Deposits and cash flow on an import order

On an import order you pay for the stock long before you sell it. The deposit goes out when you order, the balance before the goods ship, then freight, duty, GST and fees as they arrive, and only after that does the stock reach the shelf. Planning that gap is as important as the unit price.

This guide uses a common deposit and balance split, 30% and 70%, as a generic example. It is not Owningo's or any factory's payment terms: your written quote states the real terms, and they vary by supplier and order. All figures and timings below are examples.

What a deposit and balance are for

• The deposit lets the factory buy materials and book production for your order. Once paid, it is the money most at risk, which is why the checks in check a supplier before you pay a deposit come first.
• The balance is the rest of the price. Your protection is in what has to happen before you pay it.
• A common shape is a deposit when you order and the balance after a pre-shipment inspection passes. Other balance triggers are a copy of the bill of lading or a letter of credit.
• Sellers see the deposit as their protection if a buyer walks away from a made-to-order run, so most factories ask for one. How big it is varies by supplier and order, and nothing official sets a standard split.

The cash going out, in order

• Samples and sample freight, before you order.
• The deposit, when you place the order.
• The pre-shipment inspection, if you book an independent inspector.
• The balance, before the goods are released.
• Freight and insurance, depending on the Incoterms rule. On FOB you pay the forwarder; see Incoterms in plain English.
• Duty, GST and government charges at the border, generally before the goods are released.
• Customs broker, port or depot, and delivery fees.

An example timeline

An example only. These are not Owningo or partner lead times. Use the order timeline planner with the lead times from your own quote.

• Example week 0: order placed, 30% deposit paid.
• Example weeks 0 to 6: production.
• Example week 6: pre-shipment inspection; 70% balance paid once it passes.
• Example week 7: goods shipped. Freight paid if you bought FOB.
• Example week 11: goods arrive; duty, GST and charges paid, then broker and delivery fees.
• Example week 12: stock on the shelf.
• Example weeks 12 to 20: the stock sells, and the cash comes back.

In that example, the deposit is out of your account for around 20 weeks before the matching sales come in, and the balance for around 14.

An example of the amounts

Again made up, to show the shape. Example order: US$10,000 at an example exchange rate of A$1.50 to US$1.

• Example deposit, 30%: US$3,000, about A$4,500 at that rate.
• Example balance, 70%: US$7,000, about A$10,500 at that rate, if the rate has not moved.
• Then freight, duty, GST and fees on top. The landed cost calculator works these out from your own figures.

GST is a cash flow cost too

GST on imports is 10% of the value of the taxable importation, which includes the customs value, duty, and transport and insurance to Australia. It is generally paid before the goods are released. A GST-registered business usually claims it back as a credit on the business activity statement (BAS) for the period it paid the GST in, so the money is out until that BAS is processed. Under the ATO's deferred GST scheme, a registered importer that lodges its BAS monthly and online can pay import GST through that monthly BAS instead of to the ABF at the border.

Exchange rate risk

If you pay in US dollars, the deposit and balance are paid weeks apart at whatever rate applies on each day. A move in the rate between the two changes your real cost. For customs, the ABF converts the value at the rate on the day of export, which may be different again. Some importers ask their bank about ways to fix a rate ahead; that is a conversation for your bank, not a quote.

Payment methods

• Bank transfer (telegraphic transfer): the usual way to pay a deposit and balance. Simple, but once sent it is hard to get back.
• Letter of credit: your bank pays against agreed shipping documents, not on trust. More paperwork and bank fees, more protection on a larger order.
• Marketplace payment protection: if you buy through a platform that offers it, keep the payment inside the platform and read what is covered.

Whatever the method, pay only an account in the same company's name as your contract, and treat any change of bank details as a possible scam. Australian government guidance on business email compromise is to verify payment and account change requests through a set process before acting.

Decision rules

• If you cannot afford to lose the deposit, do not pay it until the supplier checks are done.
• Tie the balance to something you can verify, such as a passed inspection, not to a date.
• If the order is large for your business, ask your bank about a letter of credit.
• Budget for the border costs and GST at the same time as the balance, not after.
• If cash is tight, a smaller first order or a pooled production run can shrink the deposit, the balance and the risk.

Common mistakes

• Budgeting for the unit price only, then finding the freight, duty and GST bill arrives with no cash left.
• Paying the balance before the inspection report is in.
• Forgetting the exchange rate can move between deposit and balance.
• Counting the GST credit as cash in hand before the BAS is lodged.
• Paying a changed bank account because the email looked right.
• Taking the example timeline here as a real lead time.

Common questions