Payment Terms Best Practices: What Coffee Roasters Need to Know (+ FREE Templates!)

The hardest part about running a coffee roasting business isn’t the long hours or tedious manual labor. It’s collecting payments from wholesale accounts.

Unfortunately, these accounts are not created equal.

Some pay their invoices on time, while others must be reminded constantly or miss payments altogether. How you navigate these situations is a critical part of managing a wholesale coffee program and maintaining profitability.

Over our many years owning and operating a wholesale coffee business, plus a cafe, we navigated plenty of difficult payment issues and understand how complex these situations can be. That’s why we’re sharing our knowledge and experience with you—so you can tackle these situations with ease and confidence.

In this guide, we’ll show you:

• The different payment term options common to coffee roasters
• Best practices for setting payment terms with wholesale coffee clients
• How to best approach a client when payment terms need to be adjusted

By the end, you’ll know how to confidently set and adjust payment terms with new and existing wholesale clients.

What are Payment Terms?

Payment terms refer to the agreed-upon processes for collecting payments between a business and its clients. These terms set expectations and define the responsibilities of each party.

Payment terms explain relevant information such as:

• When a payment is due
• How a client can remit payment
• The consequences of late or missed payments

Ensuring that your customers understand and agree to these terms protects your business in situations where payments are not remitted or are delayed.

Common payment terms for wholesale coffee roasters include:

• Immediate Payment or PrePay — Payment is due immediately upon placing the order. For example, if a customer places an order on your wholesale ordering website, they can pay in full immediately with a credit card.

• Due on Receipt — Payment is due when accounts receive the invoice. Often this would happen at the same time as the delivery or shipment. Rather than paying when an order is placed, accounts are charged once the product is ready and out the door.

• Net Terms — Net terms refer to a delay in payment, due within an agreed-upon timeframe. The most common net terms for coffee roasters are Net 7, 15, and 30. Keep in mind that the further out a payment is due, the longer you’ll go without that revenue in your account. Always plan ahead for your cash flow needs! We will discuss how to decide what terms to offer below.

How to Accept Payments

There are several ways to accept payments for your coffee. The most common include:

• Cash
• Paper Check
• Credit Card
• ACH Debit (Automated Clearing House)
• ACH Credit / EFT (Electronic Funds Transfer)

Simple, right? Not always.

Each payment type has its pros and cons.

Many coffee roasters choose to accept all four types of payments. This opens the doors to different types of accounts and ensures a healthy cash flow into your business.

Best Practices: Choosing Payment Terms

As a wholesale coffee roaster, you’ll deal with all sorts of businesses: coffee shops, restaurants, grocery stores, retail stores, offices, gyms, and so much more.

The cash flow and revenue trends of one customer will not mimic another. Meaning that some companies may be able to pay for orders immediately while others will need net terms to properly pay their invoices.

So, how do you know what payment terms to offer new accounts at the start of the relationship?

Over our years in the industry, we discovered that these steps work best to minimize risk and get a new account relationship off the ground:

1. Establish Standard Terms: Require customers prepay with a credit card - It’s best practice to have standard payment terms and payment methods for all of your customers, but especially your newest wholesale customers. Your goal is to make sure that you get paid, and that those payments are received as quickly as possible. It’s for that reason that we recommend collecting payment when the order is placed via a stored credit card. Charging a credit card is instantaneous, and virtually guarantees that you’re about to deliver coffee that is already paid for.
   
   Roasters are often concerned about the fees that they pay to process these payments, but forget to calculate the many hours that their teammates spend collecting payments from late-paying customers (who may never pay at all). Establishing standard terms and payments methods - such as only accepting credit cards that are charged when the order is placed - ensures that your roastery will have a healthy, stable cash-flow, while refocusing the conversation with your customers away from their payment history, and towards how you can help them grow their coffee business with you as a partner.
   
   
2. Customers earn the right to pay with terms – As stated, we think requiring payment at the time the order is placed is the best way to go, even with long-standing customers.But, if the customer is asking for Net Terms, instead of jumping into unknown territory at the beginning of a client relationship, require new customers to prepay via a credit card for at least the first six months. This proves their ability to pay for orders on time and enables you to foster the relationship before extending to longer terms. And be cautious when giving out terms. Remember less is more.
   
   
3. Customers earn the right to pay with other payment methods – Accepting payment methods other than credit cards means that your roastery is taking on a risk. Checks may bounce. Cash can be…misplaced. ACH Debit - where you initiate the payment - may get returned for insufficient funds.Reward your best customers who pay on time with the ability to use other payment methods, because they’ve proven that the risk of non-payment is minimal and the convenience of using alternative payment methods is worth it for everyone involved.
   
   
4. Start with shorter terms – Many clients will want you to give them the longest possible terms right away. But as a roaster, this can be a risky path. Make sure they’ve established that they can make timely payments first. Always start small with Net 7, and extend the terms from there if warranted.
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5. Consider a credit check – Coffee roasters often partner with brand new coffee shops and restaurants. These accounts offer the promise of repeat volume and even marketing exposure. However, working with brand new businesses can be a risk. How can you be sure they’re able to pay their bills before they open the doors? In addition to requiring credit card/prepayment/COD payment options at the start, you may even consider requiring them to complete a credit check. Keep in mind that these services require a fee.

