continual late payer, but we need the work...

[Anonymouse72]

we've got a new client that we've been working with for a few months & they are proving to be continual late payers with various excuses & 'cheque in the post' scenario. averaging 21 days late on a nett monthly account, not a great deal i know, but cashflow is tight at the moment to say the least.

i phone them just before the account is due to make sure all ok to pay. i get told 'yes but can't give you a payment date'. i then phone on the day it's due & get a similar reply. try again in a few days 'yes, doing a cheque run on XX'. then it invariably takes at least another week for us to receive the cheque in the post (they flat out refuse to pay by bacs).

i'm wasting my breath stressing it's a monthly account & this was agreed before we did any work for them, i've tried this & just get nothing in response.

unfortunately a lot of our usual work has completely dried up at the moment so we need the orders that we're getting from this client, putting them on 'stop' isn't really an option as they'll just go elsewhere.

any ideas? or have we just got to suffer this in the current climate?

(for info - we're construction trade, max value of outstanding invoices & current work for this client is no more than £5k total).

 

[RedEvo]

You're between a rock and a hard place. However, if they are continually late they *could* be struggling. What would be the impact if they went bust owing you? Have you done due diligence on them?

d

 

[Billmccallum]

Increase your price and offer a discount for early payment.

If they query why, be honest, tell them that if they continually ignore your payment terms then they will have to pay for that extra time.

 

[Stephen Davies]

Usually this is early signs that a business is about to fold.
I think you know what you need to do.
You need to get out before they end up owing you too much money and try to get work elsewhere ASAP.

 

[Anonymouse72]

You're between a rock and a hard place. However, if they are continually late they *could* be struggling. What would be the impact if they went bust owing you? Have you done due diligence on them?

d

checks have been done & i don't think that they are in trouble, but it's difficult to tell. 1 large contract withdrawn & a lot of clients we deal with would be in dire straits (we only do the small stuff, they've got contracts worth a few hundred thousand, gulp!).

i think it's all down to the big boys at the top again & how they are paying at the moment. 90 days - take it or leave it in a lot of cases. because work has really tailed off, we just can't stand the pressure it puts on our cashflow.

i suppose i ought to consider ourselves fortunate that we are actually being paid, albeit late. so many companies seem to be going *pop* at the moment owing mega bucks, it's scary out here in the real world...

 

[Anonymouse72]

Increase your price and offer a discount for early payment.

If they query why, be honest, tell them that if they continually ignore your payment terms then they will have to pay for that extra time.

interesting. might have to consider this, but i can see them just going elsewhere if we do as there are plenty of other contractors out there willing & able to do the work.

Usually this is early signs that a business is about to fold.
I think you know what you need to do.
You need to get out before they end up owing you too much money and try to get work elsewhere ASAP.

from past experience, usually i'd agree with you, but not on this one, not just yet anyway. as i said it's difficult to tell, but they do seem to have lots of projects on the go & do appear to be busy. obviously appearances can be deceptive.

i really do think it's cashflow due to the main client(s) not paying them on time. i can be very understanding of this but if i haven't got enough to pay next week's wages, it doesn't really help me does it. things aren't that bad, but it doesn't take too many late payers each month for it to get that way.

 

[FirstClassVirtualOffice]

A guy we know says he never pays until chased and says he does this because some people forget or overlook the account and he'd rather the money in his bank for as long as possible where he can get away with it. He said there are even some that never chase and so the invoice never gets paid and if it reaches 6 years they can't then come looking to get paid after that time.

 

[Christine Hough]

usually i'd agree with you, but not on this one, not just yet anyway. as i said it's difficult to tell, but they do seem to have lots of projects on the go & do appear to be busy. obviously appearances can be deceptive.

Activity does not mean sound finances. If they are paying later and later and being less than honest when setting up an agreement beware. Have you had a look at a financial report on them or are you just going by their level of activity?

i really do think it's cashflow due to the main client(s) not paying them on time.

Cashflow is what brings down most companies in the end. Are they 'overtrading'?

 

[Anonymouse72]

Credit check done & nothing adverse popped up. overtrading? Not sure how i could confirm this?

Think i might just have to accept this is how it is for Trades, current climate is squeezing cashflow to non-existance at the moment.

Just have to limit our exposure with them, no matter if we need the work, if they end up not paying us, it's worth nothing anyway.

 

[DavidWH]

Has similar circumstances with one of our clients.

