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Customer Credit and Late Payment Fees

Started by Rick C October 8, 2021
A customer who is a pain in the ass (a very large company, so they think they can toss around my small company) assured me during negotiations they would be paying the net 30 invoices in 30 days.  Because of the large manufacturing costs the float on the funds is significant.  

The first of many invoices was not paid in 30 days, but closer to 45 days.  On investigation I found they pay late by design.  They cut payments twice a month, 15th and 30th (or 31st I assume).  If the 30 days is in the first part of the month the payment is made on the 15, likewise with the second half and the last day of the month.  So by design they are paying up to 2 weeks late and *never* by the due date.  

A customer did this before and they threw a fit when I applied the 2% late payment penalty, but they paid because I wouldn't ship further product.  I have threatened to do this with this company and have sent them the invoice for the 2% late fee.  

They are, of course, throwing a fit.  They literally think they ARE paying on time and have indicated they can fix the problem by putting payment on a weekly cycle which would only be up to a week late... without acknowledging that it is still LATE!  I've suggested they enter into their payment system the invoices are 15 day credit terms which would be paid in 30 days and they say they can't because it would pay BEFORE the 30 days are up as if they are to be assured of floating the money for 30 days.  

They responded by saying they would not pay the late fee, then saying they might pay it if it is calculated on a daily basis.  Woot!  I said that is not happening.  I'm told she (the director) is sending this to the lawyers (I'm invoicing $973.50 which she wants cut to $400 something and how much do they pay lawyers?) 

So far I'm standing my ground.  They are champing at the bit to get product so not shipping is a good lever.  I'm not telling them I can't ship at the moment anyway because some of the parts are on a container ship outside LA.  My CM is not very good at dealing with this sort of thing, so it's hard to get info from them on exactly how many units they *can* build and some sort of a schedule.  But that's ok really.  

I'm wondering how much leverage my customer has against me in this situation.  They've paid the original invoice, but not the 2% late payment fee.  Am I on solid ground by holding the shipments?  

On a government job once a vendor did a "ship in place" with the government's approval.  This meant they listed it as shipped but the maker kept the unit to use in whatever they were doing with it.  I'm wondering if I can resume building units and "ship in place" so I can send invoices.  Or maybe prepare shipments to the customer but not hand them to the shipper.  If I start shipping them invoices that should rattle some cages and get a response... or not.  The machinery seems to be pretty slow to respond to anything.  

-- 

Rick C.

- Get 1,000 miles of free Supercharging
- Tesla referral code - https://ts.la/richard11209
Rick C <gnuarm.deletethisbit@gmail.com> wrote: 

> A customer who is a pain in the ass (a very large company, so they think > they can toss around my small company) assured me during negotiations > they would be paying the net 30 invoices in 30 days. Because of the > large manufacturing costs the float on the funds is significant. > > The first of many invoices was not paid in 30 days, but closer to 45 > days. On investigation I found they pay late by design. They cut > payments twice a month, 15th and 30th (or 31st I assume). If the 30 > days is in the first part of the month the payment is made on the 15, > likewise with the second half and the last day of the month. So by > design they are paying up to 2 weeks late and *never* by the due date. > > A customer did this before and they threw a fit when I applied the 2% > late payment penalty, but they paid because I wouldn't ship further > product. I have threatened to do this with this company and have sent > them the invoice for the 2% late fee. > > They are, of course, throwing a fit. They literally think they ARE > paying on time and have indicated they can fix the problem by putting > payment on a weekly cycle which would only be up to a week late... > without acknowledging that it is still LATE! I've suggested they enter > into their payment system the invoices are 15 day credit terms which > would be paid in 30 days and they say they can't because it would pay > BEFORE the 30 days are up as if they are to be assured of floating the > money for 30 days. > > They responded by saying they would not pay the late fee, then saying > they might pay it if it is calculated on a daily basis. Woot! I said > that is not happening. I'm told she (the director) is sending this to > the lawyers (I'm invoicing $973.50 which she wants cut to $400 something > and how much do they pay lawyers?) > > So far I'm standing my ground. They are champing at the bit to get > product so not shipping is a good lever. I'm not telling them I can't > ship at the moment anyway because some of the parts are on a container > ship outside LA. My CM is not very good at dealing with this sort of > thing, so it's hard to get info from them on exactly how many units they > *can* build and some sort of a schedule. But that's ok really. > > I'm wondering how much leverage my customer has against me in this > situation. They've paid the original invoice, but not the 2% late > payment fee. Am I on solid ground by holding the shipments? > > On a government job once a vendor did a "ship in place" with the > government's approval. This meant they listed it as shipped but the > maker kept the unit to use in whatever they were doing with it. I'm > wondering if I can resume building units and "ship in place" so I can > send invoices. Or maybe prepare shipments to the customer but not hand > them to the shipper. If I start shipping them invoices that should > rattle some cages and get a response... or not. The machinery seems to > be pretty slow to respond to anything.
Do you consider their value to you as a customer? Maybe you should take their late payment practice into consideration when pricing your product? Do keep the group informed...
fredag den 8. oktober 2021 kl. 20.25.33 UTC+2 skrev gnuarm.del...@gmail.com:
> A customer who is a pain in the ass (a very large company, so they think they can toss around my small company) assured me during negotiations they would be paying the net 30 invoices in 30 days. Because of the large manufacturing costs the float on the funds is significant. > > The first of many invoices was not paid in 30 days, but closer to 45 days. On investigation I found they pay late by design. They cut payments twice a month, 15th and 30th (or 31st I assume). If the 30 days is in the first part of the month the payment is made on the 15, likewise with the second half and the last day of the month. So by design they are paying up to 2 weeks late and *never* by the due date. > > A customer did this before and they threw a fit when I applied the 2% late payment penalty, but they paid because I wouldn't ship further product. I have threatened to do this with this company and have sent them the invoice for the 2% late fee. > > They are, of course, throwing a fit. They literally think