Im curious...

[ed_lang]

I had the same problem with Lowes and Walmart when I ran a small engine shop. It took forever to get paid but they wanted the equipment back quickly. I had to stop delivering fixed equipment till they got their accounts paid to date a few times.... I had their customers equipment and the customers pushed them to pay me.

Shopbot required full payment in advance before they would even start to build my machine... they didn't have any problem telling me that if I didn't pay the next person would just get the machine and I could wait.

[richards]

I think that the question that you should ask is: "Do I want/need this particular customer?" If the answer is yes, then you have to accept the customer and the customers's terms of doing business. If the answer is no, then you find another customer.

For me, finding a customer takes a lot of time and money. Keeping that customer happy, all things being equal, is my first choice. If the customer has terms that cost me time or money, then my prices have to reflect those additional costs. If the customer refuses to pay for the additional cost that they create, then the cost of keeping the customer is probably higher than the cost of finding another customer.

Somewhere along the path of doing what we want to do, we have to accept standard business practices and problems as part of working for ourself. Paperwork is part of business. Satisfying the customer is part of business. Working long hours is part of business. Getting paid has to be part of business. Trying to change a customer's business practices is not part of business.

[terryd]

Mike, you nailed it good!

[Brady Watson]

Early on I decided that I would only accept 50% or more before beginning a job, and ALL customers pay at time of pick-up or delivery. That's it. That's MY policy. I almost got burned prior to this policy, but now I have peace of mind...AND everyone pays before materials even get ordered.

Personally, I am not willing to sell my soul because another 'large' business wants things on their terms. I don't EVER fear that there is another guy around the corner that will get on their knees and do what the large company wants, and in turn, undercut me. If so, then so be it. I bought my bot to get away from these shenanigans indicative of the corporate game, and refuse to carry it into my business.

Some companies, govt agencies, radio stations, etc have balked at my terms whining about thier policy and the whole bit..let me tell you ~ They figured out a way to get what they needed from ME using whatever internal loopholes they had to, or just changed their policy.

As a business owner, and retiree of the corporate saltmines, I have to ask myself just who I am going to be in my business...a champ, or a chump? If someone has to break policy, it's going to be the other company...not mine. If there are going to be headaches, they can have them. I know what I wrote may come off as sounding niave or unreasonable, but it has been working for me with absolutely no problems. I get paid instantly and everyone is happy, especially me.

Just my 2 cents.

-B

[richards]

Brady,

In every industry (that I've worked in) there has been ONE local shop that was clearly the best shop in town. That ONE shop could set its own terms because it was the best. Being the best in town is a very good position to be in. However, I'm sure that there are at least a few of us Shopbot owners who live in towns where there is a lot of other CNC shops competing for the same job or who are still learning how to make everything work. There are probably just as many Shopbot owners who live in areas where there just isn't enough business to keep even one shop busy full time. So, my point is, that on the way to becoming the owner of the best shop in town where everyone knows you are the best, where you can pick and choose your customers and set the terms that make most sense to you, it's sometimes necessary to accept jobs that will pay the bills. In that situation, it would be my goal to price my products so that a decent profit could be made and to add some kind of built-in surcharge to cover the additional costs of meeting the customer's terms.

I completely agree with all of you who demand cash in advance for any unproven customer whose ability to pay may be of concern; however, I have never had a problem collecting from large corporations - except waiting for them to send the check. If they want my business and if I can charge a fair price, and if they want to pay full price instead of receiving a discount for prompt payment, I'll work on their terms.

[rcnewcomb]

In my pre-Shopbot days I worked in IT at 5 different Fortune 500 companies - either as an employee or as a consultant. For many of these companies the standard for the Accounts Payable module was to trigger payment at 53 days from receipt of invoice for vendors that were Net 30. The director of the AP group indicated that they had found that 53 days was their "sweet spot", i.e. optimizing how long they could hold onto cash vs. vendors not working with them.

With one of the largest companies I chose to go through a broker who would pay me faithfully every 30 days because I knew that if I dealt directly with this company's AP group that there would be a 90 day lag between my first invoice and my receiving first payment from them. At the time I didn't have a 3 month cushion so the broker was the better way to go.

[wemme]

Hello. It is good to hear other peoples ideas on this topic and it is an important issue that can make, stress or break small companies.

No one wants to wait on what is thiers.

I've had one customer who had me waiting on money. due to this I now charge them more to compensate for any possible delays in payment.

Regards
Bart

[Brady Watson]

Mike,
I totally get where you are coming from & I guess that I have been lucky in the sense that I have been successful in 'enrolling' customers into my way of doing things when it comes to money. As with anything else, there are agreements or contracts that must be drawn up when business is conducted. Who says that the larger company dictates the rules? Because they make more money a year? Like you have to feel 'grateful' to them because you are just a lowly CNC owner/operator? To me, that is 'poverty thinking' and your company can just as easily create the rules to live by as the larger company can. The terms are in the contract. YOU draw up contracts ALWAYS & you in turn, always get things YOUR way.

