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slow pay report

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Bob Cole
slow pay report
on May 28, 2009 at 11:02:48 pm

My local colleagues are reporting a distinct slowdown in payment by clients. I'm seeing the same thing. Your experiences?

Bob C


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Pat Ford
Re: slow pay report
on May 28, 2009 at 11:06:11 pm

two months and counting for me.



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Todd Terry
Re: slow pay report
on May 29, 2009 at 3:44:52 am

We have not really noticed a slowdown in clients paying. We have always had clients that paid quickly, and a couple that paid painfully slow, and that's still pretty much the case.

I will say though that we have gotten more vigilant about keeping after the slow-payers, whereas we used to let it slide a bit, and we're also asking for bigger/prompter deposits when jobs are booked, as opposed to the pretty much everything net/30 that we used to do.

Just last week when a client called to order some dubs of a television commercial we had produced, I did think to check and sure 'nuf they had not paid for the actual production, which was quite overdue. I'm usually very lenient with them but this time I instructed our GM to play hardball... we gave them the "What would be a convenient time today for us to come pick up a check?" call. Their office person countered with the expected "Oh we mailed that a couple of days ago, you should be getting it any day now." To which we explained, "Great, we'll release the dubs when that arrives," and held the tapes "hostage" until the check did arrive. Which actually was the next day, so I guess in that instance they were telling the truth. Go figure.


T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com






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Nick Griffin
Re: slow pay report
on May 29, 2009 at 12:04:32 pm

Sadly, ditto for some of our clients. One biggie in particular, who always paid net 15, in January informed us that going forward they would be net 45. They held to that for a few months and lately 45 has slipped to 60.

We have a clause in our agreements stating that we can charge 1.5% a month interest on outstanding balances, but in the current environment I'm reluctant to use it.

Although slower pay is an issue, the far bigger problem these days is the delay mentality. "Oh, yea, we still want you to estimate the job and do the prep work," says the client, "We're just not going to get this approved right away." If August and September turn out to be half as busy as we were told they would be in February, March and April I'll be happy. (And surprised.)


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Todd Terry
Re: slow pay report
on May 29, 2009 at 2:10:30 pm

[Nick Griffin] "We have a clause in our agreements stating that we can charge 1.5% a month interest"

We've considered doing that too, Nick, especially with one of our clients who, other than being veeeerrrry slow to pay, is a great client. With them, it's not a sign of the economy... even though they are a quite large and very successful ad agency they've operated that way for the 10 years we've been dealing with them (and some vendors in town, such as the local Mac store, won't even work with them at all any more). Some people just think it's ok to do business that way... sadly.

It's important to remember though that IF one wants to consider imposing "finance charges" or whatever you want to call it for late payers, it MUST be stipulated upfront with the appropriate lingo ("Overdue invoices are subject to late fees up to the maximum allowed by law"... or whatever). One can't decide retroactively to start charging late fees and then spring them on a client after the fact.

Maybe we should start...


T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com






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Bob Bonniol
Re: slow pay report
on May 29, 2009 at 3:44:08 pm

We actually have successfully used the opposite direction with some of our slow pays... Rather than framing it in a penalty semantic, we offer them a 2% discount on services for payment within net 30. If they pay up front we increase the discount to 8%... It's really motivated some of our feet draggers...

Bob Bonniol


MODE Studios
http://www.modestudios.com
Contributing Editor, Live Design Magazine
Art of the Edit Forum Leader
Live & Stage Event Forum Leader
HD Forum Leader


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Bob Cole
Re: slow pay report
on May 29, 2009 at 4:46:55 pm

My first introduction to this was Kodak's purchase discount for raw stock. I think it was 5% and it was like "found money."

I've never offered it, though. Can't articulate why, but it hasn't seemed appropriate, somehow, for my clients and business. But now that we're in the "longest recession since the Depression,"
all bets are now off. I may start to offer it.

I'm just glad it isn't only me and my immediate local circle of friends who are experiencing this problem.


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Chris Blair
Re: slow pay report
on May 30, 2009 at 12:56:11 am

I've never believed offering the "if you pay early or on-time, you get a discount" does anyone much good. We've been in business for 13 years and in our best years our bottom line net profit has been 8-10% of gross revenues, some years less, and a couple years we lost money. So if we offerred an 8% discount as incentive for people to pay on-time, and they all took advantage of it...we might get paid quicker but we wouldn't make squat!

