Cash flow issues....the self employed will understand

[Kanewpadle]

Jim, Do NOT let them get too far behind. It will just snowball and they don't care.

We have the same problem at work. Our terms are also Net 30. Most of our accounts pay on time. But big businesses and local government agencies are the worst.

The worst is a huge nation wide property management companies. We were on the phone with them every day! Still no check. But you bet your butt they called for service.

We cut them off. No more work until they were caught up. That got their attention quick.

 

[THEWELSHM]

I feelyour pain.I have something akin to this--trying to find some computer wiz to post some things I have for sale--on places like: facebook and craigs list--and im hitting nothing but walls. I stand to make near three K when this stuff sells?

Really?? If you can work this site you can perform those tasks yourself mate

Thewelshm

 

[LVSteve]

Bill,
Yes, I have talked to her supervisors, and they sympathize, but can't do anything. The problem is the accounting office is in another state, Georgia, I think, so they are beyond my reach except through email. This is one of my largest clients, so I don't want to rock any boats.

Years ago there was a business analyst in the UK who helped small businesses/self employed folk with similar cashflow issues. Quite often the result of his analysis came up with one, or both of the following:-

1) Up your rate by 50%, you are way underselling your product/services.

2) Ditch the bad paying clients, especially the big ones, because they are just bankrupting you by inches.

 

[HOUSTON RICK]

A lot of large companies know that everyone is dying to do business with them, so they jack their service providers and vendors around as a matter of course. A lot of smaller companies either do not have the cash or believe (and I heard this from a regional CEO) "We are such important customers that we do not have to pay". He did not mean, that we do not have to pay on time, he meant they were so important that they did not have to pay period. Contracts usually cost more money to enforce and nobody really wants to sue their clients. As stated above factor in the price and give discounts for early payment. 5/10 net 30 was made up for a reason - it works. Send reminders when the discount is about to expire and plant to receive the discounted amount about a week after the discount expires.

 

[johngalt]

Sounds like the company where I used to work, except they used to stiff their employees on business trip expenses.

We were required to use the company credit card, but it was in our name, not the company. The bills were our responsibility, while company kept the perks.

Go on a trip. Come back and submit expense report. Company refused to pay. CC company sends your name to collections. This happened to several people. Apparently they felt the employees had an obligation to fund business trips out of their own pocket.

After several months one guy walked down to accounting and told them he was going to cancel the card and refuse further travel until he was paid. Holding a company CC was considered a risk to to your credit score there.

 

[Snapping Twig]

Sounds like the company where I used to work, except they used to stiff their employees on business trip expenses.

We were required to use the company credit card, but it was in our name, not the company. The bills were our responsibility, while company kept the perks.

Go on a trip. Come back and submit expense report. Company refused to pay. CC company sends your name to collections. This happened to several people. Apparently they felt the employees had an obligation to fund business trips out of their own pocket.

After several months one guy walked down to accounting and told them he was going to cancel the card and refuse further travel until he was paid. Holding a company CC was considered a risk to to your credit score there.

I worked for a company just like that. They said they didn't pay for meals, I had to eat and it was my responsibility.

I countered that while true, my food was at home in my kitchen and I was out of town at their demand.

Needless to say, it was the the irresistible force meeting the immovable object. I did a work-around, found a way to cover my costs at their expense which was... unpopular. Hey... they make the rules, I just played by them.

I was shocked at the depravity of large companies treatment of employees. Indentured servitude is the closest I can align it.

Didn't take me long to give my notice. I signed a term of employment that 18 months minimum to compensate for the 'training' they invested in my. Training my rosy red behind! I got out of that in under the 18 months.

Knowing your rights and understanding the opposition goes a long way towards positive results.

I had half the company cheering me on, the drones and dead wood opposed to me and at the end of the day I went into business repairing graphic arts equipment which they made and had full support of the technical staff.

Respect.

 

[LoboGunLeather]

The bigger a company is the slower they pay their bills. Basically, if they can get 100 vendors to wait 90 days for a $1000 payment that amounts to an interest-free line of credit for $100,000.

Every customer should be on a written contract for services. Every contract for services will have to be renewed at some point in time. When the time for renewal arrives bump your rates by 20%, offer a 10% discount on all balances paid within 30 days, slap on a 1.5% per month penalty on unpaid balances over 30 days, and add in language addressing all costs of collection (legal fees, court costs, etc). When they cry crocodile tears offer to reduce the service fees, but increase the penalty provisions. Any account that goes over 90 days should result in a collection action (minimum of a letter from an attorney, summons to small claims court or county court even better). Since you are providing contractual security services I presume you are doing so on the customers' properties; might be worth looking into the feasibility of filing liens on those properties for unpaid billings.

