Two Things You Can Do About Cancelled Purchase Orders
Like in life, some things in business cannot be controlled.
Purchase orders cannot be cancelled right? Let me rephrase: If you asked the average punter on the street they would say that once the purchase order is raised it cannot be cancelled.
The thing is, orders get cancelled all the time.
So what can you do about it?
Why not sue the buyer for specific performance of the contract? Ha…good luck, your lawyer will say this is a great idea and no doubt it is….for him.
When this happens the general rule is that you are S#%t out of luck (BTW I did not make this saying up, I have borrowed it from Richard Eitelberg at Hartsko, Richard taught me a thing or two about Purchase Order Finance).
So when an order gets cancelled what do you do?
If the goods have already been shipped and paid for (hopefully not using trade finance), your best defence is to make sure you only finance goods that have the following properties:
Have a high liquidation value so could be sold at auction with minimal loss of capital. Importing Kevin 08 t-shirts may not be a good idea.
You have a good spread of alternative customers who you can also sell this product to (over time).
The thing about Purchase Order Finance is that even if the transaction goes south you will still need to pay the financier for their services.
A financier only finances the transaction and does not take on the transactional risk.
If you want to “bend my ear” for a moment (as Julia so often put it), call me in the office and we can chat about how to minimise your risk with purchase order finance.