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Late, Slow Pay Clients
We have a client we’ve done a lot of work for. They’re VERY demanding, and often not much fun to work for. Lately…they’ve also NOT been very keen on paying their bills.
We started doing work for them last October, and they paid on-time for the first 4-5 months we did work for them.
But now they’ve over gone to 150 days on some invoices, and upwards of 120 days on a whole host of others. We’re FTPing dozens of spots for regional air for this client weekly, and the only leverage we have is we’ve shot hundreds of hours of raw footage (and we have the tapes), and more importantly, we have the power to NOT output and upload their spots for air.
We feel our only option here is to tell them they have to pay a certain percentage (at least 30%) of outstanding bills within 10 days, or we’ll stop uploading their spots for air, and stop all current production on projects (there are scores of them in progress).
My question is: has anyone else faced this problem? Rumors are rampant that the company is in financial trouble (yes they’re well-known), and they’ve closed an estimated 250 of their 450 stores in the last 6 months. The closing numbers could actually be higher as no-one really knows. Worse still, last week we fed-ex’d some DVD’s and low and behold, Fed-Ex won’t accept their billing number. They wouldn’t tell us why but the girl on the phone said “you can probably guess.” Then…this week we get a bill from Fed-ex and about 25 shipments from the last few weeks sent to this client were
reverse billed to OUR Fed-ex account number without our knowledge. (To the tune of over $700 with a $10 “re-billing” fee for each one switched). We have no idea who authorized this or whether this was an automatic Fed-Ex action when they weren’t getting paid…or whether our client initiated it…and we cannot get answers from either.So the bottom line is…we could live without getting paid for work done, but we DO NOT want to get stuck for the nearly $65,000 in expenses that’s included in what they owe us, including hotels, travel, air fare, meals, fees for freelancers, grip trucks …well you get the picture.
So…since there are so many sharp business people on this list…I thought I’d ask opinions. I’m not really concerned about pissing these folks off…as it’s not much fun to work your ass off trying to help them with their marketing…when they seem to not care about paying for it. But we want to approach this in a way that will insure we get paid the maximum owed (preferably all of it), which probably means “we shouldn’t piss them off!”
Lastly…they have paid us something each month…but beginning in about May, the payments have gotten more infrequent, and get smaller and smaller (very small in fact) with each payment. But it’s no where near enough to even begin to get them caught up. We have made them pay deposits on some large projects, but most of the projects we do are TV spots, and most have budgets in the $3-5000 range for post, so it’s hard to ask for a deposit on those.
We plan to take some action on Monday or Tuesday…so eagerly awaiting feedback on this
So fire away folks.
Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com -
15 Replies
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What does your contract state? Most contracts for production work entail a net 30 or 50-50 payment schedule. A more detailed contract includes stipulations for the issues you are experiencing.
Certainly stop doing more work, and consult your attorney for your next move.Mike
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[Chris Blair] “and the only leverage we have is we’ve shot hundreds of hours of raw footage (and we have the tapes), and more importantly, we have the power to NOT output and upload their spots for air.”
That’s actually a lot of leverage, if these projects are important to them.
You’ve got to hold their feet to the fire. I don’t know what your terms are (let’s say, net 30). In that case, the very next time they call you for anything, and I do mean anything, whether it’s to shoot something, edit something, or even just look up a slate number… I’d inform them (politely) that you simply can’t do any more work for them until any and all invoices that are past due (more than 30) are paid in full. Period.
It might seem that it is better to get a little of their money at a time if possible… but it sounds like you have a lot personally invested in their projects. Look at it this way, if they are in financial trouble, you’re probably not going to get paid anyway. If they are able to pay, they are obviously one of those clients that will do so only when forced. You can’t be the weak link, you have to be the squeaky wheel. I guarantee you that they are not 150 days late on their rent, phone, internet service, payroll, insurance, and all that jazz. If they were, they’d be out of buisness… because none of those other vendors would stand for it. Why should you? You’re their production company, you are not their bank. Why should they treat you as such? More importantly, why should YOU let them treat you as such?
[Chris Blair] “My question is: has anyone else faced this problem?”
Yep. We do business primarily with advertising agencies. One of them in particular we really like because they are very talented folks and bring us very good and interesting work. But they are VERY slow to pay. Once they ordered some new dubs of a television commercial that we produced for them more than a year earlier, despite fact that they had very large outstanding and waaaaay overdue bills for several other projects. We made the dubs, called them and told them they were ready for pickup, and asked that they please bring a check to cover ALL of their overdue invoices before we released the dubs to them. Well, the lady that runs their office was livid. She came down to the office, didn’t quite make a scene in the lobby but did read our general manager the riot act. She claimed that we were “holding her dubs hostage” and that she didn’t do business that way. She wrote the check, got the dubs… but then demanded all of their archival material and left in a huff saying they would “never be back.”
