<HTML> <HEAD> <TITLE>Re: Slow Paying Customer Policy</TITLE> </HEAD> <BODY> Terry, It sounds like you have always gotten paid by this customer – but always late, correct? Financing your customer’s business obviously costs you money, thus you’re in essence discounting your product to them. Just as obviously, you’d like to keep this customer because they are a good source of revenue. Your dilemma is that you don’t have a good sense of where the value is – to you or to your customer. Perhaps part of your value to your customer is their ability to run what is essentially a cash business – they get paid, you get paid. You should ask them. If they need you to finance their business, they should pay for that (it has value to them), assuming that you are willing to assume that risk. If they’re just taking advantage of your lax collection policies, you should change them. Call them and explain the new policies and why they’re in place. What is their value to you? Obviously it’s not cash flow. What is the trade off for lower margin work? Volume? If you lose this customer it’s either because they found someone else to subsidize their business or they found someone who would help solve their cash flow problem. (What would happen to your customer if they couldn’t get soundboards from you?) What’s the risk of asking for a 50% deposit and balance before delivery? What’s the risk of continuing to do low margin work with no assurance of getting paid? If this company eventually stiffs you for several thousand dollars, what is the real cost to you? What is your “lost opportunity” cost? Perhaps you should ask for a $5,000 deposit (whatever number makes sense). You’ll produce against that deposit until it drops below the cost of a single soundboard, at which point you will not accept another order. Let them place money in your “bank” to draw on. That allows you to continue to do short turnarounds without waiting for checks to clear. (Assuming it has value to you to be in the banking business.) Talk to your customer, explain your position, know what you’ll accept, and be prepared to say “sorry”. Your good clients ultimately subsidize your poor ones if you don’t change your pricing structure or collection policy. David On 6/4/07 7:06 PM, "Farrell" <mfarrel2@tampabay.rr.com> wrote: <BLOCKQUOTE>I'm looking for some opinions on setting a policy for a slow paying customer. A company I have been building soundboards for several years now has consistently been a slow payer. The last invoice they paid up was for $3,500 - it was finally paid this February - they got their soundboards in May of last year - eight full months to pay. And it was like pulling teeth. I currently have an unpaid invoice for them - I have sent three copies of the invoice - the last one with a very personal note in red ink - emailed and phoned them. They owe me $1,500 - they got their soundboard panels last October. My policy has always been to take a soundboard order, build and ship it, and then bill. Everyone I deal with pays promptly (thank you guys!) - except this particular crew. I love building soundboards for anyone. But I gotta get paid! I received another order from this same company for more soundboards. I definitely need to have all previous invoices paid up before I start on their new order - I know that. I know many folks who do this type of work will ask for 50% up front and the balance upon completion. I have always been very timely with constructing and shipping their orders - even on short notice. I'm thinking that because of their demonstrated reluctance to pay their bills, it would be reasonable and really the only sensible policy to ask for payment in full with shipment of soundboards within two weeks of receipt of payment in full. I hate to have to play hardball - and I know I might even loose this customer because of it - but if I don't get paid, what good where they anyway? I have little doubt that I have wasted enough time over the past few years to have built a soundboard for someone else in the time I have spent tracking down these slow payers. I'm a one-man-show. I have no administrative help. I'm reasonably efficient building soundboards and related things. I'm very inefficient at administrative tasks. I probably spend ten times the amount of time doing administrative things that someone more efficient at those tasks could be. I just don't have time to spend being a bill collector. Any opinions on a fair, efficient and productive policy for this client? Terry Farrell Farrell Piano www.farrellpiano.com <a href="http://www.farrellpiano.com"><http://www.farrellpiano.com></a> terry@farrellpiano.com </BLOCKQUOTE> </BODY> </HTML>