Coming to Terms
When I founded the Empire, payment terms gave me more grief than my quest for clients.
It was only my mentors’ patient advice that helped me resolve this angst and realise the world of business isn’t always fair.
In these present interesting times, however, one client has pierced my cocoon of tranquillity. Should I lower my standards, or should they lift theirs?
I’m a literal chap. This makes me fabulous at proofreading but less so at parties. When I sent my first invoices years ago, I firmly believed 7 Days meant 7 Days and that everyone felt the same. When 14, 21, 30 and even 60 days passed with no result, I became agitated and launched a follow-up email campaign (which I blush to recall today).
All it did was annoy my clients and disturb my sleep.
I couldn’t understand it. I paid my bills the day I got them. Especially if they came from a loyal supplier who’d provided great service at short notice. Even if it meant using my line of credit. Was this street not two-way? My mentors told me that:
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Not everyone is literal.
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Few people read terms.
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Some who do, pretend they don’t.
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Not everyone has a line of credit.
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30 days is the norm; anything sooner is a bonus.
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Accounts Payable is often ordered to delay payment as long as possible.
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In a downturn, payment times blow out.
This wisdom took time to penetrate, because I invariably did flawless work, on time, for a reasonable fee. Finally I realised I was neither the centre of the universe nor the model of mankind.
By lowering my expectations, I reduced disappointment. By bending, I didn’t break. Life became easier and happier for all.
Until yesterday.
Some time ago, I did a super-urgent job for a client. I had to bring in another specialist, who pulled out all stops. Late nights, weekends, favours, a car chase … the lot. We did the job in time. And it was beautiful. The specialist and I sent our invoices (which reduced, for goodwill, the number of hours we’d actually spent).
30 days later, no loot. While I was prepared to be patient, I felt responsible for the specialist. A polite email to the client revealed we had a further fortnight to wait. Given all our effort, the specialist and I were miffed.
My mentors say tough times mean I should be even more flexible. Yet my heart says a last-minute job, done perfectly under pressure, deserves swift reward.
I’m either justified or relapsing. What do you reckon?
Paul Hassing , Founder & Senior Writer, www.thefeistyempire.com
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Good timing…we’ve just added an article from Dun & Bradstreet to myBRC that talks about the impact of late payers on cash flow, and what you can do to mitigate the risk including tips about how to establish a credit policy, debt collection advice and assessing the financial health of your customers before you extend credit to them.
The article also has links to other resources within myBRC on the subject of managing late payments.
From my experience working with small business owners on myBRC, you’re not alone Paul – this issue plagues small businesses and it seems to be getting worse at the moment as everyone struggles to hold on to their cash for as long as possible.
Guys, one other thing – I’ve had some feedback that some people would like to see the most recent comments appear first. Does anyone else have an opinion on this? Personally I like to read them chronologically but I’m happy to reverse them if that suits most people.
It is a difficult issue and requires a certain amount of balance. It can depend a bit on the organisation – frequently Accounts Payable is completely divorced/cocooned from the rest of the business and you may need to push your contact to organise prompt payment. Very gentle implication that you may not be quite so able to meet their delivery schedule in the future can work. Possibly increase the rate you charge them in future or have a clause that allows for a late payment charge or prompt payment discount for those clients that are slow payers. Generally if the client wants to use your services again, they will ultimately pay and usually there is a payment pattern for each client – some always delay – so for those ones – some sort of carrot/stick. But defintely, let your contact know you really went the extra mile for him/her and you would appreciate reciprocal treatment
Thank you, Megan. I’m glad you feel we’re staying topical. I’ll definitely check out that D&B article.
With regard to comments, I’m keen to serve this community first and global blog conventions second. Out of interest, does anyone know which is the more common way to handle comments? Either way, I reckon a two-thirds majority vote from our commentators could reasonably carry the day.
It is tricky, isn’t it, Margaret? Seeing into hearts isn’t my strong suit, so I often invoke Fonnie’s superior powers to help me chart a course for results without upset.
Certainly those 5% late fees and early discounts achieve their intended effect on me. Yet so far I’ve not been able to ‘transfer the magic’ to my clients. I’ll be very interested to see what the others say. Thanks for your helpful input!
Wow, Megan, that D&B article really is good; hats off to Christine Christian:
‘Businesses are currently averaging 57.6 days to pay their bills. This means that businesses are being denied access to their own funds for almost double the average period of payment.’
‘…businesses must be prepared to turn customers away. The loss of a sale is more manageable than a persistently delinquent payer that impacts cash flow and spreads resources thin as the business seeks to recoup outstanding monies.’
Great stuff!
Hi Folks,
My Vote for comment reading order – I’m with Megan…I like chronological. I found a couple of blogs on this – http://bit.ly/fcXX7 & http://bit.ly/ywKe4.
A couple of the comments (via the abovementioned blog links – the one on the left), mentions that many CMSs have options that allow readers/commenters to change the order of comments themselves and/or to display ‘threaded’ comments. I know Joomla! does both, but this one is built on Sharepoint isn’t it? If it is, it should have the same/similar option/s.
In the event that a 2/3 majority votes for reverse order, may I suggest that the numbering of comments is also reversed?
Cheers
Stephen G
Paul, you certainly have a knack for consistently picking very practical and relevant business issues…another great post mate…thanks :- )
I found Margaret’s excellent comment difficult to add to in terms of observation & practicality…thanks Margaret. So I thought I’d just pop-up something anecdotal that came to mind while I was reading Paul’s article:
Back in the olden days (that’s what I used to say when I was talking about my parent’s childhoods…now, scarily, it applies to mine :- P ), when I worked for a prominent tyre retailer (& wholesaler), I quickly gained a dislike for ‘debt recovery’ from overdue account customers.
I managed to instigate a policy that rewarded client loyalty by offering accounts to high-frequency wholesale clients that had been with us for 12 months or more.
This turned a ‘negative’ & highly sensitive topic into a very ‘positive’ value-add. A letter was sent out to all our wholesale clients (account & non-account), letting them know that they would be automatically offered a 30, 60 or 90 day account (their choice), as a reward for being a reliable paying customer for 12 months or more.
The letter addressed overdue account group by saying that current overdue accounts would be reset in line with the new policy and that in 12 months their accounts would be re-offered.
As I recall, we got flooded with phone calls from overdue account holders offering explanations for delayed payments and arrangements to pay, along with a considerable number of appreciative new account customers. Most of our overdue account holders felt respected enough to continue being our customers and paying up front.
We lost one account because their business was genuinely going under.
From then on, the time saved in debt management alone, more than covered any short-term costs.
Cheers
Stephen G
We LOVE your anecdotes, Stephen; they put meat on our bones. Who’d have thought that all life’s BIG QUESTIONS could be answered by the tyre sector?! I can see people scribbling down your proven policies as we speak. Thank you!
Great links re the comment order, Stephen. Oldest first seems to be preferred, except in YouTube and massively long debates, which I can understand.
Megan, were the requests you received triggered by the 50+ comments we got for the Naming Rights debate? If so, perhaps we can stick with what we have unless massively long debates become the norm. It’s just a fort… (Tonto).
No it was actually in response to the Feedback to the Future – from someone who wanted to post advice. I’m happy to leave them as chronological – I just suddenly thought I should take my blinkers off and see if anyone wanted it differently.
To answer your question directly Paul (i.e. “I’m either justified or relapsing. What do you reckon?”), I reckon you may be having a ‘justified relapse’ :- )
And isn’t it always the way that the ‘love jobs’ seem to fall through the cracks in ‘handshakes’ and even ‘formal agreements’ into the inferno of ‘I should’ve known better’? :- P
When I was involved in the community housing sector, I remember the ‘Government’ asking for a definition for ‘Community Housing’. I suggested that because there was already a national ‘Housing’ sector, that what the Government was really looking for was a definition for ‘Community’ that could be used to distinguish ‘Community Housing’ from ‘Housing’.
Our committees submitted proposals that included my definition for ‘community’, to which I still aspire to this day…I also do my best to hold to the same definition for business:
“The honoring of agreements.”
