Zeex, re: "Some customers prepay for orders (i.e. they do not have credit with the company, or they buy directly from SNDK's web site, if SNDK sells in such a fashion to end users). Other customers pay within 10 days of shipment and take a 1% to 2% credit for paying ahead of time. Most customers pay net 30 days from delivery, and then za smaller number of customers have longer term payment."
A couple of points (from someone who has been selling to mass market retailers for years).
- When you are selling to the big guys, terms will be a minimum of 60 days, most will be 90 days. That is an increasing channel of SanDisk distribution, and could account at least in part for the increase in AR.
- When you have a seasonal product, where the retailer will load up in expectation of high seasonal sales, the manufacturer will sometimes offer extended terms on the large order "buy in", to help defray the retailers carrying costs. I have no idea if this is the case with SanDisk.
- SanDisks policy of not recoginizing revenue until the retailer sells the item is ultra-conservative at best, and inaccurate, misleading and stupid at worst. From personal experience, you never get a true picture of investory at a given retailer, so how do you accurately measure sales? You have issues including shrink, returns that get credited to the wrong manufacturer, IT problems, other things, it's just a mess. To say nothing of your terms, if a product sits on a shelf for 60 days, and you grant 90 day terms, you are looking at 120 days to get paid. It's much cleaner to recognize revenue as the product leaves the SanDisk dock, as 99.9% of companies do.
One other point, retailers started see decreased sales in September, they may have held back their payments to many vendors in an effort to make their own balance sheets look better.
I would say the culprit here is SanDisks method of recognizing revenue, and I expect AR to remain volatile.
John |
