Home – New Forums Money matters do you let customers dictate payment terms

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  • #987210
    TehCamel
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    i just chased up a customer who is 7 days overdue on our standard terms.
    It’s not the first time I’ve had to chase them up. They seem to persistently be overdue.

    They’ve just told me “we work off 30 day terms” for the first time ever.This isn’t a large customer, either in terms of revenue, regularity or even company size.

    So the question is – do you, or would you, let customers dictate terms.

    #1161648
    MissSassy
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    Hi Andy

    Sometimes you just have to do what works – If they are a good client that you want to continue working with then it may be worthwhile.

    If however they are not a good client then you must illustrate your desire to be paid on time or you are not able to work with them anymore.

    #1161649
    JohnTranter
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    I don’t let my customers dictate payment terms.
    80% of my clients pay immediately, but I have some clients who don’t pay until the first reminder (and some even the 2nd or 3rd)
    I automate reminder emails every 7 days after the invoice is sent, it’s a good way to ‘nag’ without feeling bad that you’re chasing them.
    The email content looks obviously automated too, so clients don’t feel bad as it’s not ‘me’ chasing them.

    If the money owed is particularly large, I’d look at creating milestones during your work so that the payment is spread over the period and you’re not waiting on a vital amount of money at the end.

    #1161650
    TehCamel
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    see.. it’s not large amounts. if it was, then i’d understand (I have a uk client who only pays 30 day terms, and 98% they are pretty good.they average probably 10x what this client does.)

    i hate chasing money. it’s absolutely the worst part of running a business.
    i;ve considered outsourcing AR, but don’t really have the budget yet.

    #1161651
    Greg_M
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    I’d agree it’s the worst part of running a business.

    The old “30 day terms” is what we do, is often a cash-flow exercise in my experience … either that, or they’re starting to struggle a bit if they’ve been prompt in the past.

    A hard one to call, some I let slide away, some are just slack, or poor managers (but honest), so I put up with them but put them on the bottom of the priority pile.

    An old client of mine has an office assistant of long standing, in many ways she’s not that good and makes quite a few errors … but, she’s like a terrier dog chasing money. 2 minutes overdue, and she’s on the phone … and she doesn’t go away till they pay, or give her a damn good reason not to.

    IMO worth twice what she’s paid :)

    #1161652
    tanjazurak
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    TehCamel, post: 186796 wrote:
    see.. it’s not large amounts. if it was, then i’d understand (I have a uk client who only pays 30 day terms, and 98% they are pretty good.they average probably 10x what this client does.)

    i hate chasing money. it’s absolutely the worst part of running a business.
    i;ve considered outsourcing AR, but don’t really have the budget yet.

    Hi TehCamel,

    I just wanted to introduce myself to this discussion, I am very new to this forum based communication, but I do believe it is great! I think your quote “i hate chasing money. it’s absolutely the worst part of running a business” is the number 1 reason our product was created at http://www.apricityfinance.com a form of supply chain finance for small business.
    We pay 100% of your invoice less our fee of 3% for 30 days, its great for people who hate chasing money, want to grow their business with a simple online system and its designed for businesses who supply to large supermarkets and government. I am so passionate about businesses in Australia and really enjoy helping them become the leaders in their field through the experience we offer from our team.

    Thanks for the interesting discussion all, i think its really important all businesses address cash flow in a proactive approach- there is a solution!

    All the best – happy to answer any questions you all have about business.
    Regards
    Tanja Zurak

    #1161653
    Melanie Miller Biz Coach
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    No chance that I would ever let customers dictate when they pay me – as much as I am sure some would like to:)

    I have a trading terms agreement which they sign and then a direct debit system – my billing is monthly in advance so super easy with direct debit.

    I have a rule of do it my way or we don’t do it at all. I found that when I didn’t do it this way I was paying my bookkeeper or wasting heap of time chasing down people for payments. My profit was dying due to the number of hours wasted.

    It can feel really cash flow painful to have to keep clients to your agreed terms (I have felt the pair..arrgghhh) but for me the alternative is not worth the time wasting.

    Hope you can find a solution – good luck!!!

    #1161654
    James Millar
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    TehCamel, post: 186788 wrote:
    i just chased up a customer who is 7 days overdue on our standard terms.
    It’s not the first time I’ve had to chase them up. They seem to persistently be overdue.

    They’ve just told me “we work off 30 day terms” for the first time ever.This isn’t a large customer, either in terms of revenue, regularity or even company size.

    So the question is – do you, or would you, let customers dictate terms.

    Walk into an apple store, ask for an ipad and tell them you will pay in 30 days which is your standard policy.

    If your are selling a great product / service that people want then your terms must be respected. Simple.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1161655
    arrowwise
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    For a customer to dictate payment terms they really need to be an exceptional customer who hold extra special merit. If they just want to play funny buggers to suit themselves it will often burn you up trying to jump their hoops. Very few customers are that special that they don’t warrant to fit into your reasonable standard payment terms. Once they start dictating otherwise they are often showing traits of what is to come, such as being late to pay or cause other issues.

