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Invoice Issue (did I overstep?)

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Aaron Cadieux
Invoice Issue (did I overstep?)
on Jul 13, 2011 at 3:39:36 pm

Hello,

I have been having problems collecting money from clients. It has gotten so bad that I have instituded a new policy. Before turning over finished work, I now require my clients to either pay on-the-spot of delivery, or sign a contract. The contract requires payment within two weeks of the delivery date. Failure to pay within the two weeks results in late fees. I have some clients that have traditionally paid quickly, so for those long-term relationships, I don't require them to fill out the contract. Any new clients, or troublesome clients must pay immediately, or fill out the contract.

I have a new client who is balking at the contract. He sees it as a personal attack and sign of mistrust. I told him that it's nothing personal against him or his company, and that it's simply my policy. He then lectured me about "how the business works" and what the usual wait-time is for vendor payments. I asked him if he gets upset when a rental car company requires him to sign a contract before taking the rental car out on the road.

Is my new policy unfair? Is it insulting? Is this unorthodox? Thanks in advance for your respones.

Best,

Aaron



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Aaron Cadieux
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 3:42:27 pm

Before I get jumped on for a spelling error, I know it's "instituted", not "instituded". I was typing in a rush.



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Scott Carnegie
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 3:51:47 pm

Every project you do should have a contract or some type of payment schedule in writing. At minimum I will provide a quote/proposal for people with delverables and payment schedules that they will agree to via e-mail, some clients want a more formal contract. Have something.

http://www.MediaCircus.TV
Media Production Services
Winnipeg, Manitoba, Canada


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Andrew Rendell
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 4:08:04 pm

I have a template that I use as a confirmation document which has such things as client contact, working address, invoicing address, and so on (basically so that I don't forget to get all the information that I need) and on the bottom I have a bunch of T&Cs - minimum call time, cancellation fees and so on. That way no one can claim that I sprung something on them that they hadn't been informed of at the start.


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Michael Hancock
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 4:38:16 pm

Aaron -

If he doesn't sign the contract he pays on delivery. It's not a matter of trust, it's a matter of business.

Watch this (WARNING: Language may be offensive to some - proceed with caution):



----------------
Michael Hancock
Editor


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Aaron Cadieux
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 4:40:31 pm

Michael,

I didn't think I was being unreasonable. I was just making sure that this wasn't an unheard of practice. Thanks for your response.

-Aaron



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Mike Smith
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 5:52:29 pm

Your approach sounds fine. I'm sure you present it with charm, not sullenness or aggression. That client response feels like a warning flag.


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Aaron Cadieux
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 5:57:06 pm

Mike,

I simply said "attached you will find blah blah blah . . . Please fill it out, scan and re-attach". It was very professional, polite and matter-of-fact.

It makes me nervous that they are so opposed to the contract. To me, that's basically their way of saying "yeah, we'll never be able to pay you in the time you require".

Thanks,

Aaron



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Gary Hazen
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 8:54:37 pm

From my experience, net 30 is standard practice in the industry.
That's not to say you can't do whatever you want to do, it's your business.


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Mick Haensler
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 9:46:43 pm

[Gary Hazen] "From my experience, net 30 is standard practice in the industry"

It was until a lot and I mean a lot of people started getting screwed. I just instituted this same policy for new clients only and haven't had a problem. As a matter of fact, two of my new clients paid me in full right after the initial shoot.

For my steady on time paying clients, it's business as usual, net 15 or net 30 depending on our agreement.

Mick Haensler
Higher Ground Media


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Walter Soyka
Re: Invoice Issue (did I overstep?)
on Jul 13, 2011 at 9:41:17 pm

Is the problem the contract itself, or the terms?


[Aaron Cadieux] "He then lectured me about "how the business works" and what the usual wait-time is for vendor payments."

Everyone tries to bend to cash flow to their advantage. You're asking for net 14, but I have only one client who regularly pays this fast. I generally specify net 30, but some clients only pay net 45 or even net 60. Most of my clients are agencies or institutions with vendor management policies, and it's far, far easier to work within their requirements than it is to try to get them to meet mine.