Our accountant has told us that as a service business we should be generating 12-15% bottom line net-profit, but it seems no matter how diligent we are about expenses or how agressive we are with marketing, we've never come close to that figure....and we do a decent amount of revenue and have for a decade.

A strategy we've used in landing some larger clients is to offer them a discount based on the amount of work they do each month. We have one large car dealer that gets a 5% discount if they spend over $10,000/month, 10% if they spend $15,000. So it actually spurs them to do more production. For instance, in a month when they're close to the $10,000 or $15,000 figure, they'll usually do a couple extra shoots and versions of spots to help them get to the magic discount amount. Without this discount, we would've never landed this client, who owns 7 car dealerships and spends well over $150,000/year on production for them. They probably get the discount about 6 months out of 12 during the year.

The upside to that arrangement is that we ALWAYS charge them full-rate for everything we do, and they get charged for every hour of work done. Whereas on a lot of longer-form and corporate work bid on a project basis, we often end up doing more work than we've budgeted for, so the projects are often inadvertantly underbid. Which is pretty much the same thing as giving a discount I suppose.

All I know is it's tough to make the kind of profits that everyone says we should be making, and it's been that way since 1996. And yes...clients are getting slower and slower to pay, with one large corporate client sending a formal letter stating their pay policy has changed from 30 days to minimum 60 and payments can't be considered late until 90 days. Not much you can say to an $8 billion company when they send you a letter like that.

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com


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Bob Cole
Re: slow pay report
on May 30, 2009 at 1:41:12 am

[Chris Blair] " Not much you can say to an $8 billion company when they send you a letter like that. "

Especially when it's signed, "Heywood U. Buzzoff"


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Tim Kolb
Re: slow pay report
on May 30, 2009 at 1:04:22 pm

In some cases, you may have a situation where your client needs to get apid in order for you to get paid...in the case of an ad agency for instance. We recently had an ad agency client who ended up taking 4 months to get us paid, but all their clients are slowing payments too.

By not being a hardcase, but following up persistently, I was at least able to get a partial payment at a point before they got paid.

I do think it's important that we all realize that the economy is stressing all businesses and keeping clients may be dependent on us being able to show some empathy and flexibility...



TimK,
Director, Consultant
Kolb Productions,


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Bob Cole
Re: slow pay report
on May 30, 2009 at 2:11:48 pm

[Chris Blair] "Our accountant has told us that as a service business we should be generating 12-15% bottom line net-profit, but it seems no matter how diligent we are about expenses or how agressive we are with marketing, we've never come close to that figure"

I don't understand the accountant's concern, especially with corporate taxes (if you're in the U.S.). If you're paying your expenses, including capital items and salaries, you're fine. If you want to increase your net profit just cut back your salary. But why would you want to do that?


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Bob Bonniol
Re: slow pay report
on Jun 1, 2009 at 11:03:17 pm

With those margins I understand... My business operates fairly differently, in that we are creating content, but also providing ubiquitously talented individuals who know how to put giant stadium shows together; and then sometimes do big multi cam shoots of the same after we put them up. We operate on margins closer to 35%. So giving 8% back on the content line doesn't really gut that at all. We don't give it to everybody either. Most of our feet draggers are actually our largest institutional clients, where projects are pretty large, and we are able to stay on margin. Having that money totally up front, sans 8%, has worked well. The 3% to 5% for Net 30 on smaller stuff has also not affected our margins that significantly.

I can definitely understand how tightly produced project flow wouldn't really work with this idea. Conversely, when you are sitting around at 90 days out, wondering if GIANT Client will ever pay, that upfront begins to look like it would have been pretty sweet...

Different strokes for different...uh... Margins...

Best,
Bob Bonniol


MODE Studios
http://www.modestudios.com
Contributing Editor, Live Design Magazine
Art of the Edit Forum Leader
Live & Stage Event Forum Leader
HD Forum Leader


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Marc Villarin
Re: slow pay report
on May 30, 2009 at 1:59:39 pm

My Fastest, 2 Weeks. The slowest 6 months. And those six months not one cent I seen from my commision. only after 3 months of the actual date of dub release I got the payment in full. There is one I never got to see my payment because my client filed for bankrupt.

There client who are fast there are some who are slow as a turtle. I guess additional trait for us in the industry, is having the patience of a saint.

http://www.youtube.com/user/marcdanielvillarin

Look on the Bright Side...


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