We agreed to increase their credit terms (from 30 to 60) but reduced their credit limit (we actually halved it). On the grounds that on 30days terms they were paying at 74, so even with 60days they would still be 2weeks overdue.

It's a case of minimising risk.

 

Credit check done & nothing adverse popped up. overtrading? Not sure how i could confirm this?

Think i might just have to accept this is how it is for Trades, current climate is squeezing cashflow to non-existance at the moment.

Have to agree if work is so scarce,but at the same time try diferent avenues to get other work.

Times are tough for most except the usuall suspects and no chance for things to improve in the forseeable future in the UK and europe without major governmental policies changing.

Whats happening was inevitable given modern technology and peoples reliance on financial institutions.

 

[CKG]

Small time construction contractors often rely on pay when paid when it come to subbies etc in the absence of liquid credit facilities

Although it's not a credible excuse in the eyes of the law to not pay it is as you say often the way it is these days.

**** rolls down hill as they say. And we're often the ones at the bottom of the hill with our gobs wide open. Not a great or very safe position to be in.

Rather than get pissed at the guy that owes you money - pull them in closer and try and understand the situation - it could just be slack admin or they could be half way up the creek.

You must have some kind of relationship with the company that would allow you to build a bit of rapport with the owners/managers? If you haven't, try and build one.

 

[PDRD]

Im afraid to say we are the same. Bottom of the pile of sub contactors so payments are always on their terms but this is only with the customers who do not have the cash reserves or good credit terms with larger suppliers. I just charge more to the slow payers, priced a job today at £500 and then quoted it at £900 for the simple reason that we will finish the work by end of feb but they will not pay until they get paid which will probably be May.

I do make a point of thanking the on time payers and telling them they get preferential rates.

Sent from my GT-I9305 using UK Business Forums

 

[Anonymouse72]

i did think that we had a reasonably good relationship with this client, obviously not! have to buy them an even bigger bottle of whiskey next xmas

definitely don't think it's slack admin, the accountant i speak to for payment is a Director & part owner. probably more a case of just holding on to cash for as long as possible, refusing to pay by bacs is the biggest marker on this one i think.

i did have a chat with the other half about this last night & he knows that they are really busy with various contracts all over the place. i did counter this with "yes & how many businesses looked busy right up until they went bankrupt?". we really aren't in a position to get any further financial info on them so i guess i'll have to just stop worrying, unless we get to the point where it's no payment at all instead of just being late.

it's the same scenario that PDRD pointed out & there's lots of us little guys at the end of the food chain begging for our overdue payments. we'll just carry on charging them slightly more than normal as they are late payers & just watch the total £ exposure.

thanks for the replies, kind of helps to know that we're not the only ones in the same boat

on a happier note, we've got some more work that should see us through at least the next few weeks & this should take us up to future bigger contracts already booked in (unless they get shelved at the last minute which is what left us struggling now, we'll see...).

 

[Employer Labour Relations]

Frankly speaking, it is quite tough situation for you. The best option is to let the late payer team go and opt for some new client who whether make little orders but altleast pay on time. But if you can't go with it, then continue working with this client until you got a new client. Ask the late payer for some early payments or make some offers as little less payment on early payment to bribe them.

 

[appyammer]

i did think that we had a reasonably good relationship with this client, obviously not! have to buy them an even bigger bottle of whiskey next xmas

definitely don't think it's slack admin, the accountant i speak to for payment is a Director & part owner. probably more a case of just holding on to cash for as long as possible, refusing to pay by bacs is the biggest marker on this one i think.

i did have a chat with the other half about this last night & he knows that they are really busy with various contracts all over the place. i did counter this with "yes & how many businesses looked busy right up until they went bankrupt?". we really aren't in a position to get any further financial info on them so i guess i'll have to just stop worrying, unless we get to the point where it's no payment at all instead of just being late.

it's the same scenario that PDRD pointed out & there's lots of us little guys at the end of the food chain begging for our overdue payments. we'll just carry on charging them slightly more than normal as they are late payers & just watch the total £ exposure.

thanks for the replies, kind of helps to know that we're not the only ones in the same boat

on a happier note, we've got some more work that should see us through at least the next few weeks & this should take us up to future bigger contracts already booked in (unless they get shelved at the last minute which is what left us struggling now, we'll see...).

Anon what does the contract payment terms say ? Are they different to your terms to them? If they are longer than your terms you should not be doing the work. If they are the same and they are paying late you should not be doing the work.

