Im curious...

[robtown]

More and more these days my clients are stretching out final payment, it is now to the point of hilarity (if it weren't funny anyway). i have companies with millions of dollars in assets, stretching me out 60-90 days routinely. And deposit money? pshaaaawwww.... that don't happen. I don't have a supplier that gives me terms longer than net 30, most of them are net 10. So for that 90 days I have to pay my suppliers 3 times, my rent 3 times, my monthly round of bills 3 times (don't get me started on my current gas bills), my employee 6 times, and me well just whenever I can if I can that is.

As for my small clients, well those jobs are always low profits, and HIGH maintenence, (It seems the lower budget someone has the more they want to be personally involved in the work) and after all that they usually try thier best to skate with product while not leaving that check.

Don't get me wrong here, I build a good product, and we have never had a dispute with quality or delivery, so these issues aren't occuring due to problems like that. And I stay busy, good work seems to find me, every single person I talk to about this echos the same sentiments. I'm spending far too much time these days collecting and not enough time creating, and it's hard on the psyche cause that's not why I signed up for this gig...

Am I alone here,or is anybody else feeling the same?

[lto]

Rob,

My experience has been that I get very uncomfortable with long payment terms, especially where there isn't a repeat business relationship. You have a right, even a duty, to establish what you will accept. I have made an exception to my rule in the past on a fair sized account, only to learn later that they were also doing this with others. My leniency in this case contributed to their false sense of well being, causing them to continue digging a deeper hole. Needless to say, the situation didn’t turn out well. No need to be ashamed to ask for prompt payment of jobs satisfactorily completed. Does anyone allow you 90 days lead time on an order these days?

There are those very few exceptions, people can experience misfortune. The shorter the payment terms, the less opportunity for a special situation to occur which may inhibit payment. You can better afford to lose 10% of your customers than to have even 5% of your jobs go unpaid.

[gene_marshall]

True, that is the hardest part of being a business owner.
We take 100% up front on jobs 1000 bucks or lower.
We take 60% on jobs requiring finish, 30 before finish and 10% on delivery. No exceptions.
When we call to arrainge delivery, we tell them the balance and ask if a check will be waiting.
No check= no delivery.

I suggest you get tough and protect your interests.
Best of luck.
Gene

[robtown]

No, nobody I purchase from extends 90 days to me, and if I try to take it I get nailed to the wall. I'm not ashamed to ask for my money, my frustration is that I have to. I pay my bills promptly, I stretch where I can and raid personal money where I have to. My situation is not with Joe Blow contractors, but with large companies like Brassfield & Gorrie, Coca-Cola, Emory University, Turner Broadcasting, et al...

These are companies that can do as they please, and if I drop out there are a 1000 guys inline ready to cut my throat because they feel that these jobs are worth being cutthroat over, only to find out that it very well may be 6 months after project completion before you see the first dime of your money. And what's truly vexing is that you talk yourself blue in the face about cashflow and prompt payment, it states certain terms in your contract and they sign it knowing what you expect, and then your money gets caught in the loop by the "folks upstairs" etc...

I will price away work or walk away from accepted pricing in a heartbeat if I feel its not in my best interest. When you deal with the heavy hitters you feel somewhat secure that the money is there. I am not at all concerned about losing my customer base because I choose to be a hardass about payment, my pain is that people sign up for the work knowing what I expect, then do whatever they please when it's been delivered.

Thanks for weighing in here, I'm looking forward to other responses to see if it's just me...

[rookie432]

Sometimes (and I mean sometimes) it helps to offer a discount if paid on time. We offer a 2% discount if the bill is paid in 10 days. Now it seems the bigger the company the worse the abuser. Industry standard seems to be 60 days for large firms or manufacturing facilities. If they are a repeat or constant customer and pay consistantly on a 60 day basis we can usually work with those terms. At least we know when we are going to get our money. However in this business if the abuse is not corrected then it's 50% down 50% on delivery no exceptions. Fortunately I have the luxury to walk away from a job because I have another source of income so take this with a grain of salt but it just seems to me that if I have to wait for my money all the time all my profit would be lost in interest payments and replenishment costs. How do I bid on the next big job if I can't afford to purchase the materials and pay labor because all of my receivables are tied up. Cash and cash flow is king.

Bill

[propellers]

Rob, I have been manufacturing a custom product for 27 years and got taken to the cleaners three times and that was in the first two years of business. I felt embarressed about asking for payment upon delivery.
I decided to set a policy and stick to it. Our policy is a min. of 50% of the job up front, there is not a refund of the deposit once the product has been started and a fee if the order has been canx. The product will never leave our facility unless we have 100% payment.

I have heard the crying for years that it's not the purchasing companies policy to prepay. I then let them know there are other companies that will do the work and inform them politely that to do business with with me these are my terms. Sometimes you may have to be creative for instance the government. They have a policy that they will pay in advance if there is a discount, regarless of amount so I give them a token discount and get payment in advance.
We have a very unique product of manufacturing aircraft propellers and being few in the market place I suppose we can get away with being a bit more snobish than the company that manufactures and installs their product, but even so if I presented the policy to the customer and I installed cabinets and they didn't have the check I would not go back home without the cabinets and charge them for a re-installation.
I don't think you can be an effective business person without having and sticking to a policy that works for you. Of course we all want to be friendly and helpful but you can't accept non payment or extended payment when it comes to the survival to your livelyhood.
When the customer has the product, the money will always be harder to obtain and raises stress levels than sitting on the product until the customer hands you the check.

[richards]

Rob,

Talk to your banker about short term loans to cover your receivables. Get a purchase order from the larger clients before starting the job and then take that purchase order to your banker and get a loan to cover as much of the job as necessary. BE SURE to increase your prices enough to cover the cost of the banking charges.

If your banker won't help you, check out the factorers who buy receivables. Their "service" is expensive, but it gets you a check when you need it. Again, you'll have to increase your prices enough to cover the additional finance charges.

As you raise your prices, offer a discount to those who pay according to your terms. In effect, the cost of borrowing money is part of the cost of running a business. If your customer doesn't cause you to have to borrow money, you can discount those costs on his bill. If your customers are national companies, someone in the banking business will give you the necessary loans.

[stevem]

Slightly OT...

The Canadian government has an agency that offers receivables insurance. I have used this service in the past with customers who may be potential deadbeats. The are also private insurance companies that offer this type of policy, including coverage on a one-time basis. This type of insurance is very valuable for piece of mind and can be vital for business survival.

[robtown]

Mike, it's stuff I've considered but it all adds layers and costs, I guess my main frustration is that it all means I spend more time running the business, and less time being the business.

Steve, it's not a situation with deadbeats per se, really it's more larger companies that are apparently unable to produce specialty items themselves lean on smaller guys (me) to do it within budget and deadline, then simply pay when it feels good. I've never encountered a situation where I honestly thought the money wasn't coming.

I'd still be curious to here from more of you on whether it's just me, or if it's an actual trend. I've discussed this with quite a few of the people I deal with on a daily basis, and they seem to have the same or similar issues.

[terryd]

Rob, Having been the big guy (manager of) let me reassure you that it is not about you. The fact is that it was always simply a matter of scale. If you supply a product although needed is not critical I appreciate your efforts and will use your service again but in these days of major companies leveraging each other through A/P's and A/R's you are not going to get any special considerations. The exception to this general practice was when the Prez or VP ask me why so and so was still waiting for his money then you were paid pronto to go away. I had enough trouble covering my nuggets from below without worrying about head shots.