This is a situation many small businesses find themselves in, and can be a tricky one to negotiate, particularly for smaller companies or freelancers dealing with a big client. There is a tendency to stick to the ‘customer is always right’ philosophy, and not risk upsetting the applecart - especially if it is a big contract. And besides, what grounds do you have to protest? Who dictates payment terms anyway?
Best for your business
There are a number of sound business reasons why you should strive to set the terms that suit you.
For a start, why should you wait 60 days, or 30 for that matter, when you could be paid in a week? If you have completed the work contracted for, you are entitled to payment, and there is no reason why it should not be prompt. As all businesses know, cash flow is vital, so being made to wait for money you are due can be damaging.
From an administrative point of view, it also keeps things much simpler if payment times are kept to a minimum. Once things start to become stretched, it is easy to lose track of what has been paid for and what has not. Precious time can be wasted checking and chasing, and you can potentially end up not getting paid for work you have done because of clerical error. Staying in charge of your payment conditions makes sense for your bottom line.
Here are some ways you can keep control in a friendly, professional way:
1.Be up-front about your terms.
Set out your preferred payment arrangements at the earliest opportunity. If there is an issue with them, there is an opportunity to negotiate from the outset.
2.Explain your reasons. Although you should always be prepared to compromise in business, explaining why you expect payment in a fortnight rather than 60 days in terms of your business needs puts you in a strong position. Resist attempts to push you into making an exception; if you relax the terms too much for one, then what if the next client asks for the same? The bottom line is to put your business interests first; explaining this clearly can head off all sorts of problems.
3.Resubmit your terms
If the client does issue you with purchase terms that differ from your own after the work has started, then it is imperative that you resubmit yours and tell the client that yours remain in force. As a general rule the last set of terms take precedence so make sure you have the final word when it comes to when payment is made.
4.Be prepared to walk away. If a client won’t budge and you cash flow cannot support an extended wait for payment, be prepared to walk away. In some circumstances it can ultimately be more profitable to turn away some business, rather than rely on short term, high interest credit facilities to fill a hole in your finances. This is especially true if the work in question has a small or low profit margin as it may actually cost your business to support your customers extended credit demands.
In an ideal world, everyone would pay freelancers and small businesses within hours or days, not weeks or months. While you can’t always influence the minutiae of your agreement, getting paid promptly and ensuring your business has enough capital to survive should always be your number one priority.