LearnThe most insane payment terms ever

Ryan
writes on September 27, 2007

We asked one of our customers to pay an invoice and this is part of the email we got back. It’s so absurd that I had to laugh. I’ve bolded the funniest part:

Italy 90 days from the end of the month the invoice was issued in

Finland, Norway, Sweden Net 30 days

Denmark Net 35 days

All remaining EMEA countries Net 45 days (UK is one of these.)

To request payment terms shorter than the standard noted above, complete relevant lines in the template and email it to your Finance Director for their approval. Once the FD has approved, forward this template along with the FD approval to your BU VP and your CFO Staff VP for their approvals.

If you need to be paid before these date, you need to fill the form.

I don’t even know what a ‘BU VP’ is and we sure as heck don’t have a ‘CFO Staff VP’! They’re making it so damn hard to get paid promptly that I’m sure most people give up (including us!). Sheesh.

This just seems wrong – why can’t you pay your bills on time (within 30 days), like everyone else? This strong-arming is just bad business.

0 Responses to “The most insane payment terms ever”

  1. Thanks for this, the discipline of internal, staff and workforce communications is at a crossroads as communicators seek to take advantage of new and social media technology to better communicate with their people.

  2. Well…. for large organisations that don’t pay on time, you can always call up their corporate communications/PR department and talk to them about the press release you’ve just written about how big companies often exploit small companies, and how they’ll be a featured example if they don’t pay up now.

    It really works.

  3. I know of a case where MS was taken to court by a freelance copy-writer and they paid up! I think the basis of what happened there was the marketeer he worked for at MS never had the budget to pay him – but was either cocky trying to make himself look good compared with his peers or was bullied by senior management into trying to do more for less budget. It happens and my friend nearly went bust because of it. I am wary of working with large companies as a result but this happens wherever you are in the chain. My bad debts are always the large companies. I usually ask for a commissioning fee for larger amounts of work and if the client isn’t up for it then they’ll probably be bad clients in the long term – you can feel it in your guts!

  4. Pete Mulder on October 6, 2007 at 8:18 am said:

    Once, I had to wait for almost 8 months to get paid for my work. After half a year or so, they had an ‘urgent request’. I replied with a mail that I tried to make look as an automatic reply stating:
    “We’ll be happy to inform you that we’ve synced our response time with ou customers. Please try again in [6] months.

    Thank you”

    I like to think that this did ‘speed up’ things (it only took them two more months), but since the department that’s paying for your work is not related to/does not care about the one that needs you, this is probably not very likely. (that’s why I ended up doing that request anyway)

    In a previous life, I worked at a big company where Accounts payable’s target was to keep invoices outstanding for 3 months, and Accounts receivable to get the money in within 2 weeks.

    Appearantly it’s common, but not my way..

  5. I always remember my first boss’ advice… ‘learn when to sack clients.’

  6. James McCarthy on October 1, 2007 at 6:47 pm said:

    Protracted payment is standard practice for huge US MNC’s, in fact many stick to 60 or 90 days and the supplier be damned.

    When I worked for one I and frequently had my business phone line cut off because the telecoms company crazily expected to be paid in the quarter they invoiced.

    Having to explain an (obstructive) internal process on an external communication gives a pretty good indicator of the companies efficiency.

    Ever seen the film Brazil…

  7. I include payment terms in my contracts. If a client signs the contract and then fails to meet those terms, I keep pestering them for payment (but in a professional and polite way). If this doesn’t work then I would find out my rights and send letters of demand as well. Big clients may feel they’re too big to be affected by small fry, but it might be easier for them to just pay up than be nagged constantly and continuously (remember, you are in the right!). This may all sound obvious but you need to run a tight ship to keep afloat.

  8. I’m Italian too, and I have to reaffirm what Jacopo said. Italy is a bad bad place to work. In the south of Italy (the poorest part) payment terms start from 120days but can go up to 180.

    When I started my company (after a bad experience with another one) I made myself the promise I would refuse jobs where I could not negotiate correct payment terms.

    So far I’ve been lucky with my clients, but I had to say no to interesting jobs just because of the payment terms, and sometimes that sucks.

  9. I’m writing from Italy, where yuor customer pay after 90 days from the end of the month. This doesn’t surprise me. Here you negotiate the paiment terms with every customer, there isn’t a default like in UK. The days usaully are 60, 90 or 120 :-(. That notwithstanding I would be happy if the customer paid according to paiment terms. The big problem in Italy is that all the customes, really all, pay late.
    You must open a line of credit to face this delays and pay a commission to the bank for your missing earning.
    Are you thinking to a lawyer? Bad idea. In Italy the law is later then your customers and you chance to go out of business.

