
Ask HN: How do your enterprise customers pay you? - zackliscio
If you are a SaaS company, how do your customers pay you? Credit, ACH, etc, monthly vs. annual contract. Any good resources on the subject?
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patio11
Overwhelmingly: Send a quote for the upcoming year, get a PO number
corresponding to the quote, send an invoice referencing the PO number, wait an
interminable amount of time, a check magically appears in the mail.

The last one was 9 months late in paying. Enterprise life, yay.

Salient point to keep in mind: the people responsible for everything that
happened in that workflow after my customer passed the quote to her purchasing
department are a) not my customer, b) not even on the same campus as my
customer, and c) just. don't. care. A six figure check is just another piece
of paper to them, which they'll see several hundred of this week.

~~~
eitally
Here repping enterprises, can confirm this is how things work. But we don't
pay late out of malice. Often incompetence and apathy, sure, but we don't
actively set out to cheat you guys.

We start our Net-X countdown clock at the very last moment, and typically that
is when we start receiving the service (not when we agree to a deal). This
seriously irks most vendors, but they seem to have been beaten down and
conditioned over such a period as to just deal with it. Ultimately, the goal
of an enterprise (or any business) is to have revenue that exceeds expenses,
and a super simple way to maximize this on a periodic scale is to ensure your
AR period is shorter than your AP period. Iirc, we're currently standardized
on Net-45 for receivables, down to Net-30 whenever possible, and start
negotiations with Net-90 for AP, usually getting down to Net-60. That extra
15-30 days makes a huge difference sometimes in positive cash flow. I don't
endorse the behavior but it is what it is. Another "trick" to save money is to
negotiate an annual contract into quarterly (or other periodic) payments. For
one $1.5m/yr contract, for example, that saved us something like $200k/yr.

We pay by ACH whenever possible (it is cheaper and easier for us, by far, than
writing checks), and part of our vendor qualification process includes getting
bank details. We do write thousands and thousands of checks, though. :)

~~~
eigenvector
> Here repping enterprises, can confirm this is how things work. But we don't
> pay late out of malice. Often incompetence and apathy, sure, but we don't
> actively set out to cheat you guys.

Yep. Also, small companies dealing with MegaCorps - please, just accept our
terms & conditions. Raise the price by 20% if you have to compensate for
whatever rights you feel our standard T&C doesn't give you, I don't really
care. But if you want your own terms, then your lawyers need to talk to our
lawyers and there is a 50% chance that your PO will arrive after man lands on
Mars.

~~~
swombat
Helpfully, if you have raised the prices by even as little as 20%, you can
easily use that extra margin to pay for an invoice factoring company who will
pay you the invoice upfront - for a fee, but a fee that's usually much less
than 20%.

Examples in the UK: [https://marketinvoice.com/](https://marketinvoice.com/)
[http://www.platformblack.com/](http://www.platformblack.com/) or even
[http://granttree.co.uk](http://granttree.co.uk) itself (though we don't
advertise this at the moment - our power-up fund does extend to invoice
factoring for startups with no trading history).

~~~
serverhorror
Nice I didn't even know such a thing existed...now off to find and try
something that seems acceptable.

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kephra
Let define "enterprise customer" first. This is someone for whom the terms,
conditions and prices of your website do not apply. Enterprise customer = Ask
for quotes. So you might delay the question of how they pay you, once you have
an enterprise customer ready to sign.

An other distinction is, that you might charge accounts of normal customers,
but you always just send an invoice to an enterprise customer, and they send
you the money. German customers could use the old BLZ routing, European the
IBAN routing, and US will use ACH. But I don't care, as long as I get my money
on my account. Big companies are slow payers. My trick of getting the money
fast is to offer 2% discount, if they pay within 7 days.

~~~
gk1
> My trick of getting the money fast is to offer 2% discount, if they pay
> within 7 days.

Great tactic. The reason this works, in some cases, is NOT because the company
cares about a measly 2% of whatever they're paying, but because they may have
a policy that says they _must_ accept discounts if available.

~~~
petercooper
You know you're dealing with a _very_ enterprise customer when they
automatically give a discount of this nature to themselves when you bill them
using their own billing system (I seem to recall MS's vendor system does
this).

~~~
RyJones
it did (or does). Sun did the same thing - nice discount for sun if they pay
within 7 days, so everyone raised rates by that much. It was nice getting paid
so quickly

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sologoub
My experience is that this largely depends on the procurement practices of the
company and whether or not your price range is low enough to be below
discretionary expense limits.

The greatest feature of SaaS has been the ability to take a 50k software
package and make it a 500/month subscription that people who actually need it
did not have to go through the official procurement process and could simply
expense it.

From the orgs where I worked, $500 to $1000 per month seemed to be the usual
limit for expense items, depending by company size and the position of the
person expensing it. CTOs typically can get away with a lot more...

