Question for self-employed or business people....

[LoboGunLeather]

Probably the most frustrating part of small business, especially service-related businesses. I could recite dozens of experiences as a small-time contractor. Suffice it to say that it is always best to reduce everything to writing (work order, contract, job specifications, and payment terms) and stick to the agreement.

A regular customer providing multiple jobs on a regular basis might be worth running an open account, billing cycles, etc. The occasional customer wanting work done on an as needed basis should expect (and be required) to pay the bill upon completion. Personally, I would not release the completed project until payment has been made.

Commercial banks provide business financing, usually via a negotiated line of credit agreement. That service comes at a cost, typically a fairly rigid payment structure with interest accruing from date of advance to date of payment, and usually ensured by collateralization of business and/or personal assets. By putting you off for a month (or two, or three) your customer has simply bypassed his usual expense for business financing by forcing you to carry his debt interest-free.

 

[glenwolde]

You can also offer a prompt-pay discount. Our terms were "2% 10 days, balance 30" meaning that if it was paid within 10 days they got a 2% discount. Most took the 2%. If they don't, they might have a cash-flow problem.

I'm a little wary of the "billing cycle" he mentioned. That's often just an excuse for delay. Another indicator of a cash-flow problem. We used to cut checks weekly, so two weeks was the longest you'd go with us on a C.O.D. We took every prompt-pay discount we could.

But I also understand his point of view. It depends on how big his operation is. Sometimes it's a hassle getting a check cut for a C.O.D.. But he might just be waiting to get paid before he pays you. I don't know about you, but I ain't no bank. There's a surprising number of cash-poor companies that are riding the "float".

 

[Breakaway500]

I've been running my own repair shop for over 35 years. I have never accepted credit cards. I will take personal checks from people I know,as in regular customers. I have only had a few bounce but eventually got paid. If they become habitual bouncers I bounce them off my customer list.
The only customer that I will invoice is for town vehicles because if push ever came to shove I just won't pay my tax bill..!

I give a 10% discount for Ca$h payments and 90% of my customers pay in that manner.

Your business..YOU make the rules. People will walk all over you if you lay down for them..

 

[chief38]

I was in my own business for 30 + years. My terms for large corporations were 30 days and I offered a 2% discount for payment within 10 days. I would say that about 15% of the Corporations took the 2% discount and paid within the 10 day period and the lions share of rest paid within the 30 days. There were a very small amount that I had to chase down but except for a handful of times I got paid. There were times I had to make a a bunch of phone calls, be annoying, or make a visit to their office, but that usually worked out.

Over my career I did get skunked a few times by company's or people declaring bankruptcy or just disappearing and while it bothered the hell out of me, it is the cost of doing business. Unfortunately there is not much you can do if someone simply does not have the ability (money) to pay you.

It stinks and I know you feel abused, but that's reality. All you can do in the future is establish terns of "payment due upon pick-up" and with the exception of a handful of known good accounts and trustworthy customers who you can trust, you don't hand over the finished work until payment is brought to you. Checks can bounce - but that is usually rare. You could also apply for a Visa and MC account and while you will have to incur a 3% fee for using it, at least you will give your customers with a low cash reserve or limited funds, a method of payment. You can even keep the credit card thing low profile and only use it when needed. 97% payment is better than 0% any day.

I hope you do collect your money - good luck.

 

[MaricopaKid]

I used to hand people the bill in person and stand there with my hand out until they wrote the check lol

Invoicing people can take anywhere from 30-90 days to collect,so figure that loan (and inconvenience for us little guys)into your pricing.I really didn't like invoicing and most people understood that. One "friend" took advantage twice and after that I just stalled whenever he called with something he needed done (invariably small and aggravating!)
The guy was a dr. lol

Most of my family are/were small business owners. When a discussion about "Deadbeats" came up, the answers were always the same... "Doctors, Lawyers, and Churches."

 

[Golddollar]

I got educated at an early age watching my dad have to chase after tenants who wouldn't pay rent on time. He wasn't a professional landlord, just a working person who was renting out our house after we had moved to another town for his job. I would go with him, and I remember it being a long drive back to our old house because the freeways hadn't been built yet back in the early 1960s. It basically took up our entire Saturday because of the distance and time involved. Back then I guess there weren't the ways to check people out so readily as there are now.

I don't like being in debt. If I have to leave the house when my lawn guy is still working I give him the check before I leave because I don't want him to have to chase me down for his money. I guess that's the big lesson I learned from visiting slow paying tenants with my dad.

 

[Telecaster]

Half down, half on delivery, no exceptions.

 

[Telecaster]

I almost always get paid by check, which I can deposit in my smartphone app. Cash means I have to drive to the bank and get in line to deposit it, which costs me. So I don't understand the cash discount thing, unless it's cash now vs. invoice and 30 days of waiting.

 

[LoboGunLeather]

I almost always get paid by check, which I can deposit in my smartphone app. Cash means I have to drive to the bank and get in line to deposit it, which costs me. So I don't understand the cash discount thing, unless it's cash now vs. invoice and 30 days of waiting.

Not to mention how difficult it can be to keep track of cash payments and make sure everything is reported on the income tax return. Who needs that much stress in their lives?

 

[Kanewpadle]

I ran a small business for several years. Other businesses expected us to open a charge account for them. We didn't until they used our services a few times. Then we made a determination as to yes or no.

We had them sign a document stating our terms. If they didn't, no account. If you only used us once a year, no account.

