Questions about terms of payment

[ngarri01]

Hi,
I'm working on a business plan for a microbrewery, and I have two questions about terms of payment that I need answered to clean up my cash flow statement.

1.) How long do wholesalers typically take to pay packaging breweries for orders (i.e., time between the beer being picked up at the brewery and money arriving in the brewery's bank account)?

2.) How long a period can a brewery wait before paying suppliers (e.g., grains, hops, packaging supplies, etc.) for their shipments without incurring late payment penalties?

I've been scouring the internet for information about terms of payment and have been unable to find anything useful. Any insight would be much appreciated!

Cheers,
Nick Garrison

[einhorn]

I think you're safe in assuming 30 days net for a business plan. Reality may be different, depending on your distributors & suppliers.

[GlacierBrewing]

Every state is going to have different legal rules about how long a brewery can extend to an account. In Montana, we can't extend credit to any account past seven days.

It has been our experience that darn near all the suppliers will require pre-payment for your first few orders so you can establish "good faith" before they'll extend terms. Then once you go past the terms due date, you can expect late charges and phone calls and maybe a revocation of your terms; back to pre-payment.

[pennbrew2]

In Pennsylvania, all sales are (by law) paid in full at the time of sale.

No accounts receivable, no 30-day terms, no chasing deadbeats.

---Guy

[South County]

Ditto, God love PA beer laws!

[ngarri01]

Thanks everyone. Nobody happens to know off hand what the laws for Rhode Island and Massachusetts are?

[lhall]

The laws only apply to sales to retailers - sales by breweries to wholesalers are negotiable.Try to get cash on delivery!