Having been knocked many times over the past 18 years I only learned in the last 2 to live without the bad payers.

Where are you based?

 

[Anonymouse72]

terms agreed were nett monthly account so December invoices should have been paid beginning of this month (cheque still not received...).

if we weren't so quiet, they would have normally been on stop by about the 10th of the month. as it is, we've had to do a couple of new orders for them as we had very little other work, but less than £1k value.

we're in the Midlands, in the snow, deep joy

 

[Christine Hough]

Develop your own product... garden offices using prefabricated sections. Even better if you can offer finance with them. You can use these prefab units http://www.modcell.com/ which will be great for insulation .

Just a wacky thought!

 

[CAEDAN]

You can have a couple of rates - similar to the pay early discount idea. If they pay on completion, it is x amount - if they wish to go on account add x more.

With late payers, it is difficult at the moment. I think all businesses are plagued with late payers. Someone pays you late, you end up paying someone else late and so on.

I tend to use a few weapons - There is either an interest rate on late accounts, or late payment penalty fee. Set at a rate which hurts, it does make the cheque come in - though rarely will they pay the penalty. It doesn't matter, as long as you are paid and I tend to forget the LPP.

Time limited offers - sale to be completed by X. Which means completed and not received but not paid for. If they fails to complete in time, the offer is revoked.

 

[PDRD]

Anon, what do you do?

 

[appyammer]

terms agreed were nett monthly account so December invoices should have been paid beginning of this month (cheque still not received...).

if we weren't so quiet, they would have normally been on stop by about the 10th of the month. as it is, we've had to do a couple of new orders for them as we had very little other work, but less than £1k value.

we're in the Midlands, in the snow, deep joy

we are in the construction industry also (flooring) we have 30 day payments on our invoices/applications for payment but know that the quickest we get paid is 60 days, it can be 75 days. One of our clients terms are 15th of the month following invoice, so say we did a job on the 1st Jan we would get paid 15th March

it could be with your client they need to be more honest with you and say when they can pay and not just ignore your (in my opinion) unrealistic terms if you see what i mean. 30 days net in the construction game is not the norm.

 

[Darrenchase]

I always invoices for 30 days and get paid in that time some clients are 90 days some are 14 days depends on the company and size of business but I'm always paid on time soon as an invoice is due I call them. I had a company that I've worked for 7 years really busy didn't. Expect them to go bust and they went in to liquidation last October owing me money. Me personally I would tell them it's either 30 days or to find someone else. I know it's hard at the minute I do flooring to but you don't need to work for contractors like that who pay when they want. It's your business with your payment terms big company or not its been agreed before you've commenced works.

 

[PDRD]

30 days net in the construction game is not the norm.

It used to be....... and still is with well established firms.

 

[appyammer]

It used to be....... and still is with well established firms.

Bovis,Mace, McAlpine think there well established look at their contract payment terms and I think you will find it different, although i will say they pay to the contract terms

 

[PDRD]

Bovis,Mace, McAlpine think there well established look at their contract payment terms and I think you will find it different, although i will say they pay to the contract terms

Maybe I should have said, financially stable firms, not well established...

 

[Anonymouse72]

we're within general construction & the majority of our work is sub-contract, main clients are breweries, housing assoc, local authority & schools.

we're pretty specialised so our client base is a little limited, if we turned around & said "tell them it's either 30 days or to find someone else", they'd be off like a shot - long standing good working relationship or not (we've worked with most of our clients for at least 8 years). we just can't do that in our game i'm afraid. yes, 90% of them pay later than end of month, but they do pay (generally within 2 weeks of due date). we only have 1 client who is on specific 45 day terms as they only get paid every 90 days from the breweries.

for the size of our company we're a bit stuck. if we try the domestic route for some areas of work, we just can't compete as we're up against the smaller guys/one man & a van who don't charge vat & don't have our overheads.

a couple of years ago there was a push by a big local firm to get companies for a major long term school contract. thankfully we didn't get chosen as a lot of the work was later cancelled & it came to light that this company are very bad payers too, min of 90 days & more like 120 seems the norm.

since about 1998/99 the workload has been all over the place in our industry & it's a similar story for many other contractors we talk to. if we can't survive as we are, it seems we either downsize & go the domestic route (please NO!) or we go the other way & try to compete for the £200-£300k contracts (with retentions & other assoc headaches). let's hope we can hold on as we are for around 2-3 more years, then it'll be early retirement instead...