3 ms·

> Try to focus on the kinds of customers you won't ask for down-payments and up-fronts --- the kinds of customers who will routinely delay a full quarter or two

> Try to focus on the kinds of customers you won't ask for down-payments and up-fronts --- the kinds of customers who will routinely delay a full quarter or two on payables, and you'll put up with it, because they're paying for several people's salaries, Must be nice to have so much money in the bank that not only can you pay 6 months of several people's salaries, but you can also tolerate the risk of the client not repaying you that amount.

phphphphp 4y ago
That's the benefit of working with high-paying customers!
davedx 4y ago
Yeah managing cashflows is a huge part of running a business. You really have to plan to deal with things like this because it will happen. This is exactly what revolving/lines of credit are for. Talk to your bank. Source: have seen a business growing who had to deal with this. There is no way - no way in hell - you can scale a real consultancy business using escrows and ditching clients as soon as they don't pay. It's just not how most of the world works.
- michaelt 4y ago
  > It's just not how most of the world works. By this, do you mean clients tend to insist on long payment terms in the contract? Or do you mean they'll sign a contract agreeing to pay in 30 days then they only actually pay after 90 days?
  - ensemblehq 4y ago
    Most contracts are standard 30-90 days with large enterprises. And they do take a while to process given their large structure. Sometimes there are breaches of contract terms but as a smaller consultancy serving a large organization, you really don't have much leverage to force them to pay faster. That being said, project continuity is huge with large organizations and if you're opportunistic, there's always something to be fixed. They also pay well and are more likely to pay. That's the tradeoff for slower payments.
- toyg 4y ago
  I think it's mostly an issue of trust. - Customer says they can only pay in 6-months time? Ok, you will route around it. - Customer says they will pay next month and then ghosts you for several months? That's not cool. Particularly when it's peanuts for them, in the grand scheme of things. I was personally burnt by the latter scenario. It was only resolved when they reappeared almost a year later, after I had stopped consulting altogether, asking me to find some other guy to carry on; I replied that I couldn't honestly recommend my peers a customer that doesn't pay, and lo and behold, two weeks later the money came in.
morog 4y ago
Same for gov contracts. You might only get paid right at the end of the project + whatever their payment period is, but with an order number in your hand you know they will pay. Good luck getting a downpayment from big corp accounting depts if you're small fry.
- FpUser 4y ago
  I got downpayment from a company with about $100M revenue. Not sure if it qualifies for big corp. I normally do custom product development from scratch and it takes about a year of work in average. There is no way I would sit for a year without getting paid. Normally we would write a contract that among the other things specs stages and what is delivered for each stage. Each stage is paid upfront so first one qualifies as a downpayment. Obviously if by the time I am to start stage N it is not prepaid I would simply inform client and will not start working and the whole contract timeline shifts. But it is all in the contract and frankly had never happened. I've always got paid on time and had / have good relations with my clients. But I normally develop software for companies whose main business is not software per se but they need software to conduct their business.
benjaminwootton 4y ago
His advice is spot on though in terms of what OP will encounter. My peer comment said the same. If you go after big companies they will be cash rich and they won’t rip you off, but they will be slow to pay.
ggwp99 4y ago
Agreed, if scaling with full-time employees (which I am avoiding to do in and working on subcontracting) no advance would be hassle.

phphphphp 4y ago

That's the benefit of working with high-paying customers!

davedx 4y ago

Yeah managing cashflows is a huge part of running a business. You really have to plan to deal with things like this because it will happen. This is exactly what revolving/lines of credit are for. Talk to your bank. Source: have seen a business growing who had to deal with this. There is no way - no way in hell - you can scale a real consultancy business using escrows and ditching clients as soon as they don't pay. It's just not how most of the world works.

michaelt 4y ago
> It's just not how most of the world works. By this, do you mean clients tend to insist on long payment terms in the contract? Or do you mean they'll sign a contract agreeing to pay in 30 days then they only actually pay after 90 days?
- ensemblehq 4y ago
  Most contracts are standard 30-90 days with large enterprises. And they do take a while to process given their large structure. Sometimes there are breaches of contract terms but as a smaller consultancy serving a large organization, you really don't have much leverage to force them to pay faster. That being said, project continuity is huge with large organizations and if you're opportunistic, there's always something to be fixed. They also pay well and are more likely to pay. That's the tradeoff for slower payments.
toyg 4y ago
I think it's mostly an issue of trust. - Customer says they can only pay in 6-months time? Ok, you will route around it. - Customer says they will pay next month and then ghosts you for several months? That's not cool. Particularly when it's peanuts for them, in the grand scheme of things. I was personally burnt by the latter scenario. It was only resolved when they reappeared almost a year later, after I had stopped consulting altogether, asking me to find some other guy to carry on; I replied that I couldn't honestly recommend my peers a customer that doesn't pay, and lo and behold, two weeks later the money came in.

morog 4y ago

Same for gov contracts. You might only get paid right at the end of the project + whatever their payment period is, but with an order number in your hand you know they will pay. Good luck getting a downpayment from big corp accounting depts if you're small fry.

FpUser 4y ago
I got downpayment from a company with about $100M revenue. Not sure if it qualifies for big corp. I normally do custom product development from scratch and it takes about a year of work in average. There is no way I would sit for a year without getting paid. Normally we would write a contract that among the other things specs stages and what is delivered for each stage. Each stage is paid upfront so first one qualifies as a downpayment. Obviously if by the time I am to start stage N it is not prepaid I would simply inform client and will not start working and the whole contract timeline shifts. But it is all in the contract and frankly had never happened. I've always got paid on time and had / have good relations with my clients. But I normally develop software for companies whose main business is not software per se but they need software to conduct their business.

benjaminwootton 4y ago

His advice is spot on though in terms of what OP will encounter. My peer comment said the same. If you go after big companies they will be cash rich and they won’t rip you off, but they will be slow to pay.

ggwp99 4y ago

Agreed, if scaling with full-time employees (which I am avoiding to do in and working on subcontracting) no advance would be hassle.