    Most customer have a pattern of payment, and generally serial late payers are just that, so you may need to bring them into line if you don’t want history to keep repeating.

    #1161656
    LucasArthur
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    arrowwise, post: 186921 wrote:
    Most customer have a pattern of payment, and generally serial late payers are just that, so you may need to bring them into line if you don’t want history to keep repeating.

    Or, to add to this comment, sometimes you need to identify if it is even worth keeping a client that is a serial late payer if it is wearing you down or causing you to have your own cash flow issues arise from it…

    We have had to walk away from a few clients who were being rather inflexible, taking our goods and not adhering to our terms and in fact drawing it out by ‘weeks or more’ with all the excuses under the sun as to why not paid..

    Just saying

    Cheers
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1161657
    The Copy Chick
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    Melanie Miller Biz Coach, post: 186904 wrote:
    I have a trading terms agreement which they sign and then a direct debit system – my billing is monthly in advance so super easy with direct debit.

    Discussing payment terms before the contract is entered into is definitely the wise thing to do. That way there are no surprises for either party once the invoice is issued.

    And I’m pretty sure they wouldn’t be telling their phone or power provider what their terms are. If they wanted to keep those services, they’d have to pay by the due date. Why should your business be any different?

    #1161658
    bridiej
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    The short answer is no.

    In fact, I had to sack a client a year or so ago because their accounts manager got snotty over my 7 day terms – bearing in mind I’d done a load of work for this particular client in the past and it had never been a problem. And actually, the client came back a few months later and was happy to pay in advance for my services!

    However, if it’s a government organisation, hospital etc. then it’s pointless expecting them to pay any quicker than 30 days, so I do offer those terms.

    I do send my Terms of Business via DocuSign which clearly set out my payment terms, and the client has to sign these before I start work.

    #1161659
    TehCamel
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    tanjazurak, post: 186899 wrote:
    Hi TehCamel,

    I just wanted to introduce myself to this discussion, I am very new to this forum based communication, but I do believe it is great! I think your quote “i hate chasing money. it’s absolutely the worst part of running a business” is the number 1 reason our product was created at http://www.apricityfinance.com a form of supply chain finance for small business.
    We pay 100% of your invoice less our fee of 3% for 30 days, its great for people who hate chasing money, want to grow their business with a simple online system and its designed for businesses who supply to large supermarkets and government. I am so passionate about businesses in Australia and really enjoy helping them become the leaders in their field through the experience we offer from our team.

    Thanks for the interesting discussion all, i think its really important all businesses address cash flow in a proactive approach- there is a solution!

    All the best – happy to answer any questions you all have about business.
    Regards
    Tanja Zurak
    interesting concept – i assume this works more or less the same way going to a debt collector would ? we basically assign responsibility for the debt over to you, you pay up front, then chase the customer ?

    what happens if your client has billed someone say $5,000 for services, and you’ve paid the invoice, then the payee goes out of business, mdeclares bankrupcy, whatever ?

    do you have upper and lower limits for the amounts you cover ?

    #1161660
    Johny
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    To answer the question, no, customers should not dictate payment terms.

    We are generally all buyers and sellers in business, we all buy and sell products and/or services.

    I think the important part, as mentioned by several others, is establishing the terms at the outset. As both a buyer and seller, I often have to negotiate terms. As a buyer I have the choice to go elsewhere if I don’t like them, and as a seller I have the choice to not do the business. But I also have to weigh up the overall position. If I am looking to work with a very large company, they often dictate the terms, and aren’t going to change for little old me.

    But its all established at the beginning.

    But in this instance, I don’t think this is about the buyer dictating terms, I think this is about the seller not establishing the terms at the outset.

    i just chased up a customer who is 7 days overdue on our standard terms.
    It’s not the first time I’ve had to chase them up. They seem to persistently be overdue.

    They’ve just told me “we work off 30 day terms” for the first time ever.

    This has obviously been going on a while. And just finding out after having had to chase this up many times that the customer uses different terms, highlights that this issues was not addressed clear enough at the outset.

    Hard to know for sure because we are only listening to one side. They may be overdue or they may be happy to go on the way they have because the issue has not been clarified previously. Now comes the hard part of sitting down and confronting the issue with them.

    Yeah I know, just reading back over my comments probably sounds a bit harsh, but from reading this, it highlights to me the importance of clear communication.

    And providing clear communication at the outset may save you having to pay 3% to someone to follow up your invoices.

    #1161661
    Stuart B
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    I would say no never. If they’re not a huge client then you won’t bend the rules and they’ll either comply or go somewhere else. I would be inclined to issue the invoice upfront, and then after 30 days when they pay the invoice you can commence work.

    That would be one way to work in with their 30 day terms.

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