A contract is only worth as much as you’re willing to enforce it. If you’re not willing to enforce your contract, the clauses don’t matter.
If you’re stuck in the bureaucracy: escape it. Their rules aren’t serving you so why obey them? Escalate to their legal department, send a certified letter about your impending legal action against them. Enforce your contract.
Indeed. The response to breach of contract has no place in a contract. Breach of contract is explicitly an event outside the bounds of a contract. Defining penalties within the contract attempts to place those events and outcomes within the terms of the contract, and can grant the other party leverage to avoid legal remedies.
However, some terms can help encourage payment on schedule. Early payment discounts encourage inexperienced AP to pay early. Late payment penalties signal highly strategized AP as to when the cost of not paying will intersect with their retained time value of money. If the person paying the bills is directly related to an owner, then despite whatever is in the contract it's usually a matter of figuring out how to help them do their job.
This sounds like a case of AP putting off payment because someone knows about time value of money and doesn't view their relationship with the vendor as having value they can lose. Establish due diligence to collect first, then: A letter written by an attorney to their legal team is cheap and usually an effective nudge. Asking a court to compell payment consumes little time and is not expensive, despite their latency courts are impatient and want you to not burn hundreds of legal hours over this. Selling the invoice to collections is a thing, it's not so large a sum to make that hard. But most of all, hire a competent trained accountant who has zero relationship to anyone with equity, and listen to them.
The project was for a fixed term which has ended. All deliverables are delivered and accepted. "Enforcing the contract" would mean termination, which is meaningless in this context.
In theory we could sue for our money, but the imbalance of power between an enormous multinational company and our small agency makes that utterly nonviable.
Our mistake was made on the front end, when we didn't ensure the contract specified what to do if payment was late. Because of that, we simply have to wait out the bureaucracy.
Enforcing a contract means enforcing the terms, which is… payment. We use contracts because courts can enforce them. You don’t have to hire $1k/hour lawyers and fight a multinational in court. Pay $500 for a lawyer to write a letter containing a copy of the contract and a demand for payment. That’s it. They’ll pay up within a week.
The fact that your contract doesn’t contain anything about late payment is immaterial.
I think this makes assumptions about the speed at which things are currently moving.
If you had reason to believe that the client was really, truly, about to pay you, then you wouldn't have written the blog post.
If you get legal involved, the speed at which you move towards getting paid may change to become nonzero. At some point the speed of the client's legal team is irrelevant, because a sufficiently slow legal response by the client translates to a court judgement against them.
It is impossible for things to get slower than nothing happening. There’s a very good chance that they’ve decided to just not pay you until you show you’re willing to get lawyers involved. That is a fairly routine thing that large companies do with smaller suppliers.
Your problem is that nobody cares enough to deal with paying you because maybe someone forgot a purchase order or something. Your solution is to make someone care. Sending a letter to their legal team will make someone care (and they will in turn kick the accounts payable team into action). They will receive letters like this constantly. Your situation is not unique, except for the fact that you’re not taking action.
> In theory we could sue for our money, but the imbalance of power between an enormous multinational company and our small agency makes that utterly nonviable.
Have you even talked to a lawyer? You had clear contract terms, you delivered, they are in breach. That's the easiest case a lawyer has ever seen.
The real question is if it's worth suing, giving the lawyers a cut and pissing off the client, vs hoping they pay eventually.
There are statutes of limitations though, check those out. If you wait too long you might be totally out of luck.
The escalation (eventually) is to have a lawyer send a "FU, pay me" letter.
edit: as you've said elsewhere - the goal of this isn't to take them to court, it's so whoever is waiting for whatever to cut the check can go to their boss and say "look, we really need to pay this now".
Back when I was consulting, I always made sure to stay in touch separately with three people:
a) The internal project owner. Usually a VP or Director.
b) The owner's assistant/gatekeeper, who made sure they saw and signed documents.
c) The accounts payable person who actually pushed the button that cut the checks <- The most important one if you want to get paid on time.
I also never did more than Net-30 (and often Net-7). Things went smoothly with the larger companies (once everything was signed). Startups and medium-size ones, though, had no problem stiffing you on a bill if their funding was wobbly. Those were often payable on invoice, or upfront retainer.
Still got screwed multiple times. My own damn fault for taking on projects just because they sounded cool.
Find the manager or replacement manager who bought it, who owns it inside the corp. If the internal cost owner left the company, the PO department might be emailing them for confirmation with no replies.
Send an email/letter to their legal department asking for help to resolve the matter, if they can call the PO department and resolve it, and say its been 6 months and they are in breach of contract. Be nice.
1. Go to LinkedIn. Find a mid to high level finance executive at the firm. Add. Explain. They know some of their processes are somewhat shitty and might have the grace to pull some strings / sent some internal cold mails (in ultra large firms, mailing far outside your sphere feels like cold sales) to get things resolved.
2. Sent a snail letter to the CEO. The CEO gets little post that isn’t outright spam. This gets read by an assistant and passed down the chain. Down the chain gives very large urgency. The assistant to the CEO doesn’t know anyone five steps down. So you are coming in like a champ.
Both tips would work in my firm. It’s what I’ve use once or twice to get proper service without lawyering up. The best response was when the premier customer oriented person (director of operations) of a very large firm called me to pretty much complain that the CEO tasked her with resolving my issue. I had to refrain from laughing. (It was a big problem for me but quite a delicate matter for them I explained in kind writing.) She was telling me how happy I should be that she called me. I told here thanks for calling but you should be happy this isn’t in the papers. End of kind call, start of solution.
