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I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially t

I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that. Has this been your experience as well? ... and do you "outsource" your AR for a % of your invoices?

tptacek 8y ago
I really don't think we even think about it that much. We have terms in our contract, and we send emails when payment is due, but it's not like we'd ever flip out if someone was late. You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely. At Matasano, I remember one of our anchor customers taking something close to a year to pay an invoice.
- subhobroto 8y ago
  > You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely. That at best. others just "forget" about the late payment penalties in my experience. The sibling comment from @mrhappyunhappy is interesting but when I tried it, clients would rarely pay the premium.
  - catherd 8y ago
    Late payment penalties are nice, in my experience, because it gives you an extra drum to beat when you are chasing down payment. But they are never actually paid. I just try to identify anyone who has an accounting (+20%) or purchasing (+50%) department and automatically add to my quoted fees. That premium, the imaginary late payment fee, and occasionally stopping work until the client gets caught up generally makes the situation manageable.
mrhappyunhappy 8y ago
As a consultant I state that I will charge a 10% late fee for every week a payment is late. I’ve never had a late payment. I’d say offering a discount does the exact opposite.
- subhobroto 8y ago
  Clients past a certain size just "forget" about the late payment penalties in my experience, which is why I offer a "on time" payment discount. I tried both methods and clients would rarely pay the premium compared to those who would avail of the "on time" payment discount. I have less happier clients when I make them pay a fee than when I take away a discount although mathematically they are the same number.
  - jjeaff 8y ago
    That just gave me a flashback to my college accounting courses. So many examples where a discount was offered for on time payment. Must be a reason that technique has been around long enough to be a fixture in accounting textbooks.
  - tixocloud 8y ago
    From big co perspective, absolutely true. Tons of other priorities to get out of the door than paying on time. Our invoice process was dreadful. Thinking back, if a vendor made it easy for us, we might always pay on-time!
- tptacek 8y ago
  How big is your average client and how heavily utilized are you? Your experience is very different from mine, but I may be working with larger companies (or you might be working with an idiosyncratic subset --- I don't think I am, though).
  - mrhappyunhappy 8y ago
    I work with companies 1-50mil in revenue typically. I don’t know what the law is when it comes to late fees, the language is mostly there as deterrent. That being said I am VERY picky about who I work with so I’ve never had a late payment or nonpayment, I suspect that’s more due to the screening process than the language in contract. If I ever had to actually charge a 10, 20 or 30% late fee, I would not pursue it and choke it up to a business loss and forget about it, move on. Cost of doing business.

tptacek 8y ago

I really don't think we even think about it that much. We have terms in our contract, and we send emails when payment is due, but it's not like we'd ever flip out if someone was late. You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely. At Matasano, I remember one of our anchor customers taking something close to a year to pay an invoice.

subhobroto 8y ago
> You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely. That at best. others just "forget" about the late payment penalties in my experience. The sibling comment from @mrhappyunhappy is interesting but when I tried it, clients would rarely pay the premium.
- catherd 8y ago
  Late payment penalties are nice, in my experience, because it gives you an extra drum to beat when you are chasing down payment. But they are never actually paid. I just try to identify anyone who has an accounting (+20%) or purchasing (+50%) department and automatically add to my quoted fees. That premium, the imaginary late payment fee, and occasionally stopping work until the client gets caught up generally makes the situation manageable.

mrhappyunhappy 8y ago

As a consultant I state that I will charge a 10% late fee for every week a payment is late. I’ve never had a late payment. I’d say offering a discount does the exact opposite.

subhobroto 8y ago
Clients past a certain size just "forget" about the late payment penalties in my experience, which is why I offer a "on time" payment discount. I tried both methods and clients would rarely pay the premium compared to those who would avail of the "on time" payment discount. I have less happier clients when I make them pay a fee than when I take away a discount although mathematically they are the same number.
- jjeaff 8y ago
  That just gave me a flashback to my college accounting courses. So many examples where a discount was offered for on time payment. Must be a reason that technique has been around long enough to be a fixture in accounting textbooks.
- tixocloud 8y ago
  From big co perspective, absolutely true. Tons of other priorities to get out of the door than paying on time. Our invoice process was dreadful. Thinking back, if a vendor made it easy for us, we might always pay on-time!
tptacek 8y ago
How big is your average client and how heavily utilized are you? Your experience is very different from mine, but I may be working with larger companies (or you might be working with an idiosyncratic subset --- I don't think I am, though).
- mrhappyunhappy 8y ago
  I work with companies 1-50mil in revenue typically. I don’t know what the law is when it comes to late fees, the language is mostly there as deterrent. That being said I am VERY picky about who I work with so I’ve never had a late payment or nonpayment, I suspect that’s more due to the screening process than the language in contract. If I ever had to actually charge a 10, 20 or 30% late fee, I would not pursue it and choke it up to a business loss and forget about it, move on. Cost of doing business.