they ARE paying on time and have indicated they can fix the problem by putting payment on a weekly cycle which would only be up to a week late... without acknowledging that it is still LATE! I've suggested they enter into their payment system the invoices are 15 day credit terms which would be paid in 30 days and they say they can't because it would pay BEFORE the 30 days are up as if they are to be assured of floating the money for 30 days. > > They responded by saying they would not pay the late fee, then saying they might pay it if it is calculated on a daily basis. Woot! I said that is not happening. I'm told she (the director) is sending this to the lawyers (I'm invoicing $973.50 which she wants cut to $400 something and how much do they pay lawyers?) > > So far I'm standing my ground. They are champing at the bit to get product so not shipping is a good lever. I'm not telling them I can't ship at the moment anyway because some of the parts are on a container ship outside LA. My CM is not very good at dealing with this sort of thing, so it's hard to get info from them on exactly how many units they *can* build and some sort of a schedule. But that's ok really. > > I'm wondering how much leverage my customer has against me in this situation. They've paid the original invoice, but not the 2% late payment fee. Am I on solid ground by holding the shipments? > > On a government job once a vendor did a "ship in place" with the government's approval. This meant they listed it as shipped but the maker kept the unit to use in whatever they were doing with it. I'm wondering if I can resume building units and "ship in place" so I can send invoices. Or maybe prepare shipments to the customer but not hand them to the shipper. If I start shipping them invoices that should rattle some cages and get a response... or not. The machinery seems to be pretty slow to respond to anything. >
they haven't paid something you haven't shipped?
On 9/10/21 5:25 am, Rick C wrote:
> A customer who is a pain in the ass (a very large company, so they think they can toss around my small company) assured me during negotiations they would be paying the net 30 invoices in 30 days. Because of the large manufacturing costs the float on the funds is significant. > > The first of many invoices was not paid in 30 days, but closer to 45 days. On investigation I found they pay late by design. They cut payments twice a month, 15th and 30th (or 31st I assume)
30 day payment terms means payment within 30 days, not "after" 30 days. If they have a built-in delay of up to 15 days, you need to be specifying 15 day terms so you get paid within 30 days. You won't get them to change their accounting practices, so I'd notify them that I'll waive the late fee *this time* if they agree to 15 day terms in future. That way you get paid in 30 days, and they can use their established practices. CH
On Friday, October 8, 2021 at 5:35:48 PM UTC-7, Clifford Heath wrote:
> On 9/10/21 5:25 am, Rick C wrote: > > A customer who is a pain in the ass (a very large company, so they think they can toss around my small company) assured me during negotiations they would be paying the net 30 invoices in 30 days. Because of the large manufacturing costs the float on the funds is significant. > > > > The first of many invoices was not paid in 30 days, but closer to 45 days. On investigation I found they pay late by design. They cut payments twice a month, 15th and 30th (or 31st I assume) > 30 day payment terms means payment within 30 days, not "after" 30 days. > If they have a built-in delay of up to 15 days, you need to be > specifying 15 day terms so you get paid within 30 days. > > You won't get them to change their accounting practices, so I'd notify > them that I'll waive the late fee *this time* if they agree to 15 day > terms in future. That way you get paid in 30 days, and they can use > their established practices. >
>> A customer did this before and they threw a fit when I applied the 2% late payment penalty
and perhaps with lower penalty. 2% is common years ago when interest rate was close to 10%. But excessive in today's 0% interest rate.
On Fri, 8 Oct 2021 18:07:08 -0700 (PDT), Ed Lee
<edward.ming.lee@gmail.com> wrote:

