What is a Consignment Agreement? What to Remember When Entering One?

Have you ever wanted to start your very own business? What may be stopping you from doing so? If you would answer: the capital then you can say adieu to your worries and see here our solution for you.   The good news is that you can start to operate your very own business with little or no capital at all. You may find it dreamy, but actually it is true and certainly doable. The solution for your problem of little or no capital to start up your business is consignment agreement.

What is Consignment Agreement?

Consignment agreement is a kind of agreement between two parties, the consignor and the consignee. It is a form of leverage wherein the two parties involved are getting into agreement that the goods that are sold are the only ones that the consignee needs to pay the consignor with. The consignee is the merchandiser or the retailer of the products of the consignor or the supplier.   If you would look both ways, this would be a win-win situation. The goods are sold and profits are generated through the efforts of the consignee and the consignor helps the latter to earn by the given agreement.

Is There a Bond for This Kind of Agreement?

The answer to that question would be subjective. Some consignors do post a certain bond, this will cover the damages that may occur to the goods or in case some items would be lost along the way. The bond will serve as an insurance for the supplier to ensure that the merchandiser will take care of his goods while they are under the latter’s care.


Things to Keep in Mind while in a Consignment Agreement

Make a Written Agreement. Since the consignment agreement is all about trust between the consignor and the consignee, just like in any other form of agreement or relationship, you need to draw the line. If there are consignors who set bond to ensure the safety and security of their side in this kind of business, then what would be the fallback of the consignee himself? As a consignee, you need to have a fallback especially when all else fails. You need to make a written agreement or a contract between the two of you which will serve as your protection as well for the consignor. You need to cite what would be your agreed terms, if the products of the consignor would not be sold, damaged or lost. Ensure and verify also the quality of all the products that the consignor drops before selling them out. Put everything on paper, especially the inventory of the stocks before starting to operate. This will serve as your starting line and the basis of your earnings and the money that you need to pay to your consignor at the end of your consignment agreement.

Do Not Overdo It.  So now you are in the consignment agreement, does that mean that you can get all the items that you want since you will pay for it at the end? The answer is a big NO! You need not to overdo it. Procure items that you can handle, do not go beyond and stuff the products to make it look good. Returning too many products to the consignor at the end of the agreement would give the latter the impression that dealing with you is not worth it. Who knows, your consignment agreement might be your first and last if you would overdo it. Also, the more items that you have, the more responsibilities follow. Take note of that before starting to operate and hoard the items of your consignor.

Take Care of the Products Just Like Your Own.  As a consignee, you are in charge of keeping the products entrusted to you to be in good condition. You need to check the quality, the inventory and even the set up on a regular basis. Since you are responsible for all the products that you have under your care, any damaged goods would be paid for and you do not want to lose your profits for such. Treat your consigned products as paid goods so that you’ll have more concern over the items and losing each because of damage or untoward incident would definitely feel like a liability automatically.

Starting a business with little or no capital is possible through the consignment agreement. If you have plans of starting your own business, give consignment a try.




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