How manufacturers get paid

A first clothing order may use an advance that funds materials and preparation, followed by a balance released when an agreed condition is met. Other payment arrangements are possible. The terms are negotiated, and there is no universal share that every maker should receive at the start.

Each payment needs a purpose and a condition. The purpose explains what the money funds; the condition explains why it is due now. Put both in writing before the maker books materials, alongside the evidence needed for the next payment. Sending money by bank transfer does not itself check the clothes.

01The advance funds commitments before the clothes are finished

Fabric has to be committed before finished clothes can be sent. Where the maker buys the fabric and the smaller parts, such as labels or fastenings, the advance funds those purchases and preparation for making the order. A new design in specially made fabric ties up materials and development work before there is anything to ship.

Connect the advance to the confirmed order and its material plan. The agreement should say what the payment allows the maker to book. Calling it a deposit leaves that purpose unstated. Record the sum agreed with the maker against the relevant invoice, with the currency and due date, so there is a clear record of what has been paid for.

Sometimes fabric needs to be reserved before the sample is fully approved. Record that decision and what it commits the brand to. A later change to the sample can leave material that no longer matches the clothes being made. The payment plan and the sample decisions therefore need to be considered together.

Paying an advance should not become permission to change the order. A different fabric or quantity needs a revised written agreement. Keep the version that the payment relates to, so the maker and the brand can refer to the same instructions.

02The order and bank details must match before money moves

The written order should identify the company making the agreement and the clothes it covers. It needs the quantity, the agreed basis for the charge and currency, as well as the version of the document that tells the maker what to make. The invoice should match. Check the delivery point across the documents too.

Keep the approved sample and current measurements with that record. Add the agreed colour reference, packing instructions and the basis for checking finished clothes. These describe what the payment is buying. A bank record showing that money arrived cannot settle whether the fit or colour matches the agreement.

Confirm the bank details through a known contact using a second channel. If account details arrive by email, a call to the established number provides a separate check. A request to change the account shortly before payment needs that callback and written confirmation from an authorised company contact. Money sent to the wrong account can be difficult to recover.

Where another company coordinates the order, establish which company issues the invoice and receives payment. Also name who approves documents and handles problems. Those responsibilities should be clear before the first transfer, with the legal names matching the order, invoice and bank account confirmation.

03The balance becomes due against named evidence

The remaining payment needs an observable condition. It might follow an agreed check of the finished clothes or depend on a stated set of documents. Write the condition precisely enough that both sides can tell when it has been met. Include when the documents must be sent and when payment is due.

An invoice identifies the shipment and the charge. A packing list records what is packed. A transport document can show the shipment's carriage status, while a record of the quality check can show what was checked and the findings. Each has a separate job. Asking for copies of documents leaves the necessary evidence undefined unless the agreement names them.

The phrase “balance before shipment” needs more detail. State what the maker must provide before payment and which event the wording refers to. Payment linked to a document showing the goods are on board has a different meaning from payment due when the clothes arrive at their destination.

Agree who pays each bank charge as well. Deductions can leave the maker receiving less than the invoice requires. The payment condition should account for those charges, so a transfer does not create a further disagreement over whether the balance has been paid.

04A quality check needs its own agreement before the balance is due

If the balance follows a quality check, decide how that check will work before the clothes are ready. Agree the standard for accepting the clothes and who receives the report. Write down how findings will be handled. “After inspection” leaves too much unanswered when there is no shared basis for deciding what passes.

The sample production is checked against belongs in the same order record as the measurements and colour reference. These give the check something specific to test. Payment documents can show that a shipment was presented, but they cannot establish how the fabric feels or whether the workmanship matches the agreement.

A remaining payment can also be held until a defined obligation is completed, if both parties agree. State the obligation and the condition for releasing that payment, together with its due date. Money held back without an agreed purpose leaves another payment dispute waiting to happen.

Settle the response to a late or incorrect document in advance. The agreement needs a route for raising and resolving the problem. Before the balance falls due, compare the order with the invoice and shipping instructions. Differences are easier to correct while changes can still be made without delaying the release of the clothes.

05Bank arrangements change payment conditions, not the clothes

A staged bank transfer is one possible arrangement for an initial clothing order. Its useful protection comes from the agreed stages and the evidence attached to them. The transfer itself moves money. The order records and quality checks do the work of defining and checking the clothes.

A letter of credit is a bank's commitment to pay when the documents specified in it meet its conditions. It can give the maker confidence about payment and lets the brand set documentary conditions at the start. The bank assesses documents. The approved sample and the quality check still need their own agreement.

Have the bank review the wording before the letter of credit is issued. Every required document must be possible to obtain, and the dates must fit the making and shipping plan. Changing the quantity or shipping window can require amendments. Agree who may authorise those changes and who carries the bank charges; the brand may also need access to bank credit.

Another arrangement uses banks to pass documents between the parties. Documents can be released after payment, or after the brand accepts a written commitment to pay on a future date. In this arrangement, the banks do not guarantee payment, as the U.S. International Trade Administration explains. Check whether the named documents give access to clear or collect the clothes. A banking arrangement still needs to work with the delivery plan.

06Paying after supply asks the maker to fund the wait

An agreement can allow clothes to be supplied before the invoice is paid on a future date. The maker then carries the funding burden and the risk that payment does not arrive. This arrangement can suit an established relationship with a dependable payment record and clear ways to resolve problems with an order.

Write down the invoice date and the payment due date, including which document starts the payment period. Agree the currency and responsibility for bank charges. If a limit on unpaid orders is agreed, record that too. “Pay later” is not a complete set of terms.

The agreement also needs to explain how a claim about the clothes is raised. Settle whether the part of an invoice that is not disputed will be paid while a particular problem is investigated. Otherwise, a disagreement about part of an order can hold up the entire payment.

After completed orders, review the evidence together. Accurate documents and payments made as agreed can support a discussion about a smaller advance or a later balance. Unresolved quality claims or repeated errors call for the cause to be settled before more payment is deferred. New materials can also change what the maker has to commit, even when previous orders went smoothly.

07One written order should connect every payment to its purpose

Before production starts, bring the payment stages into the same record as the clothes and their delivery plan. For each transfer, state what makes it due and what evidence the maker must provide. Keep the bank account confirmation with the invoice it relates to. Record changes in revised documents so neither side has to reconstruct the agreement from messages.

Keep delivery responsibility distinct from payment timing. An agreement about who carries costs and risk at the handover point does not set the invoice's due date. The two decisions need consistent wording, with the same delivery point appearing throughout the order.

The first payment commits money to making the clothes. The later payment follows the condition the brand and maker have agreed. A complete payment plan makes both decisions visible before either side has to act on them.