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The Credit Trap: Printers’ Terms Through a Printer’s Eyes

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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 publishing services business.


Now I realize that 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 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. But major collection problems don’t
normally come from the large publishers. They normally come from the smaller publishers.


Pressures on Printers


Printers want to print, and the
competition is tough. If a salesperson brings a publisher that is capable of
spending several hundred thousand dollars on printing at the printer’s full
price, even the toughest printer’s finance department is hard pressed to refuse
credit unless the publisher is at the door of the bankruptcy court—and
sometimes, it seems to me, even then. I know of an East Coast publisher who
became famous for not paying his printers way back in the early ‘70s but
continued in business, stiffing printer after printer, until just a couple of
years ago.


Probably those printers were all
too aware of the fact that thousands of other printers are scattered around the
United States. The result is that a dozen printers will line up to take any
current printer’s place, questionable credit and all, if the potential dollar
volume is high enough.


Meanwhile, because there are
relatively few paper mills, the pressure on a printer to pay a paper mill is
much more intense than the pressure on a publisher to pay a printer. Printers
must pay their paper suppliers in 30 days or risk being cut off, and a printer
that gets cut off by one tends to get cut off by all. It’s a little tough being
a printer without paper.


Ways to Pay for Printing


If you ask me, it’s foolish for
printers to extend credit when the potential dollar volume is high, but it’s
close to nuts to extend it when the potential dollar volume is relatively low.
A recent issue of the trade magazine <span
style=’font-size:11.0pt’>Printing Impressions
tells us that the
average printer makes a profit of about 2.5 percent. That’s not much by any
business standard, and it means that a printer has to generate $39,000 from
other customers just to recoup costs when a small publisher fails to pay a $1,000
printing bill (make that $40,000 if the printer is to earn even the 2.5 average
profit on all those transactions).


The trouble is, you can’t take the
ink off the paper once it’s on. A simple enough concept. But since the printer
can’t take the ink off and rerun, the inventory that a publisher doesn’t pay
for is worth the price of scrap paper, period.


At my company, our terms used to
be 50 percent payment with the order and the balance due before shipping the
books. It made sense to me. What idiot would pay $2,000 to $3,000 as a
first-half payment if they didn’t have the money to make the second payment? I
asked myself. Well, during the course of a year I dealt with more than $20,000
worth of idiots. Do the math. How much more did I have to sell to make up for
that? We have since changed our terms to 50 percent 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.


Where is a smaller publisher
supposed to get the money to pay the printing bill? The good news is that even
though printers don’t want to be the bank, banks do. Anyone with any personal
credit who signs a personal guarantee can probably get a $25,000 to $100,000 credit
card or line of credit with a commercial bank, and more and more printers are
beginning to take credit cards.


Banks are in the money business;
printers are in the printing business. If you pay your credit card bill in 30
days, you’ll pay little if any interest and get frequent flyer miles to boot.
If you pay the way you might ask to pay a printer—60 days, 90 days,
120-plus days—the bank will charge and collect interest. And if there is
a collection problem, the bank will come after you personally.


But the printer doesn’t want your
house. The printer just wants to get paid for printing and make that 2.5
percent profit 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 printer’s loading dock, they are
worthless to the printer if you don’t come up with the money to pay. (They are
worthless to you too, sitting on the loading dock, but the printer will find
that no consolation.)


Will you ever get an open line of
credit with the printer? Yes, eventually, if you generate enough sales to match
the credit profile commercial banks require. In the meantime, rack up those
frequent flyer miles. If you need to take 90 to 120 days to pay your credit
card off because that is how others are paying you, just build it into your


I started a business 10 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 may eventually wise up and stop extending credit. If you run your
company right, you’ll have nothing to worry about when that day comes.


Ron Pramschufer has been
around the printing and publishing industries since the early 1970s. He is
founder and co-owner of RJ Communications, a New York–based publishing
services company that operates www.BooksJustBooks.com, and co-author of <span
class=8StoneSans>Publishing Basics: A Guide for
the Small Press and Independent Self-Publisher
and <span
class=8StoneSans>Publishing Basics for
Children’s Books
. You can contact him at ron@rjcom.com.



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