Hot tubs are a sizable purchase for most consumers, and spa dealers’ choice of payment options can affect cash flow for their whole operation.
Al Eckert, regional manager of Litehouse Pools and Spas with several locations in the Cleveland, Ohio, area, has preferred payment types but accepts cash, check, all major credit cards and financing and requires spas either be paid in full or financed with a signed contract before delivery occurs.
“We offer discounts with immediate forms of payment such as cash, check or credit card,” Eckert says. “Any of these forms of payment will qualify a customer for a discount.” Eckert says Litehouse bases its sales prices around a 60-month, 0% APR financing plan.
Litehouse requires a deposit, but Eckert says they are flexible. While he encourages as large of a deposit as possible, he also wants to make it easy for customers to do business with him. “Since we do not hold inventory with a deposit,” he says, “we simply ask the customer what they feel comfortable with.”
Eckert says a typical deposit may range from $50 to full payment. To make it easy for the customer to make their decision, their deposit is fully refundable until they take delivery, Eckert says.
Jake Boyles, vice president of sales and marketing for Crystal River Spas in Carbondale, Colorado, says a 50% deposit is required for customers to order — check, cash, credit card or a financing approval — with the full balance due upon delivery. The deposit is 100% refundable until the order is confirmed for shipping from the factory.
Chris Bolte, owner of Agean Bath and Spa serving Cincinnati and Columbus, Ohio, says deposits usually are not refundable at Agean but can be used for a future hot tub purchase. “Depending if [the hot tub] is an in-stock model, display or order is a big factor regarding the amount down,” Bolte says, adding that a 20% deposit for in-stock models is the norm.
For many spa retailers, the deposit can dictate a significant part of overall cash flow. A hot tub may not be installed for several weeks following an order, but manufacturers typically must be paid in full for the tub.
Bolte says as long as there are sold tubs with deposits to show, Agean is able to replenish inventory.
Since Litehouse only locks in sale prices for customers with a deposit, Eckert says they do not commit inventory until it is paid or financed in full so cash flow is not affected. “To help with cash flow, we maintain an inventory of several spas and encourage our customers to choose from what we have in stock,” Eckert says.
However, Eckert says there is one scenario that negatively affects cash flow: when a customer finances their purchase and delays their delivery date. “This does not occur very often, so there is little impact on our overall cash flow,” Eckert says.
For Crystal River Spas, potential for negative cash flow stays outside of a workable period. “[Our 50% deposit] generally covers the cost of the product. As long as we are able to order and install within 30 days,” Boyles says, “we don’t have any issue with cash flow.”
Striking a balance that allows cash flow to remain steady can vary from retailer to retailer. There is often more flexibility surrounding cash, checks or credit. Financing may have a greater impact on payment framework. Financing can impact payment parameters, Bolte says, due to the fact that some finance companies “allow us to charge the whole amount up front” while others do not allow charging until delivery.
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