What can we do about dishonoured agreements? Aside from more management & policy oriented practices described above, I reckon ‘justified relapses’ handled on a case-by-case basis is a pretty reasonable ‘add-on’ for such scenarios as you described… :- )
Cheers
Stephen G
Gee, Stephen; you sure have been around. I like your business definition very much. And case-by-case seems a good way to go. I just launched the new site last night. Below is my effort to reduce terms trauma in the future. See what you reckon:
‘Because we work hard and fast and smart, we firmly believe we should be paid on time. We invoice fortnightly for all time spent, from briefing to invoicing. We only bill for the hours we actually spend. So, if your job turns out easier than expected, you get all the savings.
Our terms are 14 days. Payment is by electronic funds transfer (EFT). All work belongs to us until paid for in full. We list these terms in our proposals and we only accept clients who are happy to abide by them. We’d rather focus on your project than our cash flow.’
Wish me luck! And now I must fly. My clients have been VERY patient in recent days and I must tend to their needs.
Yep! If I had a dollar for every story I’d be surfin’ with Malcolm :- )But that’s another story :- )
Alrighty then! Here’s what I reckon. Butt first, let me qualify this yet again, with my now well worn adage that it is far easier to edit another’s work than it is to create from scratch…so all credit to you mate. Here’s my take:
‘We’d rather focus on Your Project than our cash flow! (Heading or bold title sentence)
Our clients actually benefit from our clients paying on time. So we prefer to honour our clients with clients that are willing to honour The Feisty Empire terms (listed in our proposals – provide link/example). Here they are in a nutshell:
(Indent &/or bullet point)- Our billing cycle is fortnightly (14 days):
(Indent &/or bullet point) – We have several payment options (we prefer Electronic Funds Transfers);
(Indent &/or bullet point) – All work remains ours until it’s fully paid for;
(Indent &/or bullet point) – We promise not to charge You for hours we don’t do. So if we do the job faster than we thought we would, you know & you save accordingly.’
There ya go cobba! :- )
Cheers
Stephen G
PS Luck! :- )
I’ve never had to deal with this one, so I’ll just give my gut reaction: a normal job would mean a bit of extra flexibility for me, but if I pulled out ALL the stops, I’d expect the client to do the same to get me paid. Especially if there was a third party involved: their not paying could adversely affect your relationship with that specialist and therefore your business. It’s just rude on their part.
Oh, and the comments: definitely oldest first. Having that automatic paging after a certain number means that the new ones are never THAT far down the page. It’s also extremely annoying (to me, personally) to arrive at a comments thread that begins “You said it, {random name}! Those Burger King folks sure do know how to fry lemons!” – I have to go hunting to figure out what’s going on. Bad.
Thanks for your suggestions, Stephen. I may wait until you communicate your formatting hassles to Megan, so I and the others can witness your complete vision.
Good point re the third party, Spike. This chap has been a wonderful help to me over the years and since it was my gig, it felt like it was me who was letting him down. Lucky he has a sunny disposition. I don’t think any major harm was done. So long as the cash arrives on May 31! Glad you agree on oldest first comments. I’ve been most impressed with your blog, by the way, I highly recommend it to our other friends.
False Alarm Megan…Paul hasn’t had his cuppa yet :- P
Cheers
Stephen G
OK. Brain’s a bit fuzzy. Fonnie kindly took me out to dinner to celebrate. Formatting aside, Stephen, I don’t immediately prefer your version to mine. However, I’m not the audience and I’ve been very close to this for many weeks. These are two excellent reasons to invite the others to compare your version and mine and to state their preference. How does that sound? I sure am grateful for your efforts to perfect my content!
Just dropped in to say “thanks” for the kind words there, Paul. As most of my ex-girlfriends would probably say: “I like a man who’s easily pleased.”
That’s the only reason I put it up there mate…I’m certainly not attached to it being used…it’s a blog comment, not a contract proposal :- )
Cheers
Stephen G
Cool, Stephen. For over a decade I’ve been telling senior managers, ‘This ad isn’t for you or about you; it’s for your AUDIENCE!’ It’ll be good for me to experience this process from the other side!
You’re welcome, Spike. 