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What are your terms for payment?
Good day all,
I am a trying to find out what is reasonable terms for payment, net 15? Net 30? Net 45? Net 60?
Most of my smaller clients are better than net 30 with payment, but two of my larger (national/international companies) are net 60 or more? Is there any recourse to have them pay earlier. If I have net 30 on my invoice, what is the validity to that term?
Cheers,
John Grote, Jr.
J. Grote, Jr.
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23 Replies
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We bill net 30.
I know a lot of people here will advocate getting a portion as an advance payment, and then not releasing the production until the balance is paid. And that may indeed may be a good way to work.
However, almost all of our clients are established advertising agencies who have been with us a long long time… so we let them go net 30.
As for what can you do if a client is late? Well, you can impose late fees or “finance charges” or whatever… but only if that is stipulated in advance in their contract. You can try to collect a late fee if it is not stipulated… and you might get lucky and get it. But the client is under no obligation to pay it.
Usually the contract verbage is something like “Overdue invoices are subject to finance charges up to the maximum allowable by state law.” Commonly you’ll see finance charges of 2% a month, since in many states the maximum legal amount is 25% a year.
T2
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Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com
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While traditions like “net 30” are still very prevalent – I think things are getting less clear cut in billing.
You’ll notice that currently American Experess’s OPEN small business service is doing a big ad campaign aimed at small business about how their new billing help program can get someone “paid sooner.”
I think it’s a message ALL of us should embrace. Cash flow for small business, being KING anything one can do to make it easier to accept payment – particularly FAST payment is a good thing.
Personally, I’ve set up not just credit card acceptance, but PayPal billing and any other electronic payment gateway options possible as well. Yes, there are fees associated with some of this stuff. BUT – time IS money.
My invoices have been ROI for decades. Which means the balance is due on RECEIPT of INVOICE. Yes, many of my clients are setup to pay net 30 – and some take longer. But fewer and fewer as I try my best to train all my new accounts to use one of the electronic forms of payment.
The hardest thing to train yourself to do is when anyone ASKS about terms – to find a comfortable way to chuckle and say “NET NOW!. Then go on to offer all the IMMEDIATE pay alternatives, before you drop down to net-30 billing.
This also give you a chance to establish that if they pay NOW, you’ll cut a few percent off the invoice in return.
Then make sure your rates support enough margin to allow the discounted rate to cover your expenses.
FWIW.
FCP since NAB 1999
creator: muti-track movies
http://www.starteditingnow.com -
Not a big fan of net 30, my preference would be:
Know good client, small and medium jobs, net 15, large jobs 1/3rd down, balance net 15, balance on completion even better.Unknown clients, or those with poor payment history. Small jobs, payment due on completion before work is released. Medium and large jobs, 1/3rd down, 1/3rd halfway through at a negotiated milestone, balance on completion before work is released.
Scott Sheriff
Director
SST Digital Media
https://www.sstdigitalmedia.com -
With the very large companies, and large government operations, if you want to play ball, you play by their rules, or you don’t play. That may mean net 90 these days. Even net 120. Sure, it is robbery, but only if you volunteer to be so robbed. Like any other negotiation, you don’t have any power to change the situation if you’re not willing to walk away from a bad deal at any time. I would always personally insist on a third down and the rest due on delivery, myself. I’m not a bank and I can’t afford to be in the loan business, and that’s what you’re doing; loaning money at low or no interest to the clients, when you let them delay payment that long.
This is one reason small operators can’t hang when dealing with big companies. A larger vendor has a cushion of cash reserves or bridging loans from a bank to live off of while they wait the 120 days. And if they are smart, they make that 120 days less painful by raising their rate to cover some of that waiting time and cost of waiting. So big outfits can bill bigger, because they can and must. The little guy can’t afford that kind of game, unless he’s got the resources or enough salesmanship to get them to agree to better terms.
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My terms are net 30, but I do not have one big client (and I mean large company, not good client) that pays in less than 60 days. The big boys take their time – don’t like it – they will find someone else. Small companies with owners that you know pay pretty quickly. Big companies that have accounting departments take their time.
Bob Zelin
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One little gimmick that sometimes helps is to check for a “prompt payment discount clause” in the client’s billing info. For example, when contractors deal with Illinois government, the ones that submit invoices with a discount for early payment by law go to the top of the processing stack.
I have heard tales here in the COW of big-muscle client companies that claim the early pay discount automatically but ignore the actual delvery date anyway. I would assume that’s tortable, but they count on you wanting/needing their business enough to let them get away with it.
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I had a job recently,
half up front, half upon finish.
Done on a handshake.First check was fine,
finished the job,
He cancelled the second check while overseas screening the finished film!! (and my bank charged me for his stopping payment)
Because he wanted to “change” a few things after screening the film.. now, because I mistakenly made the deal on a handshake, I feel I can do nothing but make his changes and hope he gives me the final payment without canceling the check he writes and running.
Im curious how someone else would handle this..
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I’d tell the loser to bring cash. And before I’d edit the thing, I’d get my wife to take the money out of the building and go deposit it.
Oh, and I’d charge him a penalty for being such an idiot.
Some others might disagree.
No way in hell I’d do it for a check or a credit card — which can be canceled in most states for at least 30 days, sometimes more.
Best regards,
Ronald Lindeboom
CEO, Creative COW LLC
Publisher, Creative COW MagazineCreativity is a process wherein the student and the teacher are located in the same individual.
“Incompetence has never prevented me from plunging in with enthusiasm.” – Woody Allen
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I had a job recently,
half up front, half upon finish.
Done on a handshake.First check was fine,
finished the job,
He cancelled the second check while overseas screening the finished film!! (and my bank charged me for his stopping payment)
Because he wanted to “change” a few things after screening the film.. now, because I mistakenly made the deal on a handshake, I feel I can do nothing but make his changes and hope he gives me the final payment without canceling the check he writes and running.
Im curious how someone else would handle this..
I like what Ron said.
Or go watch ‘Get Shorty’ on some proactive client relation tips for deadbeats.Scott Sheriff
Director
SST Digital Media
https://www.sstdigitalmedia.com -
I use 14 days as payment term. I do this on purpose. Remember, YOU are the supplier, so YOU and only you set the payment terms.
If you do groceries, you can’t expect to pay for it after 90 days without a penalty (e.g. paying interest on your credit card), so why should we be any different? Sometimes your clients say that they have to wait for their clients to pay – yeah, like that helps me when I have to pay off my mortgage!
Most of my clients actually pay within 30 days, if only because my online invoicing system starts sending them reminders when they’re running late. For legal purposes it’s always better to have the necessary correspondence if you ever need to get the money by other means (e.g. factoring company or even a lawyer).
Nonetheless, some of my clients state upfront that they can only pay after 60 or even 90 days (“It’s company policy”) and then I’ll explain to them that the invoice will feature an interest charge (1% per month), with a complementary clause that they can deduct a comparable fee if they pay within my terms.
You may loose a client or two due to strict adherence to payment terms, but these are not necessarily the clients you deserve to work for anyway.
We provide services, but we’re not banks!
Richard van den Boogaard
Freelance cameraman • Editor • YouTube specialist
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