How to Select Net Term Lengths

If you do choose to offer net terms to your wholesale customers, choosing the length of these terms requires careful consideration.

Since coffee is a consumable product, we recommend setting net terms within the timeframe that the product is consumed and/or sold. For many roasters, these terms will fall in the Net 7, 14/15, 21, and 30 range, depending on how often customers are ordering.

For instance, a coffee shop ordering products on a weekly or bi-weekly basis may be offered Net 7 or 14 terms, while a grocery store placing a monthly order may be offered Net 30 terms.

As your business grows, you find the opportunity to work with a larger company such as a coffee chain with numerous or a nationwide grocery store. These businesses may require vendors to agree to specific payment terms before entering into an agreement. In these situations, you’ll need to weigh the pros and cons of the partnership.

Is the significant volume and/or sales velocity of the account enough to warrant extended Net Terms?

Can your existing cash flow float the delayed payments?

Big accounts with extended payment terms can be worth it, if the order volume is enough to sustain your cash flow and inventory goals. However, we don’t recommend blindly entering into these agreements! Do your homework, communicate with the potential client, and make sure all your questions are answered before officially moving forward. If you’ve extended long terms to a large customer but you don’t have those terms from your supplies, you’re going to find yourself in a cash crunch.

Common Payment Term Challenges and How to Overcome Them

Setting Payment Terms for New Wholesale Clients

Landing a new wholesale account is exciting! But, it’s all too easy to get caught up in the opportunity and agree to anything the client requests.

“You want Net 60 terms paid by check? Sure, let's do it!”

We get it. On one hand, you don’t want to lose the sale over term negotiations. But on the other, you need to stand firm to your business processes and principles.

Why? Because if you don’t, you will have significant difficulty remaining profitable (and sane…)

If you let every client dictate payment terms, you’ll struggle to keep up with your cash flow needs every month. Instead, set your company’s preferred payment terms for each type of client and stick to them.

Will there be times when you need to adjust these terms or be flexible when a client has a family emergency or a random missed payment? Of course.

An example can be when a client wants to receive Net 30 terms right away. As a coffee roaster, you can offer these clients credit card payment terms. While you receive the payment right away, your clients have 30-days to pay their credit card bill. This can be an amenable place to start when new clients push for 30-day terms right off the bat.

At the end of the day, you need to look out for the best interest of your company first and foremost. Set your terms and stick to them!

Handling Late Payments or Insufficient Funds

Paying a bill late happens to the best of us. But when late payments become a problem, what happens?

The electricity gets shut off.

Your software subscription doesn’t renew.

A late fee is added onto the balance.

If a wholesale client continually misses payments, this is a problem that will continue to spiral out of control until solved.

When setting payment terms at the start of a partnership, also discuss your business’ policy for late or missed payments. Common approaches to remedy late payments include:

• Adding a late fee added to the balance.
• Switching from one payment method to automatic credit card or ACH debit payments, charged on an agreed upon date each month.
• Three strike rule—three missed payments and the terms change to COD or prepay.
• Automatic billing reminders sent directly to clients each week/month.

Of course, on top of these policies, a conversation with your client needs to happen.

Inquire about why they are missing payments. Are they unclear on the payment process? Are the terms not working for them? Remain level-headed and approach the conversation from a place of understanding, working to find common ground on how to move forward.

Initiating Payments

One of the best ways to avoid missed payments is to set terms and conditions relating to automatic charges. These agreed-upon terms would give a roaster permission to charge a client’s credit card or initiate an ACH debit payment on the day it is due.

For example, if a client agrees to Net 7 terms, the account will be charged on day seven with the designated payment method on file (if not paid in full before day seven.)

This approach can provide convenience for wholesale roasters and clients alike. You don’t need to worry about waiting around for payment, and your clients won’t worry about missing a payment! However, you’ll need this agreement in writing and a signed credit card authorization form from your clients. Luckily, there are plenty of free credit card authorization form templates available online.

These permissions must be clearly outlined as part of the initial payment terms agreement. Ideally, coffee roasters should obtain written acknowledgement from the client, agreeing to all areas of the payment terms—including automatic charges—before the partnership begins.

👉 Use this email template to confirm payment terms with your new wholesale coffee clients:

Subject Line: [Client Business Name] Payment Terms, Effective [Insert Date Here]

Hi [Client Name],

We are excited to get started as [Client Brand Name]’s coffee provider. As we move forward, we want you to feel supported by our team, from roasting to brewing.

This email serves as confirmation that you were notified of [Your Company Name]’s payment term policies for wholesale partners. The payment terms are as follows:

• [Insert payment terms here, including the payment method, due dates/timeframes, automatic charges, and late/missed payment policies]

Please sign and return the attached agreement at your earliest convenience. Once we receive the signed document, we can begin the ordering process.

Should you have any questions about these terms or ordering, please contact us directly at [Phone Number]. We thank you for your business and look forward to our partnership with you.

