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  • #969173
    mediaman
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    Hi all,

    In the last week I have had two of our major clients cancel jobs at the last minute. In fact, one of these clients did the same thing three weeks ago as well.

    For one of these jobs (the latest one) I had hired a contractor for the job but he has decided not to charge us a cancellation fee).

    My questions are:

    Should a cancellation fee apply (yes, we did refuse other jobs because of these bookings) or should we cop it on the chin because they are very good clients? (actually one of them is better than the other – one of them is only new and we are treading lightly with them at the moment. The other is one we have had for 18 months and they “love” us…)

    Does a cancellation fee tempt fate with these clients or does it show you “have balls” and – even though you are a small supplier – you are not to be messed with and that you are a serious business?

    The insecure side of me says “let it slide” as we might lose them as clients because of a charge, but the professional business person in me says “charge them without blinking an eyelid without looking back”.

    Actually the newer client asked if there would be a cancellation fee (I guess their other suppliers charge one if this happens to them) and the more established client just canceled the two jobs without showing any concern about whether we had missed out on work or not.

    Any opinions here?

    #1037261
    abacus
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    Maybe you need to get a deposit upfront before you start work.

    This is standard in the building industry. eg: Mick does a quote, customer goes ahead, customer pays 20% BEFORE we cut one single piece of product.

    If they baulk at paying a deposit they will baulk at paying the bill.

    #1037262
    yourvirtualboard
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    First off what’s in your terms of trade, do you have cancellation fees and conditions that might have these applied?

    Also if they have done it more than once now, what would stop them doing it more frequently in the future – especially if there’s no recourse?

    To try and appease both the insecurity and business sides you mention – what about bringing it to their attention this time and advising that a cancellation fee will be applied in the next instance as per your terms?

    #1037263
    mediaman
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    Interesting.

    We do broadcast video production work. These are jobs for media PR companies who have been hired to handle/promote companies’ products or services for them. They then hire us to work on behalf of them for their client.

    There is NO WAY my clients would pay a 20% deposit. Most of them are large corporations who just don’t operate like that. They wouldn’t have the time to worry themselves with it and they (being in the media and PR business) know that there is every chance the project they are handling for THEIR client could be canceled before it even starts. It’s not their doing that the jobs are indeed canceled, that is not our gripe. The gripe is that we have refused other work because of their booking.

    Let’s face it: my client would probably bill their client for the late cancelation; I mean they have mush more at risk than what we do, being a big PR firm…

    My thoughts are that they should be charged the rate we have quoted them for the day. No post-production fees, just for what we have missed out on by taking their job and not being able to work for someone else because of it.

    #1037264
    mediaman
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    yourvirtualboard, post: 44991 wrote:
    First off what’s in your terms of trade, do you have cancellation fees and conditions that might have these applied?

    Also if they have done it more than once now, what would stop them doing it more frequently in the future – especially if there’s no recourse?

    To try and appease both the insecurity and business sides you mention – what about bringing it to their attention this time and advising that a cancellation fee will be applied in the next instance as per your terms?

    Thanks Harry.

    I guess this is indeed our responsibility. We have no “terms of trade” as such that have been presented to them before we have commenced work with them. When they first came to us, we were solving a problem for them (they had left it until the last minute to get a camera crew) and so they called on us (they found out about us through another of our clients who happens to have their PR handled by this same company). So, it was a very quick job without any “meet and greet” beforehand. Not much time for formalities you might say.

    It’s funny…we get really big clients by being easily accessible and “less hassle” than other production houses around. This is what they like about us. No hassle. But, as John Travolta said in one of his movies, “don’t confuse my friendliness with weakness”. Or words to that effect.

    #1037265
    mediaman
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    Ok, perhaps we should let these latest issues slide, but present our clients, past and present, with a set of new “terms of trade” setting out the rules.

    Will be interesting to see if their requests for quotes drop off once the terms of trade are “put in writing” and directed to them.

    #1037266
    melbstrip
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    Faced a similar scenario recently. Because the average punter can’t see the difference between a good agent and BS agent, they phone around and tend to book with the sweetest talker. (Eg yeah yeah, she’s available – NOT)

    Had a very large booking for 7 girls over 6hrs. First the booking was pushed back a month, then 3 days before cancelled altogether. Next was a series of smaller bookings cancelling.

    Its not just the loss of income from the booking, but the time and effort put into co-ordinating schedules, and also the girls who knock back other work to be available to me. Is lose-lose for everyone.

    To combat this I initiated a small booking fee, roughly $25/girl booked. Most clients anticipate they will have to pay some kind of deposit, so the small booking fee is not that much of a shock. Cancellation rates are definitely on a downward trend.

    Seeing as most your clients come to you because you are hassle free, I’m not sure how you would do it. Perhaps call it a “confirmation fee”, confirmation you have accepted the job, or something along those lines.

    In any business time is money, and if you have to knock back work to take a job that cancels then you are losing out big time.

    #1037267
    yourvirtualboard
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    MediaMan, post: 45004 wrote:
    Ok, perhaps we should let these latest issues slide, but present our clients, past and present, with a set of new “terms of trade” setting out the rules.

    Will be interesting to see if their requests for quotes drop off once the terms of trade are “put in writing” and directed to them.