>On Friday, October 8, 2021 at 5:35:48 PM UTC-7, Clifford Heath wrote: >> On 9/10/21 5:25 am, Rick C wrote: >> > A customer who is a pain in the ass (a very large company, so they think they can toss around my small company) assured me during negotiations they would be paying the net 30 invoices in 30 days. Because of the large manufacturing costs the float on the funds is significant. >> > >> > The first of many invoices was not paid in 30 days, but closer to 45 days. On investigation I found they pay late by design. They cut payments twice a month, 15th and 30th (or 31st I assume) >> 30 day payment terms means payment within 30 days, not "after" 30 days. >> If they have a built-in delay of up to 15 days, you need to be >> specifying 15 day terms so you get paid within 30 days. >> >> You won't get them to change their accounting practices, so I'd notify >> them that I'll waive the late fee *this time* if they agree to 15 day >> terms in future. That way you get paid in 30 days, and they can use >> their established practices. >> > >>> A customer did this before and they threw a fit when I applied the 2% late payment penalty > >and perhaps with lower penalty. 2% is common years ago when interest rate was close to 10%. But excessive in today's 0% interest rate.
The more usual term was "2% 10, net 30" which meant the seller gave a 2% discount for 10 day payment. -- Father Brown's figure remained quite dark and still; but in that instant he had lost his head. His head was always most valuable when he had lost it.
On Friday, October 8, 2021 at 8:35:48 PM UTC-4, Clifford Heath wrote:
> On 9/10/21 5:25 am, Rick C wrote: > > A customer who is a pain in the ass (a very large company, so they think they can toss around my small company) assured me during negotiations they would be paying the net 30 invoices in 30 days. Because of the large manufacturing costs the float on the funds is significant. > > > > The first of many invoices was not paid in 30 days, but closer to 45 days. On investigation I found they pay late by design. They cut payments twice a month, 15th and 30th (or 31st I assume) > 30 day payment terms means payment within 30 days, not "after" 30 days. > If they have a built-in delay of up to 15 days, you need to be > specifying 15 day terms so you get paid within 30 days. > > You won't get them to change their accounting practices, so I'd notify > them that I'll waive the late fee *this time* if they agree to 15 day > terms in future. That way you get paid in 30 days, and they can use > their established practices.
They have already refused adopting 15 day credit terms literally as if that is impossible. That's what bugs me is that they act as if they are entitled to my money for a minimum of 30 days. In the negotiations I had a line that retained title to the goods until they were paid for. I pointed out that was the only effective leverage I had to assure payment other than taking them to court. This was a complete no-go as if it was unheard of. I got my terms and conditions from a major PC manufacturer's T&Cs. So if they ever buy from that company they must accept the same conditions. This is all about big companies thinking they have complete control over small suppliers. This is the final order of a product I supply and the entire process has been hugely ugly with the customer refusing to acknowledge the huge uncertainties in supply which go beyond the parts shortages everyone else is seeing. Two months into negotiations they stuck me with a preliminary price from the initial discussions which has resulted in profit erosion as my costs have increased. I'm not going to let them steal from me on credit terms in addition. I'm calling bullshit on this. I just need to do it in a way that I am legally entitled to. Since they have indicated they are refusing to pay the 2% late penalty, I believe I am justified in not shipping further product until they do. There is nothing in the agreement that sets a time limit to the overall process of delivering product or any specific schedule. -- Rick C. + Get 1,000 miles of free Supercharging + Tesla referral code - https://ts.la/richard11209
On Friday, October 8, 2021 at 9:07:11 PM UTC-4, Ed Lee wrote:
> On Friday, October 8, 2021 at 5:35:48 PM UTC-7, Clifford Heath wrote: > > On 9/10/21 5:25 am, Rick C wrote: > > > A customer who is a pain in the ass (a very large company, so they think they can toss around my small company) assured me during negotiations they would be paying the net 30 invoices in 30 days. Because of the large manufacturing costs the float on the funds is significant. > > > > > > The first of many invoices was not paid in 30 days, but closer to 45 days. On investigation I found they pay late by design. They cut payments twice a month, 15th and 30th (or 31st I assume) > > 30 day payment terms means payment within 30 days, not "after" 30 days. > > If they have a built-in delay of up to 15 days, you need to be > > specifying 15 day terms so you get paid within 30 days. > > > > You won't get them to change their accounting practices, so I'd notify > > them that I'll waive the late fee *this time* if they agree to 15 day > > terms in future. That way you get paid in 30 days, and they can use > > their established practices. > > > >> A customer did this before and they threw a fit when I applied the 2% late payment penalty > and perhaps with lower penalty. 2% is common years ago when interest rate was close to 10%. But excessive in today's 0% interest rate.
This has nothing to do with interest rates. This is a late payment penalty. The late payment penalty on my bills has not been reduced in the last 20 years, gone up in fact... significantly in many cases. The utility still charges 1.5%. -- Rick C. -- Get 1,000 miles of free Supercharging -- Tesla referral code - https://ts.la/richard11209
On 09/10/21 03:04, Rick C wrote:
> On Friday, October 8, 2021 at 8:35:48 PM UTC-4, Clifford Heath wrote: >> On 9/10/21 5:25 am, Rick C wrote: >>> A customer who is a pain in the ass (a very large company, so they think >>> they can toss around my small company) assured me during negotiations >>> they would be paying the net 30 invoices in 30 days. Because of the large >>> manufacturing costs the float on the funds is significant. >>> >>> The first of many invoices was not paid in 30 days, but closer to 45 >>> days. On investigation I found they pay late by design. They cut payments >>> twice a month, 15th and 30th (or 31st I assume) >> 30 day payment terms means payment within 30 days, not "after" 30 days. If >> they have a built-in delay of up to 15 days, you need to be specifying 15 >> day terms so you get paid within 30 days. >> >> You won't get them to change their accounting practices, so I'd notify them >> that I'll waive the late fee *this time* if they agree to 15 day terms in >> future. That way you get paid in 30 days, and they can use their >> established practices. > > They have already refused adopting 15 day credit terms literally as if that > is impossible. That's what bugs me is that they act as if they are entitled > to my money for a minimum of 30 days. In the negotiations I had a line that > retained title to the goods until they were paid for. I pointed out that was > the only effective leverage I had to assure payment other than taking them to > court. This was a complete no-go as if it was unheard of. I got my terms > and conditions from a major PC manufacturer's T&Cs. So if they ever buy from > that company they must accept the same conditions. > > This is all about big companies thinking they have complete control over > small suppliers. This is the final order of a product I supply and the > entire process has been hugely ugly with the customer refusing to acknowledge > the huge uncertainties in supply which go beyond the parts shortages everyone > else is seeing. Two months into negotiations they stuck me with a > preliminary price from the initial discussions which has resulted in profit > erosion as my costs have increased. I'm not going to let them steal from me > on credit terms in addition. I'm calling bullshit on this. I just need to > do it in a way that I am legally entitled to. Since they have indicated they > are refusing to pay the 2% late penalty, I believe I am justified in not > shipping further product until they do. There is nothing in the agreement > that sets a time limit to the overall process of delivering product or any > specific schedule.
My understanding from a contractor that invoked it in the UK, is that an "Anton Piller" and/or "Mareva injunction" order is an effective nuclear weapon. If the debt is acknowledged and above some amount, then the contractor can get the courts to freeze the company's assets. That gets their attention, and he reported the debt was delivered in cash by motorbike rider :) There might be US equivalents https://en.wikipedia.org/wiki/Asset_freezing#United_States https://en.wikipedia.org/wiki/Anton_Piller_order#Impoundment_orders_in_the_United_States
On 09/10/2021 01:35, Clifford Heath wrote:
> On 9/10/21 5:25 am, Rick C wrote: >> A customer who is a pain in the ass (a very large company, so they >> think they can toss around my small company) assured me during >> negotiations they would be paying the net 30 invoices in 30 days. >> Because of the large manufacturing costs the float on the funds is >> significant. >> >> The first of many invoices was not paid in 30 days, but closer to 45 >> days.&nbsp; On investigation I found they pay late by design.&nbsp; They cut >> payments twice a month, 15th and 30th (or 31st I assume)
That is very common. Figure out when their accounting cycle is and make sure you invoice so that you hit a payment window. If those dates are right then you can try invoicing 5 business days prior at a guess. Don't cut it too fine or "delayed" invoice approval will mean it goes into the next cycle. If they were anything like the lot I used to work for that would happen anyway (by design). IOW 45 days is when *they* intend to pay you irrespective of what it says on the invoice.
> 30 day payment terms means payment within 30 days, not "after" 30 days. > If they have a built-in delay of up to 15 days, you need to be > specifying 15 day terms so you get paid within 30 days.
I don't know what it is like in the USA, but the aggressive large UK corporate I first worked for would only pay larger bills on 60 day terms after at least 120 days or when the bailiffs turned up to take away the fax machine. They prevented them taking the photocopier by leasing it. They had a substantial department to handle debt chasers! I presume it must have been cost effective or they would not have done it. The CFO was paid a quadratic bonus on the number of days free credit balance they extracted from suppliers. Typically they were on the stop list of two out three equivalent generic component suppliers. The volumes involved meant the suppliers put up with this abuse. ISTR this has now been made illegal in the UK but I wouldn't like to bet that it still doesn't happen with some of the aggressive accounting practices. Things improved a bit after some enterprising debt collectors hit upon the idea of sending a tramp soaked in something like skunk oil to sit in the swanky reception of their London corporate HQ waiting for payment.
> > You won't get them to change their accounting practices, so I'd notify > them that I'll waive the late fee *this time* if they agree to 15 day > terms in future. That way you get paid in 30 days, and they can use > their established practices.
I always followed the rule that they would get no further work done or support with any of their problems until I got paid for the previous month. Once their customers started screaming at them I got paid. You need to work out what their weakest point is and then use your leverage on that to get paid in a timely fashion. -- Regards, Martin Brown