A charge account is a PRIVILEGE. Not a right.

Oh, but we're listed in Dunn & Bradstreet!
But we have an A+ rating with the BBB!

Don't fall for it. Protect yourself.

Generate a form that you can use. State your terms. State the work to be done and the agreed upon price. Have the customer sign it.

If you're good at what you do and your reputation grows you may be busier than you intended. You may need liability insurance. You'll have to pay corporate taxes. You may be able to write off certain things too.

You may want to consult an attorney and a CPA to set your business up the right way.

But again, protect yourself at all costs. Even if the customer walks away. Working for the public isn't easy.

 

[CAJUNLAWYER]

Went to a sewing place to get a new boot for my bimini. Asked for a price and he responded-"Do you need a receipt?" I said no-he quoted a price I accepted and he gave me the finished product when I paid. If I wanted a receipt-price would have been higher.
This is a learning moment for you. Hardest thing for a person is to set a value on their services and stick with it. Insist on a payment schedule acceptable to you and don't negotiate. If the buyer gets mad, you don't want him for a client. Period.
Tough but necessary lesson for all sole practitioners to learn

 

[biku324]

^^^^^That.

And don't fixate on a single transaxtion - it is the relationship that matters. I had one company that was $14,000 and change ahead of me in spring, 2014; once they got their side unscrewed, in about 60-90 days, I never had a problem with them again. I also got additional business because they appreciated my patience/good humor.

 

[JJEH]

I figure 30 days is standard business practice.

Unfortunately, for bigger companies this is common practice.

Henceforth, establish your terms before doing the job.
If you want to be paid at pickup, make sure they know that and have a good specific invoice ready.

If you do offer terms, spell them out on the invoice-
"Net 10 days" or "Net 30 days" or actually put the due date
with something like "add 10% for late payment".

↑↑↑↑↑ This ↑↑↑↑↑

If you have a website, put it there, or the newspaper. In addition, print it and put it in your workshop for everyone to see. Also, mention it on the phone with every new customer.

 

[JimBianchi]

First, email client a contract with payment requirement prior to the work starting. Require an affirmative reply before work is started.

Payment upon delivery or take the work back, if possible.

Small claims court filing fee is usually cheap. Once served, advertise his non-payment as wide and loud as possible.

I ran a business for 25 years and got stiffed near the end by my longest and largest client, who I considered a friend.

When it comes to money, some people just become asshols.

 

[ACORN]

I knew a guy that was in charge of his companies "Accounts Payable". A local petroleum products distributor/convenience store/family restaurant business. His motto was pay them when they squealed

 

[Telecaster]

I've found that the more money a client has, the slower they are to pay.

I guess that's why they have more money.

 

[len917]

You can also offer a prompt-pay discount. Our terms were "2% 10 days, balance 30" meaning that if it was paid within 10 days they got a 2% discount. Most took the 2%. If they don't, they might have a cash-flow problem.

I'm a little wary of the "billing cycle" he mentioned. That's often just an excuse for delay. Another indicator of a cash-flow problem. We used to cut checks weekly, so two weeks was the longest you'd go with us on a C.O.D. We took every prompt-pay discount we could.

But I also understand his point of view. It depends on how big his operation is. Sometimes it's a hassle getting a check cut for a C.O.D.. But he might just be waiting to get paid before he pays you. I don't know about you, but I ain't no bank. There's a surprising number of cash-poor companies that are riding the "float".

Companies I dealt with that needed to pay me right away used a credit card. Now most companies give credit cards to dept managers who need to buy smaller purchases.

 

[len917]

You can also offer a prompt-pay discount. Our terms were "2% 10 days, balance 30" meaning that if it was paid within 10 days they got a 2% discount. Most took the 2%. If they don't, they might have a cash-flow problem.

I'm a little wary of the "billing cycle" he mentioned. That's often just an excuse for delay. Another indicator of a cash-flow problem. We used to cut checks weekly, so two weeks was the longest you'd go with us on a C.O.D. We took every prompt-pay discount we could.

But I also understand his point of view. It depends on how big his operation is. Sometimes it's a hassle getting a check cut for a C.O.D.. But he might just be waiting to get paid before he pays you. I don't know about you, but I ain't no bank. There's a surprising number of cash-poor companies that are riding the "float".

I gave 2% -15 days terms to certain large and loyal customers that had their payment terms a net 60 days. They did take the 2% in 15 days. As to giving % for early payment shows a cash flow problem, I argue that is not correct. Some companies offer this as an incentive to pay early so that they can pay their bills early and take advantage of a discount OR better credit rating with their supplier.

 

[Golddollar]

I gave 2% -15 days terms to certain large and loyal customers that had their payment terms a net 60 days. They did take the 2% in 15 days. As to giving % for early payment shows a cash flow problem, I argue that is not correct. Some companies offer this as an incentive to pay early so that they can pay their bills early and take advantage of a discount OR better credit rating with their supplier.

The County, Borough and School District all give me a 2% discount for paying my taxes early. Do I take it? Every chance I can.

The discount for early payment of my taxes has actually given me the incentive to prorate all of my non-monthly expenses on a monthly basis and make those payments into a dedicated account so that when each of those items come due the money is there to pay them, particulary within the discount period for taxes.

 

[coltle6920]

G-Mac...
Terms for payment/credit should be laid out in advance for your protection. Shouldn't matter if it's a onetime customer or someone looking for a longterm relationship.

The person doing the work sets the terms for payment...not the customer.