Walter Soyka
Principal & Designer at Keen Live
Motion Graphics, Widescreen Events, Presentation Design, and Consulting
RenderBreak Blog - What I'm thinking when my workstation's thinking
Creative Cow Forum Host: Live & Stage Events


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Steve Martin
Re: Invoice Issue (did I overstep?)
on Jul 14, 2011 at 12:22:31 am

Aaron,

Your policy is not unreasonable. Yes, many corporate clients do want net 30 or net 45 days - especially larger companies. I believe that they've made the calculation of using their A/R as a source of revenue.

If you trust them to pay the bill, it's no big deal and you build in the cost of cash flow (either through your own cash reserves or a line of credit) and build the cost (time value of $) into the project cost like you would everything else.

If you can't (or just don't want to do that) another reasonable alternative is to request a credit card that you and have them sign an authorization document giving you the right to bill against it as the project progresses with the final charge hitting at the master hand off. You'll have 1-2% discount fees but you can build/bury that into your fees.

Any reasonable client would understand your need as a small business to get paid in a timely manner. Sometimes a friendly discussion can persuade them see that it's not a matter of trust as much as it is that you simply can't afford to be their bank.

Of course if they are the unreasonable type, you should listen to your gut that you might be dealing with a grinder and let him find another producer. In my experience, when they are difficult BEFORE they hire you, they're MISERABLE once you start the project and ABSOLUTELY UNBEARABLE as you approach the end. You know the type, endless revisions, etc...

Good luck!

Production is fun - but lets not forget: Nobody ever died on the video table!


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David Johnson
Re: Invoice Issue (did I overstep?)
on Jul 14, 2011 at 12:54:42 am

Maybe it's just me, but I have to ask - why would anyone deliver a final master that's ready for distribution (or anything other than a watermarked review/approval copy) without payment in full? Indeed, large/reputable companies with AR departments typically require net-30 terms, but they also have to provide credit applications and/or per-projects contracts to vendors in order to establish those terms ... it doesn't sound like this is that kind of client or situation.


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Daniel Wilson
Re: Invoice Issue (did I overstep?)
on Jul 14, 2011 at 11:22:55 am

Hi Aaron,

Your question reminded me of an article in the December 2010 (5th Anniversary) Cow magazine. It doesn't answer your question, but it has a few points which touch upon similar issues. Its an article by Nick Griffin called '12 things I know about business at 55, That I Wish I’d Known at 25'.

http://magazine.creativecow.net/pdf_download/23/unzipped.pdf

From section 3: "...if the chemistry doesn’t feel right, and you can afford to, walk away before too much unproductive time is wasted".

Sections 10 and 12 might be relevant too, but the whole article is pretty good.

Regardless of whether or not your terms are reasonable, this part would worry me: "He sees it as a personal attack and sign of mistrust". There's something weird and unstable about that attitude. I can understand being skeptical of a contract, but taking it as a personal attack? My instinct would be to assume that this person simply does not want to be obliged to pay on time. As Walter mentioned, maybe he just likes to push his cash flow toward his advantage (which in my opinion is still a dodgy way to do business if it's designed to breach the contractor's terms), but maybe he's simply not liquid enough to be able to honour the contract that quickly. As Mike said, 'warning flag'.

Cheers,
Dan


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Todd Terry
Re: Invoice Issue (did I overstep?)
on Jul 14, 2011 at 2:53:44 pm

I have no issues at all with your contract or terms... if you work, you deserve to be paid.

However, I found you saying "Before turning over finished work, I now require my clients to either pay on-the-spot of delivery, or sign a contract" just a little confusing.

Does that mean you do work for a client, show the the results, get approvals or changes and all that, and THEN spring this contract on them without ever having mentioned it before? If so, that's probably what's ruffling feathers. They may have gone in expecting net 30 terms or whatever because that's the billing reputation you have, or the deal a colleague got, or whatever. Then suddenly after the work was done they were faced with a payment demand they weren't expecting for several more days. They probably feel the work is being "held hostage." I don't think they are right, but I do see how that could upset some clients.

You definitely need to hash out all those details with a client (or a potential client) before even one bit of work is done. Contracts are signed before a job, not after.

T2

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



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grinner hester
Re: Invoice Issue (did I overstep?)
on Jul 15, 2011 at 12:04:23 am

just get half down and half upon delivery when dealing folks you don't trust.



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