Sugar Dot Surveys Recap: Cookie Order Payments

 

Thank you all for participating in the most recent questionnaire in my Sugar Dot Surveys series. In this one, I asked you questions about taking payment for cookie orders. I was curious about how you go about getting paid and why you do it that way.

I teach cookie decorating and business classes. I share my knowledge with students, but always let them know that my way is just ONE way to do things. I encourage my students to join sites like Cookie Connection and groups on social media, so that they can get many opinions and learn a variety of methods to do what we do. There’s an incredible amount to learn from our community.

At the time this post was written, only 85 of you had responded to the survey. That's about half the number that usually participates. I'm willing to bet the reason is that this survey was geared exclusively to those who sell cookies. Many of our fellow cookiers are hobby decorators. Some other fun facts . . . Most of those who participated run their businesses from their homes (85%); only four respondents operate out of brick-and-mortar establishments outside of the home. Respondents' experience levels are pretty evenly spread with 32% in the cookie biz for less than one year, 25% for one to two years, 26% for three to five years, and 18% for more than five years. The vast majority (98%) do some degree of custom work (made to customer specifications), with a full 69% doing "mostly" or "only" custom work. [EDITOR'S NOTE: That's a lot of special orders, people! I hope you're charging adequately for customization, but oops . . . I'm getting head of myself. Pricing is (I hope) the subject of a future survey! ~JMU ]

As I mentioned earlier, I teach classes on the business of cookies so I'm always fascinated to learn exactly how you all conduct your businesses and if it aligns with my teaching. Your answers here once again prove that there is no one correct way to do things.

Half of you send an email invoice close to the time of order; 10% send an invoice closer to pickup; 11% present an invoice at pickup; and 31% never present an invoice at all. Boy, did these results surprise me! Only 50% at the time of order. I expected this number to be much higher. I would guess that those who don't present invoices at all are offering cookies that are not custom. Perhaps their customers are picking up pre-made cookies and paying at that time? But, no, that doesn't jibe with what our survey says, which, again, is that most of you (98%) are doing custom work. [EDITOR'S NOTE: Wow! That's surprising to me too. I'd worry about pricing miscommunications or people stiffing me if I didn't invoice. But it's also quite possible that price and expectations can be communicated clearly enough via informal emails and so people don't feel a formal "invoice" is actually necessary? I'm dying to know, so I hope people who responded will elaborate in the comments below. ~JMU]

Holly
Holly Noah packaging custom logo cookies; Photo courtesy of Holly of Eat Your Words Custom Cookies

The next question was about deposits. Personally, I require full payment at the time of ordering cookies (as do 30% of you), especially if those orders are custom. This is also what I teach students in my classes. I found out that 46% of you take deposits and collect the rest of the payment later. Approximately half of those deposit-takers require that the balance be paid prior to pickup/delivery, and the other half require the balance at pickup/delivery. Interesting! In addition, 25% of you take full payment at pickup/delivery without taking any money upfront.

Why? The whys to all of these options are intriguing.

Let's first find out why many allow some portion or all of the payment at pickup/delivery. Respondents cited a wide array of reasons . . .
  • the cookies are for family, friends, or repeat customers, so s/he feels prepayment isn't necessary or feels awkward asking for it;
  • s/he is just starting out in the business, so handles payment informally;
  • s/he doesn't think that one should be fully paid prior to providing the goods;
  • some customers aren't comfortable paying 100% upfront and therefore may not order;
  • it feels like a retail transaction when money and product are exchanged at the same time;
  • s/he based the policy on what s/he believes the majority of cookie decorators do;
  • s/he wants to be sure the customer is satisfied with the cookies first;
  • if the customer backs out, s/he has a deposit and can still resell the cookies; and
  • customers are more likely to give a tip if they pay at pickup.

