At what point do you tell your client to... (re: overdue payments)

In My Humble Opinion
1

So, in the industry I work at, being two months behind on your billing is par for the course. That is, I bill at the end of the month for that month’s work and then assume that I won’t actually get a check for that work until the end of the next month (what with pay applications being processed, checks to get cut and cleared, supplementary paperwork, etc.).

But I’ve noticed that a lot of companies are working anywhere from 30-60 days overdue from that. That is, they’re now three-four months behind on their payments.

I’ve certainly seen companies that are 90+ days behind still doing work for the people who owe them money and I wonder: why bother?

Now, I presume that most companies figure that every now and then something like this is going to happen where something-or-other will prevent timely payment (and adjust their fees accordingly), but I know from complaints and reputations that there are some companies that make a habit of late payments, yet still find people to work for them - often the same people that are X days out on payments.

Now, I’ve worked with/for some guys who play fairly tough, with threats (empty and valid) like “money today or we’re pulling off the job,” and guys who refuse to do any work for certain clients again, but I’m always surprised to see how willing some people are to be abused by nonpaying clients.

I understand that sometimes it’s necessary to keep your guys working, especially if they’re good and you don’t want to lose them, but for a fair number of businesses, it seems that they’ve just adapted to groping for cash all their lives.

To be sure, I have nowhere near the level of experience/training that your typical Senior- or even regular-Manager has, so maybe I’m just missing something. Also, I’m just an employee and have no vested financial interest in keeping a company limping along other that it’s where my paycheck comes from (that is, I haven’t taken any loans out against my house or anything), so perhaps that’s why I can’t perceive this as an owner would.

Any thoughts on how this sort of thing works in your experience?

2

Holy crap. I apologize for my grammar. Sigh. Off to work.

3

It’s rampant. Particularly in the service industries (where you’re buying brain power, not a tangible product.)

The rule of thumb is, the bigger the client, the slower they pay. I’ve had a couple of Fortune 500 clients. We were lucky if they paid within 6 months.

Then the problem goes right down the ladder. Because your company isn’t being paid, it drags on paying its suppliers, who drag on paying their suppliers. Eventually some poor 1-person business doesn’t get paid and goes broke.

4

I work for a “Fortune 20” company, and it can take me a LONG time to pay for things I buy.

If something needs capital to buy, I get my boss to approve it, then I fill out some forms and give them to my departmental secretary, who sends it to my boss, who signs it and gives it back to the secretary, who then gets my bosses bosses signature, who then sends it on up to my bosses bosses boss to get approved (unless it’s over a certain amount, in which case my bosses bosses bosses boss is required to sign off on it). After it’s been approved, it may need to be vetted by contract management and/or legal. Then it’s sent off to the part of the company that’s responsible for actually cutting the check.

Also, for some items we have to go through a third-party reseller to buy (as in, I call them up and say what I want, and they go to the company that sells what I want, buy it, marks up the price, and then the company that actually makes the product ships it straight to me).

Needless to say, it’s easy for things to get hung up somewhere along the line. I know of vendors who’ve had to wait a year or more to get payed.

5

The longer you allow clients to not pay, the longer they’ll take to pay.

Look at it from their perspective: either, a) you pay all their bills on time, or b) you don’t. Clearly we’re talking about B’s here. It’s the end of the month, you have a stack of bills, and only can pay half of them. Which ones will you pay? You’ll pay the ones that you fear will hound you for money and cut off their services.

Also, people who have a tendency to pay their bills late have a higher probability of being people who don’t pay their bills at all. So, every month you continue to provide services to people who don’t pay you is another cash loan you’re making to someone who is a bad risk.

Call them 1 week after their bill is delinquent. Be nice, but firm. Where’s the money? If they say it’s in the mail, tell them you need the check number for your records. Then call at 2 weeks, then at 3. Then 30 days. Each time, tell them you’ll be onsite tomorrow, and can you pick up the check then? After 30 days overdue (or even two weeks overdue) tell them this is a problem, and you’ll have to concentrate on other clients until they pay. You’ll be surprised how quickly you’ll get on the list of the people who get paid on time.

6

Bwahahaha! I don’t even know where you’d go to pick up a check in person. They’re printed by machine after being dispatched by the approriate department, so you’d either go to the bank that prints the checks or the department that issues them. In either case, there’s no way security would let you onto the premises, and there’s no way you’d be able to talk to an employee who can actually cut the physical check (I can’t do that, and I’m the one who’d be buying your services).

“OK, Mr. Vendor, we’ll just use one of your many competitors who understand that, as a large company, it takes us a while to pay for things but who are willing to tolerate that because our size means that they will eventually get payed for and that we’ll pay through the nose for just about anything and we’ll buy a lot of it.”

I’m sure you were thinking of smaller customers, but business with headcounts that aren’t in the six-figure range are alien to me. :wink:

7

It also depends if it’s ongoing work. If they’re n months behind, but you’re still getting roughly monthly cheques, you’re likely to let it go and not go bust. Or even if everyone does it and you’ve worked continuously for different people.

You could try negotiating a surcharge for late payment (if they’re the sort of company that pays eventually) but good luck with it…

8

I thought it was SOP to buy a credit report on a customer before doing work for them, so that you know not to take on any clients that pay delinquently. I guess that’s only if the cost of the report ($60-100) is less than the job, but if we’re talking Fortune 20 companies…

9

Like Enron or MCI?

:wink: