I have a unique situation here. I work for an ad agency full time as their video production specialist. I also run my own freelance videography company on the side. I offer DVD/CD duplication as a side business. My bosses subcontract my freelance company to provide them with DVD duplication. My bosses will also rent my HD camera off of me for certain shoots. For duplication and rental, I am always paid as a vendor, and it's separate from my yearly salary.
It is not uncommon for invoices that I give to my employers to remain unpaid for well over 30 days. In some cases, I've had invoices with them go unpaid for 3 months. The company I work for is small (3 of us). So I know that my bosses do not pay their vendors' invoices until their client pays them for the particular job the vendors were hired for. I think that this is a very poor way to run a business! That would be like me telling the cable company "yeah, umm, I'm not going to pay this cable bill that's due until my paycheck comes in two weeks from now".
In a nutshell, how long do you guys let invoices go unpaid until you inquire about them? How should I go about this since it's my bosses that owe me the money?
Hi Aaron, I agree that waiting to BE paid before paying contractors is a bad way of going about business. That is what business accounts are for, and good credit. Perhaps this company has neither, or maybe they are just slow to do things.
Because these people are your bread and butter I would be careful about irritating them but at the same time vocalizing the fact that you like invoices to be paid on a timely basis.
Do they have an accountant, or do they do their own books? Every company should have a bookkeeper/accountant at their disposal, even part time. I am one person in my company and I have a bookkeeper I see every 4 months. If they have an accountant or bookkeeper, you can try 'can you please forward these unpaid invoices to your accountant?'
If they don't have an accountant of any sort, then you can always say that YOUR bookkeeper needs to settle up the unpaid invoices to move forward. Don't worry about the fact that you may not even have a bookkeeper! It is a white lie that won't hurt. If for whatever reason they want info on your 'bookkeeper' just tell them that your finances are personal. I can guarantee that will motivate them into settling you invoices more routinely.
A tidbit I will share from my bookkeeper: put the date on the invoices the day that the work began, and not the day that you created the invoice (which for most people is after a two week period or end of the gig). That way if you are waiting and they say 'get off our back, it is coming' you can say 'the date on the invoice is payable in 14 days, I would like it to be honored'.
I have one client that is a perpetual late payer. He is not out to get me, but rather has really bad organizational skills. You should see his desk!
Well, not to tell your boss what to do, but this is what establishing a revolving line of credit with the bank is for, to have operating funds to pay bills when they are due, in anticipation of income. I'm not a great businessman, but even I know about operating capital and lines of credit. Otherwise, a business would have to be like Wimpy from the 'Popeye' cartoons: "I will gladly pay you tuesday, for a hamburger today". I don't know any retail operation that would deal with you on such terms.
Granted, I know of a lot of situations where shooters or editors are made to wait until the whole gig is paid off, before the shooters get paid. I never understood why they would allow that, unless they felt powerless to fight it.
I have tried to never operate like that, because I make it a point on a project to get at least some money up front to pay off rentals and crew, before I take the work on. And I make sure the crew and rentals are paid off even before I myself get paid. That way, even if the project is canceled, nobody is left holding the bag for work completed up to that point.
Reputation is so very important in a close-knit production community, and so hard to win back if you break it. If shooters and suppliers know you always pay up promptly, when the rare time comes that a problem arises and you need to ask for some "flexibility", they are more likely to give you that little bit of slack, than if you always make everybody wait until you're paid. After all, why should they get punished for delivering good work on time?
As far as immediate advice, they have gotten lazy and are assuming a lot about what comes with your salary. The next time they just assume your outside gear is available, you could tell them it's already booked by someone else. If they press, you can say you had to take the other outside client ahead of them because they pay up front, and that if the boss can settle up the back accounts, you could "adjust" the schedule.
Re-establish the boundaries of the relationship, as it were. Ever see the play Lysistrata? ;-)
I'm going to gently disagree with the advice here at least to some extent.
One of the factors that's changed a lot since I started in the video business is the SPEED with which projects go from concept to completion. Nowadays, it's not unusual to be contacted on the first, have a script due on the 7th, shoot on the 9th, do a rough cut by the 15th and deliver the work on the 19th. Sometimes that's an almost RELAXED schedule in these rush rush days.
But as my clients have grown and the projects and invoices have also grown, it's not uncommon in my practice to have to front everything but labor for a five or even occasionally a six figure production budget.
My clients are typically very stable national companies. And I know I'll get paid. But even if I invoice for a third or a half up front, it's not at all unusual for the job to be done and delivered before the deposit invoice is processed. That's not unusual in an environment where the size of an invoice will require two or even three approvals up the corporate line. If one of the folks on that approval ladder is traveling or on vacation, it's not a surprise to find that it takes a full 30 days to process invoices. And let's face facts, sometimes even with honest people of good will, a PDF invoice can get lost in the electronic ether, simply mis-routed or fall victim of a server issue. I won't know that until my A/R system flags the invoice in 30 days. When this happens and I call the client, they put a RUSH on it, but that can take a week or two to cycle into the check cutting routine of a company that might be sending out hundreds or even thousands of A/P payments a week.
I'm not arguing that contract workers should be anyone's bank. Just that there are good reasons that sometimes net 30 or even net 45 circumstances are reasonable.
Back when I was doing a lot of advertising work, a lot of the agency business was built on net-60 being typical since the work that they did in month one was billed at the end of that month, then they had 30 days to collect, then pay.
All my regular vendors know that if they don't see a check at 30 days I'm already on it. And of course, if any of them need the cash, I'll always accommodate them. But in a small business, cash is KING. And regularly paying in front of collections - while noble, nice, and something that your vendors will truly appreciate, might put you in a position where you might hope that you don't get a SECOND big project that requires a lot of up-front capital outlay prior to your collecting on a First one and you have to turn the work down.
Lines of credit are nice and all. But if you're borrowing money - there's ALWAYS a cost. I learned that the hard way over the years, and I'd rather self-finance than partner with my bank and pay them to front me money on every job I do.
I will note that as you get bigger clients, one of the smartest things you can do is arrange with their A/P departments to put you on direct payments into your business account. I haven't seen a paper check in the past few years from my two largest clients, just the email notification that the payment has processed and that it will be in my bank account the next day.
That's the day I call my vendors and ask them if they want to pick up a check or have me mail it.
That system has been working fine for me for a couple of decades.
We've been in business going on 13 years now, and we've found that payment speed runs the gamut, from clients that pay with corporate credit cards and force you to give them a 2 or 3% discount (on top of the fees you have to pay to use the credit), to companies that take 90 days or longer to pay. I agree that taking longer than 30 days isn't a good way to do business. But if you're doing work for a Fortune 500 company and they typically take 90 days to pay, it's virtually impossible to speed that up. There are just too many layers of people and policies to wade through and you're sure to piss somebody off in the process.
When it's a small company, I've seen countless ad agencies in our region do what your company is doing. I don't agree with it, but the "we can't pay you until we get paid" line is a pretty standard one from ad agency folks.
One way to soften this is to require deposits on projects. A third or half up-front gets some cash in your pocket right now and insures a sort of good faith agreement for all parties involved. It's also a very standard practice in this industry.
Bottom line, if that's the way they do business, you have little chance of changing it unless you have some service or product they MUST have to do business. If they can go somewhere else and get your service at similar rates and similar quality, you're going to either have to ask for deposits, or suck it up and just budget for the wait for payment.
Magnetic Image, Inc.
Brother, Can You Spare 60 Days?
Thought some of you would find this article relevant.
[denise quesnel] "You should see his desk!"
Hey! I resemble that remark.
So, tonight I quoted a Rodney Dangerfield line to a clerk in Office Max. It was VERY funny, until the clerk looked at me and said "Who's Rodney Dangerfield?" Damn! Talk about no respect.
It's a dry heat!
Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .