โซลูชั่นท่อส่งแบบครบวงจรที่ยอดเยี่ยมระดับโลก
Almost every foreign trade customer has asked the same question:
“Why can’t we pay cash on delivery? European and American suppliers offer 60 or 90 days credit, so why do you insist on a 30% deposit?”
They ask it confidently. Before answering, let’s look at the accounts that a Chinese factory calculates daily.
1. First, let’s see how money flows in this industry.
Flange and pipe fitting factories are positioned in the most difficult middle segment of the entire industry chain.
Looking upstream: buying steel and billets, the steel mill requires cash payment, and during tight market conditions, even advance payment is required. At this raw material stage, no one gives you credit.
Looking downstream: contractors and traders demand 3–6 months credit. Even when you finally get a payment, half of it is still in the form of a draft bill—which has to be discounted with an additional interest to become usable money.
The middle is the factory: raw materials are bought with cash, workers are paid monthly, electricity and gas bills are paid in full, and after the goods are shipped, only half of the money comes back after six months.
On paper, this order is profitable. But the cash flow is negative.
So you will see a phenomenon that outsiders cannot understand: a factory that looks healthy, when receiving a “big order,” can actually run into a cash flow bottleneck. It’s not due to poor management; it’s determined by the credit period structure—if any link in the capital chain is broken, the whole operation fails.
2. What exactly is a 30% deposit?
To make sense of this, the ‘30% deposit’ is not arrogance; it is a bottom-line design that allows this industry to survive.
First, it is about sharing risks.
The factory will only dare to purchase materials and lock production capacity after receiving the deposit. Once raw materials are bought and production schedules are set, the cost of a customer backing out cannot be borne entirely by the factory. The 30% is not an advance payment; it is both parties putting a portion of their credit on the table.
Second, it is a filter.
Having been in exports for many years, I have come to a firmer judgment: serious business clients talk about specifications, standards, and delivery times; inquiries that insist solely on payment terms are highly unlikely to be quality clients. Clients unwilling even to discuss a 30% deposit either have no genuine purchase plan or have problems with their cash flow—the latter being more dangerous than having no orders at all. This payment condition acts as a threshold, helping factories filter out the riskiest inquiries.
Third, it is actually beneficial for clients.
Orders with a deposit have a name on the factory’s production schedule. Materials are secured for you, delivery schedules are prioritized, quality inspections are heightened—the 30% brings not just goods, but certainty. This principle is worth explaining to every customer who tries to bargain.
3. Where the Difficulty Lies
We understand the reasoning, so why is it still so difficult to maintain this line?
Because the small and medium-sized enterprises in the production areas have very weak bargaining power.
Homogeneous competition is right there: you insist on a 30% deposit, the next factory concedes to 20%, and another one even accepts orders with payment terms. In the end, price wars boil down to payment conditions. A single factory doesn’t have much capacity to hold firm against the industry structure.
There is action at the policy level—locally there are tools like “Pipeline Equipment Loans” and shared factories. The direction is correct, but coverage and amounts are limited, failing to satisfy widespread demand.
So the phrase “insist on a 30% deposit” sounds strong, but in reality, it is a protective line for the weaker party.
4. A Few Practical Words to Peers
How to maintain this line? Here are some practices from our own experience:
1. Payment Terms Tiered Management. For new customers’ first orders, 30% TT is non-negotiable; for old customers, don’t rely on verbal assurances; instead, exchange historical payment records for a trust limit—it’s exchanging for a limit, not for a term.
2. Set a Red Line for Acceptance Ratios. Orders exceeding the red line are better not accepted. It’s better to take fewer orders than to accept one that damages cash flow.
3. Set a Cap on Single Customer Proportion. Putting all the factory’s resources on one customer is the biggest cash flow risk, bar none.
4. Explain the Deposit in Terms the Customer Understands. Don’t just say “company policy”; explain that the deposit secures their production schedule, their raw materials, and their delivery date. Framing the payment as buying certainty makes negotiations half the battle.
