The customer believes that it paid NET 30 ("You received the check within 30 days of us deciding to send you a check. NET 30!") and that I can speak to Legal if I want to press the issue, which (naturally) I don't.
As near as I can tell, this is just priced into everyone's expectations.
It's really sad that it has come to this. I hang out on a forum where the guys are thrilled when they get a Net 30 check within 45 days.
I have a customer (my only semi-regular customer, sadly) that pays like clockwork. Seriously, I've learned that I can go to the mailbox 32 days after I sent an invoice and their check will be there. I hope it lasts!
> For example, a big company happily using the $250 a month plan could, quite possibly, be happy to upgrade to a $5,000 a month contract if you offered them the right incentive. (Twenty times as much, you ask? No, transitioning from "pocket lint" to pennies. Stop thinking like a human. Think like a corporation. Corporations are like humans whose smallest increment of currency is the largest paycheck you've ever received.)
> This is important: Enterprise pricing is discontinuous with normal pricing. If the $250 a month plan entitles you to 500 foozles and an Enterprise needs 5,000 foozles, that costs thousands or tens thousands of dollars per month. If an Enterprise only needs 500 foozles, that costs thousands or tens of thousands of dollars per month. If an Enterprise only needs 50 foozles, that costs thousands or tens of thousands of dollars per month. This is partially justified by the amount of pain you're signing up for by doing an Enterprise sales process, but is mostly just pure, naked price discrimination. Enterprises are not price conscious. Don't attempt to sell them based on your price. ( For prices customarily contemplated by software companies.)
A relative of mine has a business which sells to very large companies. One of them pays so much later than even the normally egregious large companies that they get a "special" price, which takes into account the cost of not getting paid for say 120 days. (This company is large enough that it's one of the 30 companies in the Dow Jones Industrial Average [0]).
Related, how many days you have to wait to get paid after you've spent money supplying the thing is called the cash conversion cycle. For a business selling to enterprises, maybe it's 90 days from doing work or building a widget and shipping it until they get paid. Dell back in the day would charge your credit card as soon as you bought a computer, and then only pay its supplier some time later, so that they had a negative number of days, I think around -5; in effect, their suppliers were loaning them money.
We (enterprise buyers) would never agree to that. In all contracts I work on, there is a lengthy back and forth between lawyers working out the terms. Something like a premium fee if we are late on a net 30 payment would be a deal-killer. We know it takes a long time to process payments. I don't intentionally delay, nor am I encourage to delay - it is just that the wheels of SAP turn really slow.
This is one of the things where mathematics gives way to linguistic manipulations.
If you add a "late fee", it's a no go. But if you get an "early payment credit that will appear on your next invoice", it is ok.
Don't know if this is still the case, but for a long time, merchants couldn't add a "credit card fee" (even though they pay it at 2-3%). However, they could give a "cash discount".
One of my companies sold to hospitals. They are the WORST with payables. Unbelievably bad. It was terrible. We eventually were coached by a very friendly client who had pity on us.
We ended up raising prices something like 30% and offering discount terms like 15 day 30% discount.
They never once paid on time for the discount, although we would sometimes get paid in 30 days at the higher rate. (Typical pay rates at the time were Net-180 to Net-270).
So, price it up, and show it as a discount. A good customer inside an enterprise should be sympathetic; if you're good, you can turn it into you and your customer against the customer's payables department. You can say "tell me the real story on payables", and "I have to get paid faster than that or I need more cash than we talked about" to many of them.
I know in my industry (pharma) we offer "prompt pay" discounts to our customers. 2% 30 net 60 for example (payment due in 60 days, get 2% off is paid in 30).
Of course a huge corporate has a lot more leverage with regards to terms than a small contractor.
You send an invoice at 100% and put at the bottom 'if paid before xx/xx/xxxx, amount is really $x.xx'.
Obviously this depends on local regulations. For example, in Belgium the rule is that the basis for VAT does not include the 'prompt payment discount'. E.g.: invoice is 100, 2% 10 net 30. How much is the VAT @ 21%? It's 0.21 * 98, so your invoice can say 'total payable before xx/xx/xxxx: 98 + 0.21 * 98, after that: 100 + 0.21 * 98.
I had a long, drawn-out argument with a supplier once whose very accounting manager didn't understand this concept. They would have me pay VAT on the 100, because otherwise, according to them, they'd be giving me 'a discount on the VAT' (that sentence doesn't make any sense whatsoever). So I called the tax office, PLUS an accountant, to confirm the right way for them to bill me, and they still didn't believe me (or rather - didn't understand me). So just to shut me up, they said 'we'll give you another 2% discount' facepalm
Tangential to the discussion above, I guess, just venting ;)
Good question! With a lot of our discounts we do a chargeback. That is, they pay 100%, then we send them the 2%. Not sure if the prompt pay discount works that way though.
We've added in a late payment fee that gets added on every month a payment is late. As soon as that first notice goes out saying "You now owe us $X,XXX MORE!" people seem to magically send checks. You have to have that in the MSA/Contract of course.
Given that @patio11 can have "late" checks, I presume there's already such a thing in place. The problem is what you do when they let 30 days fly by. Many of the recourses available to you aren't worth the risk of losing the client by being a hard-ass.
I've found very few Enterprise customers comfortable with NET 30 terms. We're an interactive agency any deal we do is worth a considerable percentage of our annual income so we don't get too hung up on payment terms unless we're in a cash crunch. NET 30 is "nice" but if you can't do a deal because the terms are NET 60 instead of 30 then you need to figure out why cash is so low...
I've had 45/75 and once 90 day terms forced down my throat. That being said a lot of my clients who have really long payment cycles can be very flexible with us on billing milestones (like 50%+ up front - heck we've had 90% "down" in decembers).
These days all my invoices are done electronically and I have to be honest at least for us we don't often get bills more than a day or two late. I have however learned when we were smaller that generally if something was more than 4-5 days late something was off on the invoice being processed. I stopped giving folks leeway more than about 3 days before I started hounding folks. YMMV.
Agreed. Net75 and Net90 usually only happen when there is something else in the deal that's favorable to the supplier (like a down payment, or a consulting engagement, or co-marketing, or similar). They get something, we get something.
He hasn't made an impact in the company for a while. Safra is running things for the most part, with Marky Mark in the passenger seat building a monstrous sales force.
Can you guys partner up with a hotel/motel/apartment company/something? I'm on the east coast and would love to attend on one of the available dates but I have no clue about the sfbay area, apartments, etc other than craigslist of course. And craigslist on the East Coast can get weird lol