Companies love to report strong cash positions on quarterly and annual reports. Companies hate to have to disclose pending civil actions on those reports.

You are in the contract security and private investigations business. You are not in the corporate finance business. Your customers need to understand that clearly.

 

[tacreload]

Yeah,the bigger they are the less they care. I am part of a corporate world and part of my job is getting money from customers who are behind. Corporate policy is anyone over 60 days goes to cash only. Double standard though,because when I call a supplier to obtain product I am told all too often that we are 90 days behind and account is shut off. Never once gotten any co operation from the powers that be to resolve these issues. They act like its okay and respond to me like I'm an idiot. They truly don't give a damn. Brave new world and I can't wait to not have to play with them anymore.

 

[rburg]

And we had just the opposite experience. Our owner didn't like to owe money and he was an old school conservative. We paid on time. Always. But when I needed computer or security system service, all I had to do was call. The fun call was one day our vendor for phone and camera service was really busy. Our system went down so I called him. Knowing he was covered up with work. So he packed up and left a big customer he was working on. The reason was he, like the OP and everyone else was in financial straights. He could do a couple of thousand dollars worth of work for me and get paid, or he could put the same amount of time in at the other customer and get paid 2 or 3 months down the road. For him it was a simple decision, work where you'll get paid the soonest.

He even had the discussion with his client. The guy was hurting to get his work done, but he knew how slow pay they were. And there was no real threat to take his business elsewhere. Time for another vendor to come up to speed was too long. So he watched my guy walk out in the middle of the problem and come serve us. And its the only solution for a small businessman. Once the big guy gets in to you for enough, he calls the shots. Until he doesn't. One of the real problems is managing your business in a way that it doesn't get out of hand.

In our business, we had to buy and then deliver high cost product. Not getting paid was a loser for us. So while it was common to fall behind a delivery or two, those weren't the terms. We did set a credit limit, but our drivers wouldn't leave product after the customer got behind. They heard all kinds of crying when the truck with their delivery came in first to pick up the overdue payment. And if they didn't pay up, away he'd go.

 

[Dominus_Lex]

I have been self employed for 16 years and for the first time started adding interest to accounts, even though my engagement agreements have called for the same since I started. While it did not work with everyone, it caught the attention of several parties. Long and the short of it we have a new policy, 90 days out and I start adding monthly interest.

As for the person who does not like you asking for payment for services provided, I would get a collection agency or lawyer involved....

No More Mister Nice Guy

 

[finesse_r]

I think this type of behavior is taught in Business course 101 in most prestigious universities. That it has become so widespread, is just one more sign of the deterioration of values in this country. No doubt it has been a small problem for as long as there have been businesses, but it has now become standard practice at most companies.

 

[tacreload]

I think this type of behavior is taught in Business course 101 in most prestigious universities. That it has become so widespread, is just one more sign of the deterioration of values in this country. No doubt it has been a small problem for as long as there have been businesses, but it has now become standard practice at most companies.

Yeah apparently they don't have to worry about their credit ratings like we mere mortals.Be 2 days late on your mortgage payment and see what happens to your credit score.Whole different ballgame then.

 

[LVSteve]

The stupidity of this cashflow/lean business attitude is that eventually it gets out of hand. I have it good authority that at least one major defence contractor with cast iron government work BORROWS money every two weeks to make payroll. Um, really?

 

[M3Stuart]

I have seen this problem from every imaginable angle for decades.

End of story: raise your prices until you don't care if they pay late. If they complain when you raise your prices be sure to say: "Well, I'd only charge you X amount if you paid on time." But still raise your prices.

Decisions have consequences. You either have to raise your price or walk away from the business.

 

[kozmic]

Commercial construction is the worst. Customers are all net 30 days (which is a very fast payer), hold 10% retainage until way beyond the end of the job, typically don't pay for stored materials and invent reason not to pay you....And those are the good customers.

I've totally given up on a few companies. I had a small contractor whom I've always had untold trouble with beg me to do a good-sized job for him. I informed him that I would not do anything for him under any circumstances. I told him that "even his cash was no good".