    It’s pretty important to have terms of trade established when you set up clients that will be paying on credit, which is what I assume these would be. It’s also important to have an idea of the risk they may present ie credit control – I’ve seen too many small businesses jump at the chance of a new account only to be disappointed when all their work and effort goes unpaid.

    #1037268
    jaycar
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    We always ask for a small deposit should we need to hire some equipment for a job. the hirer doesn’t care if someone cancelled on you and they wont refund so neither should you.

    #1037269
    engs
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    Harry your answers were well thought through and really hit the nail on the head so to speak. The only other thing I’d like to add for MediaMan, is to determine what other organisations that your clients deal with do. These may not be your direct competition, but they could be print media for example or talent agents (not in the area myself, but you’ll know who the large PR firms deal with).

    I have found that it often helps if you look outside of your own industry for inspiration on how to deal with issues. If you pick another industry these firms deal with and talk to them about their Terms of Trade you may find yourself with an innovative way of dealing with this issue that no one else in your industry is using. This could maintain your flexibility whilst still offering you some comfort.

    In addition, feel free to actually pick up the phone and talk to these other businesses. I have found people really open if you ask them to share their way of doing things but they need to know that you are not competition and, as always, be respectful of their time and their opinions.

    This way of approaching challenges has helped me in the past and has opened doors to the inside working of large companies. I hope you find it as useful as I have.

    – Catherine Englund

    #1037270
    wordmistress
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    MediaMan, it’s important that you do what’s necessary to avoid your business suffering damages that may adversely effect its bottom line. Especially if it starts to become a regular occurrence and your bottom line begins to flat line.

    When I read your title “Cancellation fees – friend or foe”, all I thought of was a third one: “necessary evil”. So what if it makes you appear slightly ‘less accessible’ than other businesses. Those other businesses may be missing out on jobs that you ultimately win but they probably don’t have the hassles you’re facing either.

    In my experience, setting out terms before starting a job garners respect, more than it appears to be difficult to deal with. As with children, we all need guidelines and when you set out those guidelines in black and white, everyone knows where they stand.

    I don’t know whether a cancellation fee is the right way to go about it but as you said, some of these companies won’t cop being asked to pay a deposit. My thoughts are that once a job is cancelled, trying to extract money from the client is useless. In fact, it’s probably laughable. They don’t see the efforts you’ve applied or the arrangements you have in place so for all intents and purposes, you’ve done ‘nothing’ in their eyes to warrant payment.

    I would suggest compiling a Terms of Trade document, add it to your website and also send it along with any quotations you provide. I have a Scope of Work that I send with a quote and I specifically request that the client read it thoroughly and return it to me, signed. I also request a 50% deposit, and the balance within 7 days of delivery of the writing. Before I implemented these strategies, I had problems with fuzzy terms. Once I put them in place, everything was clear as crystal to the client and myself.

    Of course, you can always bend the rules on a case by case basis yourself if you feel a cancellation fee isn’t warranted or it will jeopardise future work from a particular client. But the ball will be in your court.

    #1037271
    MAli
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    Great post Gina.

    #1037272
    King
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    Yes it is all in the terms of trade, BUT I would call it something other than a cancellation fee.

    Perhaps call it a planning and scheduling fee that invokes the understanding that this is a cost that is incurred as part of the setup. This could be X% of the total job and payable in advance/or is a non-refundable component etc. That way they either prepay, or you can justifiably bill them for this even if they cancel, because that part of the work has been done.

    If they are corporate, they won’t even bat an eyelid over paying it.

    #1037273
    Carol in Melbourne
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    I think the crux of the matter is successfully managing client expectations.

    The production houses and photographers that I deal with all have a cancellation fee – it just makes good business sense. As a client I understand that if I book a space and cancel within 48 hours I have to pay a base fee – unless they can replace the booking.

    No-one likes to be hit with a ‘hidden fee’, especially (as you said) your client may have lost the job as well. Stating your terms of trade on your estimate means everyone will know what to expect.

    cheers
    Carol

    http://www.mbdesign.com.au
    http://www.dmzine.com.au
    http://www.annualreportbestpractice.com.au

    #1037274
    Steve_Minshall
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    King, post: 47178 wrote:
    Yes it is all in the terms of trade, BUT I would call it something other than a cancellation fee.

    Perhaps call it a planning and scheduling fee that invokes the understanding that this is a cost that is incurred as part of the setup. This could be X% of the total job and payable in advance/or is a non-refundable component etc. That way they either prepay, or you can justifiably bill them for this even if they cancel, because that part of the work has been done.

    If they are corporate, they won’t even bat an eyelid over paying it.

    I agree. All you need is a purchase order number for an initial part of the project and you have something to bill against. You do not need money upfront just a purchase order. Then you are not trying to chase a cancellation fee when everyone in the company has moved on and not interested. You are simply chasing payment for a legitimate invoice which is likely to be dealt with by the accounts payable people with no future selling ramifications.

    In your current situation I would take it on the chin, I think it would be damaging to go looking for a cancellation fee after the fact. However going forward:

    MediaMan, post: 44988 wrote:
    The insecure side of me says “let it slide” as we might lose them as clients because of a charge, but the professional business person in me says “charge them without blinking an eyelid without looking back”.

    Now I don’t want this to sound brutal but, if you are worried that your USP is actually the fact that customers are able to do this to you then I think you need to look at your product.

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