Dealer Cash Flow

The Artnewspaper has an article that is very relevant in today's marketplace, especially for fine and decorative art dealers.  It has to do with collecting payment on sold items and how slow payments impact cash flow and the ability to successfully operate.  There is nothing earth shattering or new about the need for a positive and timely cash flow, but given the state of the economy the delinquencies appear to be adding up and having a negative impact on dealers.  There can be a very fine line between trying to gain new buying customers and making sound business and financial decisions.

What I find very interesting is the article points out slow payments are not necessarily tolerated in others business where many include large upfront deposits and prompt payment.  The fine and decorative art worlds are a big business with billions of dollars worth of property being exchanges every year, and for some reason our profession is not always viewed as seriously as other professions and businesses.

The appraisal profession has many of the same difficulties, where much of the public is confused by quick estimates and opinions of value instead of understanding what a qualified appraisal represents. We as a profession also need to do a better job in informing the public and users of appraisals the important differences of an opinion of value as seen on entertainment shows and a qualified appraisal.

The Artnewspaper reports

Trade sources said that collectors generally pay quickly—either immediately or within the standard 30 days. But there is a growing contingent who take longer to pay, or worse yet, cancel sales. While this can be problematic for secondary market dealers, it can be fatal for primary market galleries. Dealers say delayed payments can cause artists to wonder if the gallery has been paid, but hasn’t turned over the funds to the artist.

Here’s an unhappy scenario: a young gallery, with nearly empty coffers, hasn’t collected payment on six of the seven sales the dealer closed at a June satellite art fair in Basel. The dealer—who paid all fair-related expenses months ago—needs to cover his rent and overheads. He can’t pay the artist, who needs money for his own bills plus materials for an autumn show. To make matters worse, the dealer must remain calm and detached, while trying to extract payment. “It’s this old-school gentleman thing,” the dealer told me. “You don’t want to appear desperate.”

This sort of behaviour is less tolerated in other industries. High-end fashion houses require a deposit to pre-order a coveted handbag or next season’s coat, says Jackie Noble, manager of Manhattan’s designer Mina boutique and the Albright Fashion Library. “There is a certain element of trust, but we always make sure there is some form of payment to vouch for a customer’s financial standing.”
To read the complete article, click HERE.

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