The bigger the client, the slower they pay...

From discussions and conversations I've had, many are of the opinion that the bigger the client is, the slower they pay.

What are your thoughts on this?

Chris

Re : The bigger the client, the slower they pay

Hi Chris

Very lucky here in being able to say that in most coaching businesses people tend to pay at least a sum up front if not the whole fee, therefore this does not really arise.

I can imagine how frustrating it is though, and I believe I have heard that one of the biggest reasons small businesses fail is not so much not getting clients, but not actually being able to manage their money in particular being successful in getting their clients to pay up, does this sound familiar?

Sasha

Re : The bigger the client, the slower they pay

Hi Chris

Interesting theory. Unfortunately I find that virtually all clients are late payers.

It is an exception when someone pays on time, without prompting - and is worth the weight in gold literally, as chasing is expensive in that it takes a lot of time

Tim

Re : The bigger the client, the slower they pay

I tend to agree with Tim, some clients do take a long time to pay, however with something like catering one can always get a very healthy proportion of the total sum paid up front.

Lianne

Re : The bigger the client, the slower they pay

Sadly have to agree - the more the client is worth to you the more they seem to know intuitively that you will give them more slack as you need their business, and the slower they feel they can be paying

Thomas

Re : The bigger the client, the slower they pay

Quite a few of our customers face the same issues, although the Wageroller payroll settlement service cannot help collect monies owed from customers, it can provide vital cashflow when your business needs it most.

Lee Tumbridge
Director - wageroller.com

Re : The bigger the client, the slower they pay

What is the wageroller payroll settlement system?

Re : The bigger the client, the slower they pay

What would happen if you all made a decision to only accept work where you got paid 50% upfront... would it actually lead to less business?

Re : The bigger the client, the slower they pay

One of the dangers of being in business is that you don't get paid on a certain day each month like you would with a normal employer.

All you can do is negotiate terms where you get paid a sufficient percentage up front so at least you get some immediate return, you may find this difficult to do, however it can be the only way to stop your own personal cashflow being ruined.

David
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Re : The bigger the client, the slower they pay

Slower payers are a burden on the small business market
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Re : The bigger the client, the slower they pay

We can't apply this rule to all the clients.

Re : The bigger the client, the slower they pay

What do you mean, loadstones?

Re : The bigger the client, the slower they pay

There are many options available to help counter slow paying clients of which of course our firm can help with.

However the first free piece of advice i can give is this, DON'T give lines of credit to all in sundry, check out your potential client in advance, make sure your payment terms are clearly set out in the outset of the contract and don't be afraid to chase your clients for money - they certainly wouldnt be afraid to chase you!

If you are finding yourself in a cash flow problem, drop us a line and we will see what we can do to help.

Re : The bigger the client, the slower they pay

I agree with Philip don't be shy to contact your clients by whatever means to get them to pay up.
Firstly I would suggest that your payment terms clearly highlighted on the invoice, but Chris you would already know this anyway.
The other thing is offer settlement discount even if it is something small like 2.5% (for payment within 30 days) as this will attract clients to pay on time. However you might get the odd ball who takes the discount but still pays late.
I am sorry to the credit controllers who are on here, for giving away some ideas.
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Dikisa Pamneja, MAAT Affordable Accountant http://www.eliteaccounts.co.uk 0800 822 3166 07930 389 351

Re : The bigger the client, the slower they pay

Settlement discounts are interesting, because many people feel they do a good job and deliver on time so why should they offer a discount for others simply meeting their end of the bargain and paying.

That said if you do it, keep it to a small amount like Dikisa says, no more than 5% ever, and consider actually adding that onto your initial quote so that in reality you don't lose out

Chris

Re : The bigger the client, the slower they pay

As for size... I don't think it is a matter of bigger being slower... simply those that are least organise, both in processing payments and in collecting money themselves for their own cashflow.

I have seen several very well organised large businesses, and although they may not provide a payment service where you call to chase or get paid earlier, they do have regular (monthly usually) payment runs and you can be sure of payment.

The big guys are really no worse, and no better, than the small fellas.

Re : The bigger the client, the slower they pay

I think that corporate business is not only too slow to pay, they are often more concerned with the price whilst being indifferent to the quality or value.