The next month they were back, and have been back ever since (and are paying faster).
The simple fact that this client reverse-billed substantial FedEx charges to you without your permission is completely unethical and should give you a good clue as to how they operate. I guarantee you they wouldn’t give you the kind of break that you are giving them.
Time to “man up” and get your money. With your attorney, if need be.
T2
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Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com
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At this point, they know they got ya. If they dump you tomorrow, so what. They”ll just get the next company to jump in and repeat what you’ve already done.
So, let’s see, can they duplicate the footage you shot for, say, $25k?
What reason do they have to pay you $65k?
I had a client do this to me two years ago. He sweet talked my wife into waiting till the job was done so he could write one check. Then, he told her that the money was in Canada and it would take two weeks to make it into our bank but he needed his infomercial to air so the money could start rolling in. We sued him in June and won a $20k judgement. Guess what, the money is still in Canada and it will always be in Canada. Want to see the footage that he didn’t pay for and we can’t get pulled from the web? http://www.swingjacket.com.
This was only $20k. And, I have all of the original HDCAM tapes.
Note: If I had a written contract, I could have also sued for attorney fees but because we did it on a verbal deal, no such luck. Verbal contracts are legal and binding but they are weak.
Good luck. I say do a drive-by.
Steve Wargo
Tempe, Arizona
It’s a dry heat!Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD . -
Go get your money.
and don’t do anymore work for grinders. It aint that life is too short for this stuff… man, life is too damn loong for this stuff.
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Thats why I have a strict policy of NO delivery of finished product with out FULL payment.
There are no “technical solutions” to your “artistic problems”.
Don’t let technology get in the way of your creativity! -
Thanks guys. All the posts mirror what we’ve discussed internally. We just wanted to get some other perspectives. And this isn’t the type of client that brings you a project where you can do estimates and contracts. We have probably a 20 projects going with them all the time, and each one goes through about a dozen revisions (almost all ridiculous in nature). They’re totally schizophrenic in how they approach TV ads and other video projects, so it’s REALLY difficult to track each one.
They never ask for estimates or provide us with budgets…so there are no contracts for most projects. The only thing we get contracts for is large shoots where we incur a lot of expenses. Our invoices are net 30 days so they’re way past due on a large amount of receivables.
Thanks again for the help and suggestions.
Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com -
Hi Chris,
Good luck. It would be nice to know what you did and how it all turned out.
Bruce
Bruce Bennett
Bennett Marketing & Media Production, LLC -
Bruce,
I’ll update as we move through the process.
Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com -
[Chris Blair] “They never ask for estimates or provide us with budgets…so there are no contracts for most projects. The only thing we get contracts for is large shoots where we incur a lot of expenses.”
…and shockingly they’re in financial trouble.
I’d say simply implement a moratorium on everything until they bring the accounts up to within 30 days…that is your only leverage. Yes, they will likely go somewhere else, but you’d at least recover something.
The main issue is that it was let slip this far. Enforcing it on a smaller, less overdue basis is always easier. Demanding clients are a reality these days, but i don’t think it’s unfair then to demand invoice settlement as aggressively as they demand everything else.
I would also investigate what the post-able loss is that you could likely incur this year. You will probably have to write off whatever you don’t recover as bad debt. If your company structure and accounting regs dictate that you have to write off losses in one year, you’ll want to try and contain the loss to not exceed your net profit for the year. If you can take it over a series of years, at least you’ll be able to write it off completely.
All this would be good to know when you approach them to attempt to settle up as their first offer (and likely their final offer as well) won’t be for the total amount and knowing what you need to recover as a bottom line will make the negotiation a bit less open-ended for you. rest assured, if it comes down to attorneys, you will simply incur more costs and just be at the end of a long line of creditors when they file for protection…and they know this as well.
TimK,
Director, Consultant
Kolb Productions,CPO, Digieffects
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Tim,
We’ve been on them since May to bring accounts up to date so this isn’t the first we’ve discussed this, either internally or with them.
Also..I should point out that up until about Feb. or March they paid on-time. So when bills starting getting to 60 days, (which started in April or early May), we began sending out notices and discussing it with their Dir. of Advertising and their production coordinator, who takes care of getting our bills to accounting.
Additionally, they’ve paid us approximately $400,000 for services since about Sept. last year, so this isn’t a case of a client that had us do a project and then stiffed us on it.
That said…I agree with you as well as everyone else. The “Fed-Ex” thing really made us realize we have to take immediate action. And we already have our accountant looking at various scenarios concerning write-offs. As for our attorney, we avoid getting them involved in things until it’s absolutely necessary. Heck, they charge us a 1/4 hour of billing if we call and say “hi” to them.
I just wanted to make sure what we were planning was appropriate, as well as get some ideas from others who have experienced this.
Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com
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