Plus, automatic payments are possible to set up in platforms such as RoasterTools.

The Benefits of Switching Payment Terms

If you find yourself encountering any of these challenges, it’s time to adjust your payment terms. Aside from ensuring money is in the bank, updating your payment terms with wholesale clients has additional advantages.

Labor & Time Savings

How much time do you spend each month chasing payments from clients and working on invoicing? Or, if you’re not the one responsible for accounts receivable, how much are you paying someone to do this work?

As you’re coming up with payment terms for your clients, consider how much time you or an employee will have to spend organizing, collecting, and recording payments each week—there’s likely a much more streamlined and affordable approach.

Improved Cash Flow

There’s no sugar coating it. Cash is king.

Without cash in hand, you’ll have difficulty contracting green coffee, purchasing packaging supplies, and managing production costs without racking up a great deal of debt.

The benefit of switching payment terms to an automatic payment approach or shorter net terms is the improved cash flow of your business. Say goodbye to stressing if there will be enough money in the bank! You’ll know exactly how much cash is flowing into your business.

Enhances Client Relationships

More often than not, wholesale coffee partnerships involve two small, locally-owned businesses trying to grow their respective companies. There’s so much on our plates that tasks like paying invoices and ordering the coffee supply can fall through the cracks.

When you switch to payment terms that allow automatic payments or on demand ordering, no one needs to fret about forgetting an invoice or chasing down cash. Instead, you can focus solely on lifting up and growing each other’s business!

After all, if your clients are doing well, so is your business.

How to Approach Clients About Changing Payment Terms (+ Conversation Templates You Can Use!)

Late and missed payments aren’t the only reason to change payment terms with your clients.

For example, you may find yourself needing to better manage cash flow so as to facilitate growth in your business and decide to only accept credit card payments as a result. No matter the reason, approaching clients about changing payment terms is a delicate situation that must be handled appropriately.

The first step is to always have a conversation with your client as to why the payment terms, methods, and/or processes are changing.

👉 Pro Tip: You can be as transparent as you’d like during this conversation. But keep in mind: your clients don’t need to know everything about your business. Only share what clients really need to know about why payment terms are changing.

If possible, try to have this conversation in person or over the phone first. This allows you to have a genuine conversation with a client, rather than attempting to communicate everything over email or text, leaving room for misinterpretation.

Use these scripts as an example for getting the conversation started:

Switching to Automatic Charges:

“Hi [Client!] I wanted to chat about switching your payment method for upcoming wholesale coffee orders. Rather than checks collected at delivery, let’s make the switch to an automatic ACH debit payment initiated by our team. This doesn’t change the payment terms, solely the payment method. This way you don’t have to worry about remembering to write and leave a check on delivery days! This decision was made because [insert reason here.] We value our relationship with your business and want you to continue to feel supported by our team. To continue forward in the best interest of our respective businesses, we feel this change must be made. Do you have any questions?”

Switching to New Payment Terms:

“Hi [Client!] I wanted to chat about some upcoming changes to our wholesale partnership arrangement. Starting next month [or input a specific date in the future], our payment terms will be changing to [insert new terms here]. This decision was made because [insert reason here.] We value our relationship with your business and want you to continue to feel supported by our team. Please reach out if you have any questions about the new terms”

After this conversation, always follow up with both a formal email and an agreement document. This email and document provides written proof of the updated payment terms and the client’s agreement to move forward.

Use this template as a reference for your email!

Subject Line: Updated Payment Terms, Effective [Insert Date Here]

Hi [Client Name],

This email serves as confirmation that you were notified of [Your Company Name]’s new payment term policies for wholesale partners. The new payment terms are as follows:

• Insert payment terms here, including the payment method, due dates/timeframes, and late/missed payment policies

These payment terms will begin on [Insert Date]. You can find documentation of these terms in the attached document.

Should you have any questions about the new terms, please contact us directly at [Phone Number]. We thank you for your business and look forward to continuing our partnership with you.

Of course, you may find yourself in a situation where payment terms are changing for a single client. In this case, we still recommend first having an in-person or phone conversation followed by a formal email.

You can use the following template to start your email message:

Subject Line: Updated Payment Terms for [Client Business], Effective [Insert Date Here]

Hi [Client Name],

This email serves as confirmation that you were notified of the new payment terms for [Client Company Name] effective [Insert Date Here]. The new payment terms are as follows:

• Insert payment terms here, including payment method, due dates/timeframes, and any late/missed payment policies

As was discussed with you, these terms and conditions are being enacted due to a documented history of [missed/late payments, other reason] from [Client Company Name]. You can find documentation of these terms in the attached file.

Should you have any questions about the new terms, please contact us directly at [Phone Number]. We thank you for your business and look forward to continuing our partnership with you.

Collect Client Payments Confidently

Payment terms—and your client’s ability to follow them—can make or break your ability to obtain and maintain profitability. If the originally agreed upon terms aren’t being honored or working for your business, don’t be afraid to make a change! Use our templates as a starting point and have an honest conversation with your client.

Need help expediting wholesale payments? Check out how RoasterTools streamlines the wholesale ordering and payment process.

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