Contract is one month of monthly savings made in AWS bill.
They have not paid, and in fact terminated the contract early to avoid payment - "the savings do not occur until AWS reservations end, contract has been ended now, so savings have not occurred". The savings are going to occur, and then the client will keep those savings.
Turns out the contract also contains what looks like a poison pill, to prevent the counter-party (me) having recourse to court at all, no matter what the client does.
Also the entire contract is confidential, so I in theory can't say a word about any of it.
Maybe you already considered this, but contracts are full of unenforceable and illegal clauses. At the end of the day you did work for them that they agreed to and then they stiffed you on it in a very visible way. Generally, if the work is already done, they are liable for the entire amount.
I would be talking to a lawyer. You might even consider it part of your job to have a working relationship with a lawyer.
- $130k is a large amount, why would your contracts save such a huge payment until the end instead of spreading it out over the six months of the engagement?
- Is apsis really just doing nothing and waiting? I get the contract might not have a clause on late fees or whatever, but that doesn't stop them from paying a lawyer ~$200 to send a letter demanding payment. That should get any large company moving.
- How many contracts has apsis closed because this is a somewhat standard practice at large companies in the sense that they will take any float time they can get. I remember one company my dad worked with in construction would mail checks the slowest way possible just to get a week of float!
* Invoices were delivered semi-monthly on NET60 terms. The unpaid invoices (many of our invoices prior to these were paid) run from March to June. The first invoices lapsed into unpaid status in May, when we first raised the issue. Because we had prior paid invoices, we expected this to be a brief hiccup.
* The 6 months is how long its been since our final invoice and the end of the project --- not the term of the engagement.
* We have attempted plenty, and we continue to talk to their accounts payable team. In our estimation, involving legal professionals at this point would only exacerbate the problem, as it would rope in their legal department. For now, we consider waiting and being annoying to be our best option.
* Our standard MSA has a 2% penalty for every week past due. We rarely enforce this clause, as we tend to work with clients on long timelines. Establishing good rapport and trust with a client that we won't bring the hammer on a payment that is just a few days late helps us not only keep our current clients, but makes future referrals more likely.
> It’s a company you’ve heard of. Multinational. Publicly traded. Hundreds of billions of dollars in market cap.
Wonder if legal action would get them to pay up faster. Contract is breached. Once legal gets the letter, then it gets escalated internally.
Companies like this tend to just pay up (especially when wrong) rather than spend 10X in lawyer billables fighting/arguing it in court and getting their reputation dragged through the mud (bad optics such as “multibillion dollar company is stiffing vendors, who’s next? Possible bad quarter?” Then automated traders recognize SELL signal and company stonk drops)
The power imbalance between us — a 7-person agency — and them — a multinational publicly traded company — is immense. The dollar amount in question is outside the realm of small claims court, which means that we'd end up in actual court, where we'd lose: not necessarily on the merits, but because of the costs of attempting to litigate against a giant.
It's the implication. The letter is a threat that you take them to court, which will cost them at least five figures, and will tie their attorneys with the case. They don't know how much fighting power you got, just make them believe you're willing. No one wants that fight, even multinational corporations.
"Contractually they’re in breach. But it doesn’t matter."
It does matter. The payment is net-60 and it's been net-180. This goes well beyond reasonable error/omission into overt negligence.
If your client can't figure out how to do a wire transfer that's on them. It doesn't matter how big/small they are, if they're that incompetent, you're likely not the only vendor in this situation and they know it.
1) You've been in long-term structural breach on an objective brass-tacks issue. Immediately completely "out-source" this former client-vendor relationship to a 3rd party--likely a law firm.
2) Write off this engagement and those funds. Even if you win judgment, you'll still have to collect on it and the collection costs themselves can be exorbitant and years-long time-consuming.
3) If/When you file suit (but not before hand), publicly "out" this company in a single post linking the publicly available information about the lawsuit then shut-up about the entire affair until the jurisprudence has completed--likely over a year.
Every so often a politician comes up with some idea of special legislation to force large companies to pay invoices within X days or gather 2x base rate interest on the bill
These always fail. Mostly because it’s pretty much impossible to define the various parameters but really because … if we want to get paid by a company larger than us we take the chance it will all work out … and gift people free credit for months
my longest time to collect on invoice was 9 months and it took me two years to recover from the debt tailspin that went into (if I ever did)
Good luck getting it to work out.
One day there will be the legal backup. It might make it socially unacceptable
This is exactly the right question. I see five entries. It doesn't make sense to keep working with more than one unpaid entry plus thirty days. Good solutions are those that prevent problems.
This is a standard playbook at large organizations with finance departments. CFO 2 companies ago used to literally coach people on extending payments and delaying. Best case scenario for them, you never get aggressive enough to actually collect. Repeat that at scale across many vendors and suddenly their entire P&L looks substantially better.
At a certain point the answer is just lawyers or at least the threat thereof to kick this into an actual problem for the client rather than a passive issue. Hard to say if it's worth it without knowing what other steps have been taken or how critical this client is to the business but if it's becoming a financial risk it's probably about time to escalate this to a level beyond a passive aggressive blog post.
Even without specific clauses there are legal remedies for breach of contract you just have to be willing/able to use them.
I actually really appreciate this comment; our mistake, even after 10 years in business, was to assume "it'll be ok" instead of doing real, proper due diligence on client-provided terms. An easy mistake for small agencies when trying to land a big account!
If you’re stuck in the bureaucracy: escape it. Their rules aren’t serving you so why obey them? Escalate to their legal department, send a certified letter about your impending legal action against them. Enforce your contract.