The Risks That Come With Memo Transactions

Founded in 1992, RDI Diamonds is a wholesale diamond company dedicated to the success of its jewelers. Located in Rochester, New York, RDI Diamonds offers a memo transaction service that allows jewelry retailers to show more stones, therefore maximizing potential profits.

A common practice in the jewelry industry, memo transactions are similar to credit transactions or loans in which suppliers lend their products to retailers. Stone suppliers who engage in memo transactions allow retailers to hold on to their products for specified periods of time at no cost. If sales transactions are completed between the retailers and their customers, the suppliers charge the retailers fees. However, if no sales are made prior to the expiration of the contracted periods of time, the stones are returned to the suppliers.

The process by which these transactions are carried out, also referred to as consignment, comes with risks. Should retailers file bankruptcy while the stones are in their possession, getting stones returned to suppliers can be a difficult and lengthy procedure. Suppliers can avoid obstacles to retrieving their stones in these instances by exercising necessary precautions, such as completing memo agreements and evaluating credit reports and Uniform Commercial Code filings to gain more detailed understanding of retailers’ financial soundness.