[LRUG] [FINANCE] Startup/finance question around invoices

John Arundel john at bitfieldconsulting.com
Fri Aug 8 05:38:04 PDT 2014


On 8 Aug 2014, at 12:04, chat-request at lists.lrug.org wrote:
> From: Sleepyfox <sleepyfox at gmail.com>
> 
> # Challenge
> I have a client that for the third time running is late with paying their
> invoice.

The odd thing is that it seems the bigger the creditor, the less of a damn they give about paying you. Most of my clients are other small businesses and startups who are extremely cashflow-conscious, and I’m happy to say that in the main they pay on the nail, and in many cases before the deadline. [Informational sidebar: if you pay your vendors this way, I can tell you that they will love, honour, and cherish you, and do everything in their power to help you out of a jam. If you’re a late or reluctant payer, not so much.]

However, in my decade or so of consulting, I’ve encountered everything including:

* Client regularly pays late and only after being chased multiple times
* Client 'loses' invoice altogether
* Client comes up with inventive stream of excuses (admin assistant broke her leg, waiting for funds, floods destroyed accounts payable files, etc)
* Client is 'big' company and says, in effect, we’ll pay you when we feel like it
* Client ums and ahs on signing contract, in the meantime running up substantial bill for meetings, calls, etc, then denies that they ever agreed to anything and that any work undertaken was voluntary on my part
* Client fails to pay for a year, offers half the total in settlement, then files for bankruptcy, winds up the company paying pennies on the pound, then starts new company with strikingly similar name and same clients, but no debts

What’s interesting is how good a correlation there is between a client’s payment habits and their general integrity / business sense / trustworthiness. The worst payers are the dodgiest dealers, the most likely to screw you over or default altogether, or simply to go bust owing you money.

My business practice now, honed by some bitter experience, is this:

* Always insist on exchange of contracts before doing any substantive work
* 30-day payment terms clear in contract and on invoices
* Reminder 7 days before payment due
* Reminder on day that payment due
* Depending on the client and my relationship with them, stoppage of all work if payment is more than X days late / overdue X amount
* Late charges (happily, I’ve never actually had to apply these; usually, the mention of them is enough to unblock the money pipes)

I very much dislike having to chase people for money, so fortunately I have an excellent VA who can do that for me. If things get really bad I set her on them and she will just keep calling every day, until it’s less hassle for them to just pay up.

I was really interested to see the statutory late charges / interest regulations, as I wasn’t aware of those. An excellent worst-case weapon to have in your back pocket, but at the end of the day I’d just rather not work with people who do business like that.

Regards,
John
-- 
Bitfield Consulting: we make software that makes things work
http://bitfieldconsulting.com/




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