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This is why you're getting paid late
- tptacek 13y agoWe have full-time staff allocated to this challenge, and still have clients that will pay us late. This is a fact of life in business.
- andrewljohnson 13y agoDo you have late fees, and are they exercised? I am curious, because I recently added said terms to contracts.
- eli 13y agoI think that's probably useful to have in your default contract, but IMHO the people who are adamantly refusing to pay you $5,000 are very unlikely to have a change of heart when you inform them it's $5,100. Consider that debt collectors typically offer to settle for potentially far less than the original amount owed. One of the most surprising things I found when I started working in B2B is the percentage of clients who simply don't pay their bills. Like tptacek said, I think that's just the way it is and, at least at a certain scale, the only reasonable approach to hire people to do collections.
- pnathan 13y ago> One of the most surprising things I found when I started working in B2B is the percentage of clients who simply don't pay their bills. What scale of company was this?!?
- eli 13y agoWell, I've pretty much only worked at B2B startups (from 3 employees to ~50), but I would assume it's an issue at all scales. The worst was when I worked for a mom & pop consulting shop. The clients were mostly other local business owners and getting them to pay on time was a serious problem. Law firms were the worst. I assume because threatening them with a lawsuit didn't carry much weight.
- arctangent 13y agoAnother way to do this is to offer a discount for "early payment" but charge more initially. In other words, build the fee for late payment into the original quote.
- adrianhoward 13y agoYup. I do that. I've found it works much more effectively than late fees. People love getting a bargain. Some financial departments are setup so that they will always take the cheapest option. Make the cheapest option the one that gets you paid up front. Made my life much simpler. You also get some of the advantages - to channel patio11 for a moment - of "charge more". Your base day rate - the one that anchors your true value - is the "expensive" one that factors in the cost of late payment to you.
- 30047f 13y agoThere's a cultural aspect to this too. In some types of business, putting late terms in contracts and hassling customers for payments is normal. In other types, quietly putting up with late payment is normal. In those cases, as a vendor, you factor the likelihood of late payment into the price. For repeat customers, it turns into a game of tit-for-tat. For one-offs, it's harder.
- tptacek 13y agoNot that I know of.
- od2m 13y agoI work for a fortune small-cap company, we have 500m in sales per year, more money than we know what to do with, and we never pay our bills. It's a little game the accounting department likes to play. This has caused a problem more then once as engineering (my department) was unable to obtain specialized equipment due to not having paid the vendor previously. The most quixotic thing is, engineering expenses are scrutinized heavily. I literally can't get basic equipment needed, yet we have 100's of unnecessary managers flying all over the world on lavish expense accounts. Why did I become an engineer again?
- codegeek 13y agoAfter working as a contractor (Corp to Corp) for a while, I have realized that death and clients not paying on time is certain in this field. Yes, you can do many things to minimize it but total elimination is not possible.
- deleted 13y ago[deleted]
- ambiate 13y agoUgh, our lapse rate is typically 30 days. We have companies that have lapsed 6+ months. Yet, it has been going on for decades. No one questions it and we always seem to get paid in the end. It is just bad form for both parties. 'We have always let them do it!'
- rhizome 13y agoThe one secret trick that will get you paid faster: some people LIKE bugging people every few days for late payments. Hire an admin assistant who has some A/R skills and put them to work on your late list. "There's a new sheriff in town..."
- inerte 13y agoI used to work at a very large telecom company, and one of our clients was on average 380 days late with their payments. We used to say we were their bank, lending money for cash flow. Except never charging interests :)
- nawitus 13y agoSome companies purposely accept getting paid late, as it's a selling point.
- djcapelis 13y agoIf it's a selling point, then the payments aren't late.
- praptak 13y agoI made some side money as a student by creating and maintaining a DB app for a local dealer of a particular brand of chemical products. The owner had a simple rule - customers pay upfront unless the sum was large enough for him to sue for. He had a de facto local monopoly so he could afford to enforce this. Obviously it didn't apply to trusted customers.
- chasing 13y agoHere's a really, really basic business concept, presented in about ten times the number of words it needs. PLEASE SIGN UP FOR OUR PRODUCT. Also: That's not why I'm getting paid late. I get paid late for a variety of reasons.
- JDGM 13y ago"Here's a really, really basic business concept, presented in about ten times the number of words it needs. PLEASE SIGN UP FOR OUR PRODUCT." Good observation, and humour points for the light-hearted snark. I don't quite disapprove of these articles, but I agree once you see the pattern it is rather ubiquitous. Where I am with these at the moment is questioning whether the person would have written it anyway and is tagging their business into it (reasonable) or writing something specifically to increase their visibility (I'm more skeptical). Occasionally I imagine such a writer sitting at their desk with "the big book of business basics" saying "which one shall I write up today and post to HN to obliquely promote my product?". But then, if they're sharing something of value then do I even care? The ones which seem dangerous are those which have distorted something of value to specifically relate to their product. There was one a few months ago (re)defining "Technical Intelligence" in a really confusing way in an attempt to tie it to the business in question - absolute train wreck.
