A thirty per cent deposit and a seventy per cent balance is the most common structure on a charger order, and those two percentages are the least important part of it. What decides whether the structure works is the event that releases the balance and the document that proves the event happened.
Charger deposit and balance: the structure
Two payments, and one of them is defined by an event.
The deposit is paid against the order; the balance is paid against something that has already happened. Where the second half is described by an event rather than by a document, the two parties discover their disagreement at the point when the goods are ready and the money is expected.
The thirty and seventy convention
It reflects the material cost of a first run rather than a rule.
A charger bill of materials is bought before assembly, so a factory starting a first order commits component and tooling spend immediately. A deposit sized to that spend is the number the factory cares about, and it happens to land near a third on most orders.
What the deposit is buying
Four categories of purchase, and one of them is not recoverable.
The controller and passive components, the enclosure parts, the packaging and the tooling. The first three can be reused on a later order; the tooling cannot be un-cut, which is why a cancelled first order rarely returns the deposit in full.
What releases the balance
One of four events, and each suits a different stage.
Completion of production, readiness for shipment, presentation of the transport documents, or arrival at the destination. Moving the trigger later protects the buyer and slows the factory’s cash cycle, so the choice is a trade rather than a preference.
| Balance trigger | Evidence required | Favours | Watch for |
|---|---|---|---|
| Production complete | Completion notice | The supplier | Goods still in the factory |
| Ready for shipment | Packing and inspection record | Both, if inspection is agreed | The scope of the inspection |
| Documents presented | Transport document set | The buyer | Discrepancies delay payment |
| Arrival at destination | Arrival notice and clearance | The buyer | The supplier finances the whole transit |
Why a balance before shipment costs less
The supplier stops financing the programme.
Money paid before the goods leave the factory shortens the period the supplier is funding, and a shorter funding period is a smaller number in the unit price. The saving is real, and it is the reason this trigger remains the default on new relationships.
Why a balance against documents is safer
The buyer keeps a decision until the goods are beyond recall.
Once the transport document exists, the goods have been handed to a carrier and the inspection record has been issued. Paying at that point means paying for a shipment that has been verified and released, which is the strongest position available without a credit instrument.
Where the two sides usually meet
At the inspection record, on a second order.
The first order is normally settled before shipment; the second moves to documents once an inspection has been agreed and performed. The inspection record is the document that makes the move acceptable to both parties, because it is issued before the money moves.
What the order should record
Five lines, and each is testable.
The deposit percentage and its amount, the balance percentage and its amount, the trigger event, the document that evidences it, and the bank charges allocation. An order carrying those five lines rarely produces a payment argument.
What the two payments do to the cash cycle
The deposit moves cash to the factory before the components are bought, and the balance moves it again before the goods are released. On a thirty and seventy structure the buyer funds the whole order within the production window, which is why the trigger matters more to the supplier’s price than the percentages do.
Where the balance moves to against documents, the supplier funds the interval between the material purchase and the payment, and that interval is priced into the unit rather than offered. A buyer comparing two quotations on the deposit percentage alone is comparing the smaller of the two numbers.
The practical test is to draw both payments on a timeline with the milestone that releases each one. A structure that cannot be drawn on one line is a structure that will be argued about at the second milestone. The same line also shows which payment is exposed if the shipment is delayed.
FAQ
Is the deposit refundable if the order is cancelled?
Only to the extent that it has not been spent. Components bought for the order may be reusable, while tooling and printed packaging usually are not, and the contract should say which is which. Ask which items have already been committed at the date of cancellation, because the answer differs between an order cancelled before the components are ordered and one cancelled after the tooling is cut.
Can the balance be split across two shipments?
It can, and a partial shipment usually means a proportional balance against each transport document. The proportion is stated in the order rather than calculated afterwards. State whether the proportion follows the unit count or the value, and name the document that evidences each partial shipment, so the second balance is released against the same evidence as the first. Confirm the evidence before the first shipment, so the same document releases both balances.
Should the trigger be an event or a date?
An event is more precise and a date is easier to administer. Where a date is used, it is written as a long-stop date so that a delay in one party’s process does not stall the payment indefinitely. A long-stop date also keeps the payment from depending on the other party’s internal process, which is the delay that most often turns a settlement date into a dispute.
Who pays the transfer charges?
Each party normally pays the charges raised by its own bank. Where a correspondent bank is involved, its charge is allocated in the order rather than left to whichever account it lands on. Name the allocation before the first transfer, because a correspondent’s charge that lands on the received amount is indistinguishable from a short payment. Also confirm which party instructs the transfer, because the instruction route decides whose bank raises the charge.
Next step
Send the order value, the shipment plan and the balance trigger you need to Wecent Group through the contact page. The reply sets out the deposit, the trigger and the documents behind it. Related reading: charger manufacturing services, our charger factory and OEM and ODM charger manufacturing. External references: ICC business solutions for trade, Bank for International Settlements, European Banking Authority, World Trade Organization, European Commission taxation and customs and UK HM Revenue and Customs.
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