The trouble is that people in large companies are often disengaged from the reality of business and only concerned with what they are measured on e.g. procurement = lowest price.

Jamie

Re : The bigger the client, the slower they pay

I have worked in 'big business' in the past and it never appeared they were even vaguely price sensitive at the time, however now from the outside it seems that they are.

Therefore I have concluded it largely depends on what service you are offering and 'how much of it' - with a big, large project they are not so price sensitive, with something that is small and one off much more so.

As for the quality point, this is very important, and my own feeling is that many of the people who source work from outside the company don't really understand the product and aren't able to discern from quotes received who can do the job well and who can't, therefore they fall back on price. Having someone who really understands what they want and recognising who can deliver it would save companies millions a year on persistently choosing the wrong supplier, just like properly trained interviewers are more likely to get the right employee for the company.

Sarah

Re : The bigger the client, the slower they pay

In my experience really big and professional companies such as Tesco, W. H. Smith and John Lewis are actually very good payers. The payment terms are agreed beforehand, (for non-food consumer goods normally the end of the month following that of delivery) and as long as you don't screw up your end, they stick to this like glue. If you are dealing with relatively large businesses however who are not of the same rank as these, the ones who are doing well should be just as reliable on payment. However a client which has a bad track record has to be watched very carefully, especially if there is a sudden deterioration in their payments performance or if you are pressed for extended payment terms.

In these cases you must forget that they are big buyers and start thinking of them as being potential big losers - of your money. Also if any approach by you to collect overdue amounts is met with any kind of aggressive response, it is probably time to begin to extricate yourself from their business.

Bad payers don't withold settlement from everybody. If you are not seen by them as being on the button when it comes to addressing overdue accounts, the others will be paid but you will not.

Joe
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Re : The bigger the client, the slower they pay

You may get advice to try factoring or invoice discounting to deal with this problem as the factor or invoice discounter will advance you cash against your debts (while a factor should also take over the collection of your debts).

If you are thinking about this you need to be careful in choosing a factor / invoice discounter as their efficency and services (as well as terms and charges)vary enormously.

To help clients make an informed choice we put together a 44 page guide on how these types of finance work and how to select the best deal for you which you can obtain for free from www.creativefactoring.co.uk - look for the link to publications.

Hope this helps

Re : The bigger the client, the slower they pay

Mark - Is invoice discounting and factoring suitable only for large sums of money or am I wrong on thinking that?

Tim

Re : The bigger the client, the slower they pay

As a rule Tim, these are for larger sums of money and helping liquidity and cash flow be fairly smooth.

Re : The bigger the client, the slower they pay

If you're selling equipment, including IT Equipment and Software, or even a service such as websites, by partnering with a finance company, you typically get paid in full within 24 hours, plus you're giving your clients a more flexible, tax efficient, payment option.

Re : The bigger the client, the slower they pay

Tell you what, to solve all late payer problems is simple.

Know exactly everything there is to know about your prospects before agreeing on anyhting.For example.. If you know how long on average your prospects takes to pay his or her bills you can set the invoice accordingly. So if you prospects takes on average 45.5 days to clear an invoice, why set it at 7 days.

Also taking a quick look at how finacially viable they are can help to improve payments.

Its understandable that large corporates take longer to pay, it has to go trough more channels than just one propietor doing all the work.

Hope this helps.
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Kindest Regards Adam Hawas Business Development Executive 01656 679275 Switchboard: 0870 850 8566 | Fax: 0870 850 8599 E-mail: adam.hawas@marketsafeuk.com | Website: www.marketsafe.com 'The essential toolkit for sales and marketing experts'

Re : The bigger the client, the slower they pay

Have clear payment terms in your own terms and conditions and purchase orders, and apply interest and penalties to late payment. We have pay on use prices, credit prices and instalment plans, most clients go for the pay on use price as we make it attractive for them to get the best price by deducting our collection costs.
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John Dalton Http://www.limeone.com T 01244 852550

Re : The bigger the client, the slower they pay

It's true - they always take longer to pay; red tape is the issue and multiple departments.

In addition often they take up more of your time than a smaller client due to 'too many cooks' dealing with the same project making it all much more complex than it needs to be.

To be honest I think smaller clients are much more profitable overall.

Amanda