- chasing 13y agoThis article sounds like someone with basically no real-world experience quoting a professor (possibly) out of context (because, christ, what an asshole as a CFO) and over-simplifying an actual problem to make such an extremely obvious point it should probably go without saying. I'd love an actual discussion about dealing with late-paying clients. This article contributes nothing. In fact, it makes the claim that not paying your bills on time is just fine! As long as the person you owe isn't constantly pestering you about it, hold on to that cash! Suckers! Sorry: That's not just fine and if you consistently do it, you're going to earn a nice reputation as someone who's a pain-in-the-ass to work for because extracting payment takes forever. It's not up to the person you hired to bug the shit out of you until you decide to grace them with payment for their work. As far as advertising Hourglass and the FREE GUIDE that's plastered all over that page... More harm than good. Because they clearly have a very amateur view of how business works.
- chrisa 13y agoSadly, this is very true. It's also a very hard lesson to learn. Even worse, it's extremely difficult to change the behavior after it happens the first time. If you're having trouble with this, here's a talk that helped us quite a bit: http://vimeo.com/22053820 http://vimeo.com/22053820
- will_brown 13y agoAs a former vendor to a Fortune 500 Company, even said Company often paid me in excess of their own net 30 payment terms. I can relate to "Company Y" in the article, because my thought was if I complained my orders might shrink or not come at all, plus I could afford it. I did not stay quite entirely I would contact their accounts payable and try to move their hand, but it was clear they were capable of inventing issues to justify their failure to pay (much like I imagine insurance companies always have an excuse for denying a claim) so I found "complaining" actually worked against my goal.
- cowsandmilk 13y agoI find offering discounts works extremely well. You write 2/10, net 30 and almost all customers will pay in 10 days.
- mirkules 13y agoWhat does that mean? Someone else above wrote "5% net 7" also and I have no idea how to interpret this.
- freehunter 13y ago"2/10 net 30" mean you need to pay within 30 days, but if you pay within 10 days you'll get a 2% discount. It's called trade credit if you are interested and would like a place to start your research.
- rhizome 13y agoAh, that's different than how it was explained to me. Thanks!
- asmithmd1 13y agoOr they will pay in 45-60 days and take the discount anyway.
- illuminate 13y agoI find that more likely.
- antonios 13y agoInteresting article. However, I find it a little difficult to believe that the aforementioned finance professor cared as much about "social justice" as the author says. It's unprofessional and rude to expect someone to complain in order to pay him.
- lucian303 13y ago"If you've ever been hit with that crippling fear ("I'm embarrassed and don't want to send another invoice. I'm afraid they still won't pay!") after a project has reached completion, you need to rethink your workflow." No, you shouldn't be running a business. Period.
- RandallBrown 13y agoWhat advantage do you gain by always paying them late? Just hanging on to the money a little longer so you can earn a little more interest on it or something? I've worked with a company that always pays me late. I've told others to be wary about working with them because of it. I don't see how this is a good thing since it makes you seem extremely unprofessional.
- nwhitehead 13y agoIt's almost a tautology, but by paying late you keep your cash available for other uses until you pay. Cash flow can be the limiting factor for many (most?) businesses. Another way of looking at it is that by paying late you pass some risk from yourself to the recipient. Interest rates quantify both the time value of money and the risks associated with payment in the future. Paying late without penalty is an interest free loan.
- jerven 13y agoFor large companies paying as late as possible is part of their cash flow management. Why pay if it does not cost you? its like a free 30 day loan. So if the terms say 30 days to pay on day 34. If your company is large enough you, just the carry trade on income you have and expenses you have not paid yet can make a difference on your balance sheet. If some one is kind enough to extend it to 60 days without complaining, then its more free money for the customer.
- artursapek 13y agohttp://imgur.com/BkeZuKI.jpg http://imgur.com/BkeZuKI.jpg If you're gonna piss off your readers to make a few extra sales at least do it right.
- willtheperson 13y agoIt may be "good business" but she's still a bad person who is fueled by greed.
- nick2021 13y agoI pay my cell phone bill (AT&T) late every single month, sometimes two weeks late. Why? Because they don't ever complain. No email, no phone call, nothing. I end up paying it when I'm bored and end up thinking about it.
- hmottestad 13y agoI find that very greedy. I was going to say a lot more, but what can I say to a line ending it "but they didn't complain". Pretty sure that would justify a heck of a lot of things.
- epoxyhockey 13y agoWhen I worked for a Fortune 10 company, they would rarely pay a bill on time. To get a timely payment, the late fees needed to exceed what the company would earn off of interest on the same amount of money.