etc). This in an important protection for you to have in writing. If by some chance the shipment went astray you can begin tracing it not only through your carrier but also from the receiving end.

    4. Invoice number. Its customary to start with a four-digit number, such as 1001, then number each subsequent invoice in order after it.

    5. Customer's purchase order number. Both you and the shop may need it for identification purposes. You must have this number on the invoice and on any further forms you send in connection with this order so that the receiving department or the shop can find the original purchase order when the merchandise arrives.

    6. Terms of payment. (Net 30 days, C.O.D., etc.)

    7. Quantity and description of items, their unit price, and total amount. Make this section as detailed and as specific as possible so no uncertainty remains about which style number was ordered in what quantities and in what colours at what price.

    8. Shipping costs. Generally, the buyer is expected to pay shipping cost, but this, along with the terms of payment, should be confirmed at the time you take the order. If the buyer is paying it, simply add the actual amount of postage or UPS charges to the total cost of the goods. Then indicate the proper F.O.B. notation on your invoice.

  • PACKING SLIP: A packing slip is similar in form to an invoice--the items to be filled out on it are the same. It should agree in description and number with the information shown on your invoice, and be a complete record listing only those items that are actually packed in each box or carton.

    The function of the packing slip is to allow buyers to have some kind of checklist when they are unpacking a shipment. The number on the packing slip will be the same number as on the invoice.

  • STATEMENT: A statement is another name for a bill. The invoice tells the shop what you have sent or delivered; the statement is a summary of a financial account showing the balance due and asking the store for payment. Sometimes of course you will be paid when you deliver your merchandise or within the thirty days stated on the invoice, in which case you are save the trouble of making out a statement. Or to save you from having to produce another form, you could simply send a duplicate invoice, only this time, write the words "second notice" at the top.

  • RECORDS: There are many different ways of keeping track of who owes you and how much. It is important to keep good records of all transactions.

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