I suppose that part of me sharing the way that I bill, will inspire others that they don't have to play by a larger company's rules if it is not aligned with their company's policies. This is especially true for guys that are starting out and/or running their business on a shoestring. Being paid on time is a big deal. Although it may not be aligned with conventional 'wisdom' (which is almost always wrong anyway), I believe that if you don't come from a place of fear or inferiority in your business dealings, then the 'big' company will almost always play ball on your terms. I think that a lot of smaller companies do things as the larger company dictates out of a sense of compelled performance, because if they don't play by their rules, then they'll lose the account. In my dealings this has never happened because I demanded 50% (or more) and immediate payment upon delivery. Everything that I create is custom...and as such, comes a 'custom' payment schedule. I think that a lot of people just do what other companies ask of them because they just haven't realized that there are other possibilities out there for doing things, or they are simply afraid..or don't want to 'rock the boat'.

In closing, I just want to add that I am no different than anyone else on here...and my business probably doesn't differ too much from anyone else's here either. What I have done differently from when I worked for 'corporate' is ask myself just what I am willing to deal with, what I want & how I want to be paid. I decided that I didn't make the customer wait for their parts...I am not willing to wait for my money. I guess it could be worth my while to charge extra to wait, but I prefer to be paid immediately. Once I put my terms in place for the business, then that's it. That's who the company has to be in it's business dealings, no exceptions. By sticking to my guns, I avoid all of the stress and anxiety associated with people not paying on time...to me, that's worth a LOT more than the token fee I would have to charge them to buffer the waiting period and still remain competitive.

I'm not telling anyone that they are wrong for their perspective, just sharing my take on things in my world...

-B

[gerald_d]

Small business often have a problem with supplying to big business (BIG) because they don't understand how BIG processes their payments. Please excuse the local terminology that follows, but I am sure that something similar applies where you are.....

1. If someone from BIG gives you a verbal order, don't accept it. BIG, at minimum, uses an Order Book with order numbers. Somebody in their Payments department checks that they only pay for stuff that has an order number. BIG does this to prevent fraud - otherwise any old employee could order private stuff and get BIG to pay for it.
2. Don't even accept a verbal order no. unless you know them really well.
3. At minimum, get them to fax you their order and check that order to see if the following is clear:
- Legal name of company placing the order and address (The company/place that you are going to write on the bill).
- Name and signature of the person placing the order
- Description of the work and price
- The agreed payment terms, unless you accept their standard 30 or 60 days.
4. If BIG is really big, be suspicious of a hand-written order. Any way, if you have any doubt that you may have payment hassles after receiving the order, call their Payments department and ask them if Order no. 123 is registered for future payment - the Payments departments bear the brunt of accusations of slow/non-payment and they normally gladly tell you if you have a valid order or not.
5. This could be the point where you learn that you need to be a registered supplier on BIG's system before they will pay you. Meaning that you have to fill in some form with your legal name, address, tax number, etc.
6. Close to delivery time, call BIG's Payments department and ask them what paperwork they need to process a payment. Typically they will need a POD (Proof of delivery) signed by the same bloke as who signed the order. (So, get a signature when you deliver.)
7. If your bill is not paid by month end, send a Statement that lists all your bills presented in that month and attach copies of the bills to the back of that. Often we find that the monthly Statement is the most important trigger to getting payments - BIG's Payments department is geared towards servicing their big suppliers and there they only write cheques for Statements. It is not rude or aggressive to send these reminders, it is the norm, and if you don't send them you get left behind. And do realise that the 30 or 60 days is only measured from the Statement date (don't plead ignorance on this - that's how your credit card works)

I don't share the sentiments in this thread about avoiding doing business with BIG. Get to understand them and their systems and it can be very profitable to you. BIG is not out to screw the little guy - heck, they could make a lot more money screwing another big guy. But BIG does have systems in place to prevent employee fraud and you need to navigate these systems.

[bleeth]

Dealing with larger companies in such a way as to get paid on time takes a bit of imagination. In the commercial part of casework business there is usually some part of the contract that spells out billing and payment dates. The billing date is often construed by small contractors as the soonest they can bill after the job or phase is completed. Larger or more savvy subs, however are aware that you can include in your bill work anticipated to be complete by the time payment is rendered. As such, on a job I am now working on that includes three phases over 1 1/2 mos, I just billed for all materials for the job and two phases of installation even though we are just now starting to install phase one. This is not unusual and the only thing you have to do is make sure you actually get the work in when you are supposed to.

Dave