Very, very interesting. All of those reasons are legit. Has anyone been convinced to stop taking full payment upfront? I'm still a firm believer in being paid ahead of time, before starting anything custom. Again, there is no right or wrong way. We do what works for us and our customers. [EDITOR'S NOTE: When I had my cake bakery, I made a distinction in policy between my standard and custom orders. For all custom orders and ones requiring delivery, I took a 50% deposit, and then required full payment well before delivery/pickup. I didn't want to run the risk of doing custom work or going on a time-consuming delivery and not being paid in full. Most of my custom work was so custom that it could not easily be resold. For more standard orders that would be picked up, I also took a 50% deposit but allowed for full payment at the time of pickup. The risks of not reselling that type of work were far less, and so I felt comfortable allowing customers the payment flexibility they often get when ordering other products. I would, for the most part, agree that there is no right or wrong way to handle deposit-taking, unless, of course, your policy is causing you heartache or losing you money. But, from the looks of our survey, it seems most of your policies are working well for you. Only 10 people (about 12%) reported a few occasions of not being paid in full when payment was due. ~JMU]

Now let's find out why some of us DO take full payment upfront . . .
  • s/he is guaranteed payment by the time of pickup/delivery, so no time or ingredients are wasted (the most common reason);
  • s/he wants to treat the business like a storefront; i.e., if you order from one, you pay at the time of ordering (people can take advantage of home businesses);
  • payment is easier to manage administratively in one step;
  • most of his/her orders are shipped;
  • because s/he has been burned (shortchanged) before;
  • the person picking up isn't always the person who ordered (and thus might not pay);
  • the person receiving at the delivery site is often busy with party prep (and thus might not pay);
  • s/he feels awkward taking and counting money in front of the customer;
  • s/he doesn't want the order cancelled at the last minute; and
  • if you order anything online, you pay in full (i.e., that's standard practice).

Again, all legit answers, huh? Those of you who take deposits, are any of you convinced to change your ways and collect all upfront instead? The beauty of owning your own businesses is that YOU are the boss. We are so fortunate in this age of the internet that we can learn from others in the same business. We can learn about other ways to do things, and then make decisions that are best for ourselves, our customers, and our families. Another beautiful thing is that our policies aren't set in stone. As we learn and gain experience, we can make adjustments to the way we do things. My business and policies sure have evolved over the last seven years!

Shari
Shari Weyrauch and Nancy Westfall at Show Me Sweets, photo courtesy of Shari of Smart Cookies Bakery  

No matter if you take deposits or ask for full payment upfront, we all run into "situations". Some of the problems we encounter in this whole invoicing and collecting process include: customers ignoring our invoices; feeling awkward invoicing family; finding time for administrative tasks like invoicing; high merchant fees on credit cards and other forms of e-payment; customers quibbling over prices; customers having difficulty making online payments; finding time to deposit/cash checks; the uncertainty of whether to make the cookies when not paid on time; and customers saying they'll pay later - after pickup! The struggle is real! Most of us are doing it all ourselves - communicating with potential customers, taking orders, doing admin tasks, taking photos of our work, keeping sites up to date, posting to social media . . . oh, and making and decorating cookies! The list can feel like it goes on forever.

Thankfully, you all had some great advice on this topic . . .
  • limit/streamline order and payment options (i.e., don't accept multiple payment options or orders coming in from multiple streams like email, social media, and websites);
  • document everything (make sure every invoice has order details);
  • send an invoice as soon as you get a request (then follow up two to three days later with a reminder about the ordering process);
  • require payment before an order goes on the books (if another customer wants that date and is prepared to pay, then that customer gets the date);
  • require payment two weeks in advance, which gives you time to send a friendly “I didn’t receive your payment” reminder, if necessary, before you invest any time in the order;
  • invoice early and set clear payment expectations upfront so there are no surprises later on;
  • if you have to follow up to get paid, do it and don't be shy about it;
  • be upfront and polite, and clear and transparent in your wording in all customer communications;
  • stay on top of your work (i.e., don’t let it pile up and then get overwhelmed trying to get it all done); and
  • put aside a few hours each week specifically for accounting matters.

You all are some smart cookies! Thank you for that advice and for participating! Thank you for allowing us to learn from YOU. The survey covered more than I can recap here, so if you took it, you can go back at any time to see the results for each question. If you haven't yet taken it, please do so! It will be open and capturing new responses in perpetuity! Once you take it, all of the survey results will reveal in the same place!

Until next time,
Dotty Raleigh
Sugar Dot Cookies

Dotty Raleigh is the owner of Sugar Dot Cookies, which began in 2013 with custom cookie orders, and has since grown to include decorating classes and cookie parties. In 2018, Dotty began teaching a series of online classes called Cookies as Business and providing business e-books, which cover everything from finding the optimum shop location and workflow management to pricing and packaging cookies. Dotty loves sharing her years of experience and encouraging those just getting started in their own cookie businesses. Please visit Dotty's Cookie Connection member profile and Facebook and Instagram pages.

Photo credit: Dotty Raleigh

Note: Sugar Dot Surveys is a bimonthly Cookie Connection survey/blog feature designed to foster experience-sharing and identify best business and decorating practices. Dotty starts by posting a survey every other month about a specific cookie practice, tool, or technique, and concludes with a recap of responses aimed at helping everyone learn and grow. This article expresses the views of the author, and not necessarily those of this site, its owners, its administrators, or its employees. To read all of Dotty's past Sugar Dot Surveys recaps, click here. And to see all of her surveys, click here.

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Great job, @SugarDotCookies! Interesting - you and I are/were also pretty different in our deposit practices, though part of the reason may be that I was mostly doing wedding cakes at that time. There were very few customers who were willing to pay fully upfront for a relatively high-ticket, high-stakes wedding cake. (The risk to them of the baker not delivering is relatively high in this case.) So, 50% deposits were the norm in that sector, and I'd have priced myself out of the market if I had required full payment upfront. With a cookie order, the risk to the customer is a lot less because the average order size is so much smaller, so I can see why customers might not balk at paying all upfront on a cookie order.

Great info! In response to the invoicing results, in my case,I used to not collect payment before hand and gave a computer generated receipt at pickup/payment mostly because I lived in a small rural community and did most of my business there. If someone would have ordered and not paid, EVERYONE would know about it. It would have been highly embarrassing for the buyer if they didn’t complete their transaction. You would be put on a DO NOT DO BUSINESS WITH private list and any other merchants would be cautioned about doing business with that individual. So, I guess that’s why the majority of people honored their orders and paid for them. Also, most people ordering needed the cookies (or cake, I did both) for an event and would be in a bind themselves if they didn’t have the dessert. It was different in the small town. I’ve now relocated to a major metropolitan area and I wouldn’t think of not getting a deposit for any custom items. You don’t know who you are dealing with. There is a higher chance of non payment/no-shows. The deposit is your only insurance of getting the customer to show up or getting some sort of payment for your supplies. Another difference I’ve noticed is in the small town the majority of payment was cash. In the metro area, there are more debit/credit card purchases, often online. “Swipe and go!”

Shakenbake posted:

Great info! In response to the invoicing results, in my case,I used to not collect payment before hand and gave a computer generated receipt at pickup/payment mostly because I lived in a small rural community and did most of my business there. If someone would have ordered and not paid, EVERYONE would know about it. It would have been highly embarrassing for the buyer if they didn’t complete their transaction. You would be put on a DO NOT DO BUSINESS WITH private list and any other merchants would be cautioned about doing business with that individual. So, I guess that’s why the majority of people honored their orders and paid for them. Also, most people ordering needed the cookies (or cake, I did both) for an event and would be in a bind themselves if they didn’t have the dessert. It was different in the small town. I’ve now relocated to a major metropolitan area and I wouldn’t think of not getting a deposit for any custom items. You don’t know who you are dealing with. There is a higher chance of non payment/no-shows. The deposit is your only insurance of getting the customer to show up or getting some sort of payment for your supplies. Another difference I’ve noticed is in the small town the majority of payment was cash. In the metro area, there are more debit/credit card purchases, often online. “Swipe and go!”

Interesting again - there are so many particular variables that go into determining one's policies. I have been of the "always take a deposit" school of thought, but I can see now the circumstances where it might not be necessary to bear the added administrative burden of it, i.e., when communities are small and tight-knit.

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