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Chinese Supplier's Lead Time & Payment Term | Cash Killer Vs Cash Saver - YouTube
Channel: GOODLIFE WARRIOR
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how are you my friend I hope your day is
going well it's you ping here thank you
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for checking in with me today is a video
that you must watch it's one of the
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essential videos that you need to watch
to run your business successfully
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because it has 100% to do with your
money so let's get started ok my friend
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once you kick start your business
especially after you start to sell your
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product so successfully you will quickly
realize that you will need a continued
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cash flow to sustain your sales so on
one side you will have the cash inflow
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coming either from Amazon or your own
website on the other side you will have
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the cash outflow to pay out either the
product or service providers since you
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decide how much you're gonna sell and I
teach you the sourcing side of the
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business
I'll explain the two most important
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factors that you need to understand how
these two factors are going to determine
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your cash outflow on the sourcing side
the two most important factors in
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determining your cash outflow one is the
lead time another is the payment term
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these two are a pair Lee time and a
payment term we cannot talk cash outflow
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without talking the Lee time and payment
term together so let's elaborate a
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little bit okay let's talk about the
lead time first lead time should be
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given with a nickname called dead time
why is that because this lead time is
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the period of a waiting time from the
moment you place your purchase water
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here to the time where the product is
available for you to sell and convert
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this product to cash this period of time
nothing could happen but wait so
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literally it's a dead time
especially when you prepaid for your
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product nothing is happening to your
cash so if you are in the training
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course especially if you have a watched
the inventory planning module this
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should be a no-brainer to you you should
really understand the killing effect of
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the long lead time why I am saying that
the longley time has the killing effect
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it's because not only you have all these
cash tied up in this waiting period
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there's nothing you can do about it but
wait but also the longer you have to
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wait the more likely you are going to be
wrong with your inventory forecast one
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is that during this long time of waiting
you run out of stock now you are
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panicked you need to estimate the icepad
idea product either air frayed or you're
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anxious pushing your suppliers to finish
the product finish the production sooner
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as soon as possible I'm out of stock my
PSR is dropping I need to backfill my
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product please PLEASE rush the
production help me finish the production
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sooner that is the anxiety you you have
to go through because you're running out
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of stock and you have no choice but to
wait for this long period of time that's
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one side of the risk of having long lead
time the other side of the risk you
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being wrong it's because you know you're
gonna wait for a long period of time and
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you over predicted how many you're gonna
sell what end up happening is once you
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receive the shipment finally you realize
that you have too many in stock
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eventually you may end up having to pay
to Amazon for long-term storage fee or
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whatever warehouse you're using you see
the killing effect if the long lead time
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is not only you have all these cash tied
up but also the risk of running either
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out of stock or ordered too many that is
the lead time plane into how much cash
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you're going to burn now you understand
the one factor lead time and how much it
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plays into
your cash situation the second factor is
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the payment term
what does payment term has anything to
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do with your cash you guessed it the
exact opposite the longer of the payment
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term you can get from your suppliers the
more cash you can save because you can
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delay your payment let's say if the
supplier Lita Mae is one day and the
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payment day to payment term is 30 days
now you can literally use other people's
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money to run your business because they
can produce it in one day you can sell
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it in a day or two or a week and you
don't even have to pay the supplier in
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30 days all of the sudden it's free
money for you to run your business the
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business reality for most Amazon FBA
sellers is this the time side we're
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talking about a seventy five to ninety
days from the day you'll place your
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purchase order to the day where amazon
receive your product it takes at least a
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75 to 90 days assuming your ocean
freight your product not air frating
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because it takes 30 days to produce 30
days to ship and a couple weeks in
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between to handling your shipment or
receiving your shipment on the payment
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term side we're normally talking about
30 percent down payment
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70% paid to the supplier when you take
your shipment we're talking about
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significantly cash done to carry this
infantry from the time you place the
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order to the time where you can sell
your product so the lee time and a
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payment term are the two most important
factors in terms of your cash flow
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impact i want you to understand the
relationship of these two factors so you
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can focus on negotiating a better lee
time a better payment term to improve
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the health of your business if you
wanted to learn how to negotiate a
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better payment terms and potentially
reduce lead time so
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free up your cash I suggest you sign up
my training course those training videos
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are exclusive for those who are super
serious about their business if you are
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one of those people who are incredibly
driven to be successful I would be so
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delighted to have you in the elite
sourcing warriors training group I would
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share with you everything I know about
sourcing to help you save money alright
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my friend I hope you are enjoying this
video until the next time I'll see you
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soon and you have a good day
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