    These are the rules of the game.

  10. sorry, that’s mr sweaty.

    i don’t own balmer. yet.

  11. either that or offer to charge them an extra 5% if they pay within 7 days. they won’t know what hit them and you just might get paid what you’re due plus a bonus! (hit them with my sweaty sharpish if they show signs of trying to ballpark what 5% of their bill is)

  12. Just go straight to Balmer and say you’ll pull out the the monkey-boy vid without warning if he doesn’t stump-up pronto …

  13. 90 days sucks … as does 60 and 30 in my opinion. In today’s workplace I cannot see why companies are still using this archaic timeframes for payment.

    Surely if a project is completed then the customer should settle up on completion and not after a grace period. I know that the whole world seems hell bent on retaining the 30 day rule but I struggle to see why.

  14. Big companies will routinely do this to small suppliers because there’s not much a small vendor can do. And for one-time purchases (e.g., graphic design, specialized printing), some companies will just wait to see if the supplier goes out of business and then never pay (I seem to remember a Dilbert comic about that).

    In some cases it is a necessary evil because big companies need to manage their cashflow just like everyone else. In other cases it is just a tactic to keep money in the bank longer.

    A more rotten practice is the arbitrary discount. Small vendors get hit with this one a lot: the customer unilaterally applies a discount for early payment. I’ve heard (but never experienced) that Microsoft will apply a 2% discount if it pays within 10 days. I know company that would apply arbitrary discounts as high as 5 or even 7% if they paid within 75 days!

    Small vendors without a diversified customer base just have to take that kind of crap sometimes. If your product or service is not well differentiated from the competition, you’re replaceable and the customer can take advantage of that. The vendor won’t be too alarmed if you threaten to stop selling to them and if you raise your rates/prices to compensate, they can find a cheaper vendor to abuse for a while. And the cycle repeats.

  15. Unfortunately this is a huge multi-national company and we have no bargaining power. That’s what sucks about it – they make the rules.

    We can live with it, but it’s frustrating.

  16. I’m afraid this is just the real world of business. Not a cloud, “2.0” or happy rounded corner in sight!

    The problem seems especially acute in the UK, although I have also had recent experience of late payment from a major German client.

    One company pays another late, that company then pays its suppliers late and at the end of the chain someone has cash flow problems and goes bust. Mea culpa, I have had late payers and been a late payer as a result.

    There is no single, simple solution. Saying “it’s our terms buddy, read the invoice” is not realistic. Like any company, especially a large one, is going to start shaking in its boots and say “You know, you’re right, we are so sorry, here’s a cheque”.

    I have found only three things work:
    1. Budget for late payments. Track your average debtor days and manage your cash flow to that number, plus a bit.
    2. Credit control. Little and often, just like sales. Get commitments from your customers and manage against those commitments.
    3. Sack your bad payers. Late payment is stressful and life is too short. Don’t do business with consistent late payers.

  17. Pete Lambert on September 27, 2007 at 1:35 pm said:

    Working for a company that’s tens of millions of pounds in the red, I’m fairly familiar with these kind of payment terms.

    Basically, we don’t have the money to pay early. Work we do gets paid late because we work for other companies who can’t afford to pay us.

    We owe money to the banks and hedge funds are involved. They will always get their money before you do.

    To caveat that – I’m not in finance. This is just the way I understand the situation from what I’ve been told.

  18. Just going through the same issue with a client. His response to why the bill is unpaid is “we pay after 60 days [note: my terms are 30] for everything and no-one complains. anyway we haven’t been paid yet so we won’t pay you until we have been.”

    i’m still stunned/fuming about it…

  19. Yeah, you set the terms, not them. They have to agree to them of course. But the UK default is 30 days not 45. They seem to be full of bull in more ways that one.

    If they are late payers, you are entitled to charge them annual interest of 8% above the base rate at the time the invoice was issued.

    So at the moment that would be about 13.5%. I thin you can also get a single conpensation fee as well.

    Do you provide hosting for any of their services….lights off

  20. They earn the interest

  21. Surely if your Terms and Conditions state payment terms of 30 days etc then it is your terms they have agreed to and thus, you can just send them final demand notices etc?

  22. I’m guessing BU VP is ‘Business Unit Vice President’, and CFO Staff VP is obviously ‘Chief Financial Officer Staff Vice President’, though I’m not sure I’ve even heard of either position.

    And why a supplier’s invoice is telling you how your company should function internally is beyond odd.

    Perhaps this is boilerplate for other companies within their group, and not for 3rd party suppliers?

    I’d just send them your normal payment terms and see if they’ll sign it, trumping their own, rather than jump through their bizarre hoops.

    Or–as you say–don’t bother working for them.

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