~~~
smackfu
Software procurement also tends to get hung up on EULAs because someone
decided they want a fancy indemnification section that that lawyers at
EnterpriseCorp don't want to agree to.

~~~
eitally
Just to use an example fresh in my mind... we're a Google Apps customer and
bought a bunch of Lucidchart licenses to help wean people off Visio. One of
the things Lucidchart does that, if we had known about it beforehand, we'd
have written into our terms, is that they refuse to delete accounts even after
a person's Google account is deleted, so we end up paying for licenses for
terminated employees unless we physically add Lucidchart as a checklist item
in our termination process, and then pay a guy to go do the needful and de-
allocate it. Lucidchart is cheap by comparison to lots of things, but managing
licenses is a pita (and they are by no means the only offender).

~~~
outworlder
> and then pay a guy to go do the needful

I've seen that sentence several times in different contexts. Is it in current
US usage?

~~~
smackfu
Only among people who deal with Indian software engineers, in my experience.

~~~
eitally
Right, and I meant it as such. Quite a few of our support staff are based in
India.

------
lanstein
As always, I'm happy to meet for coffee in SF with any founders who want to
talk about SaaS sales in detail. I was the first sales hire at PagerDuty.
Email in profile.

To start to answer, do annual deals whenever possible. Large companies want to
pay once a year via ACH/check/wire rather than dealing with credit card
payments and expensing, etc. Often times credit card payments are prohibited
(though that rule is often ignored). Money up front is key for the business.

~~~
hunvreus
I'm most likely gonna take you up on that offer.

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GordonS
Late. That's how :/

Invariably we have to spend a lot of time sending emails chasing late
payments, and sometimes making phone calls. They always _eventually_ pay, but
it always takes a ridiculous amount of energy to get to that point.

Oh, and US customers (we are based in the UK) most often still pay by cheque
(or 'check', if you are American :), which take weeks to clear and usually
involve high processing fees. On the occasions where US customers pay by
bank/wire transfer, they sometimes do so while specifying that _we_ also pay
_their_ side of the transaction fees. Bad practice, and very irritating :/

~~~
codecondo
:/

------
raverbashing
Funny how in the US paying with cheques is still a thing

Cheques are practically non-existent in Europe. SEPA all the way.

~~~
mrgriscom
Seriously, it's fucking embarrassing.

To send me money, someone writes numbers on a piece of paper. That piece of
paper is physically transported hundreds/thousands of miles to me. Then I have
to write on the piece of paper. Then I take a picture of the piece of paper
and upload it, where someone reads the numbers written on the piece of paper,
and actually transfers the money. Is this really how the world works in
2015???

~~~
mcherm
Well, if I'm sending out payments then that's several days of "float" where
I'm still earning interest on the money because all those physical pieces of
paper are still in transit. So given the choice, why wouldn't I go with the
less efficient process?

(That's a rhetorical question - but feel free to answer it if you feel so
inclined.)

------
vivekpreddy
If you're a startup selling to the enterprise, I would highly encourage
billing upfront. Collecting cash upfront has huge ramifications for cash flow
and how fast you can grow the business.

In terms of payment, it really depends on the company and size of deal. For
some companies you can send an invoice and they'll send you a check back
quickly, but the larger enterprises usually will need you to fill out a PO,
you'll certainly go through procurement, and then you'll be able to invoice.
I've typically seen Net 30 days for payment due date, but some companies may
push back to Net60.

Credit Card usually only works for smaller transactions (<$10k) or monthly
recurring charges.

------
jeremyw
There is justified pessimism here about getting enterprise checks paid on
time. An early colleague taught me to make relationships inside the accounting
department, address invoices and questions to one or two people specifically
and personally thank them for their time. For that small effort (15 minutes
per month), I get direct reminders about deadlines and payout boundaries, and
consistently good paper turnaround. Doesn't work universally, but holy cow
when it does.

------
snowwrestler
I purchase services on behalf of a company; not a huge one but has some
"enterprise-y" trappings. That said, make sure you're doing thinking and
research about the companies you are targeting with your business. There's no
one answer that covers all B2B transactions.

For me, dollar amount matters. Is your service $100/month? It can go on a
credit card and get expensed; Legal might take a quick look at your online
standard terms and conditions and privacy policy (which must exist if you want
to sell to enterprises) but not likely to argue anything.

Is your service $5,000/month? Then I need a contract that is approved by the
lawyers and signed and dated by human beings, and an invoice that Finance can
validate against the contract for audit control, and then they will send you a
check. Because all that is a pain in the butt, I prefer to do the whole thing
only once per year on an annual renewal.

Is your service $20,000/month? All the same legal stuff above, but now I might
prefer monthly or quarterly invoices for cash flow reasons. But I'm guessing
since you're asking here that your SaaS business is probably is not charging
$20,000/month. :-)

------
cperciva
Some of my largest customers pay me via Paypal. I've offered to take credit
cards or ACH, but apparently they like Paypal.

Mind you, my largest customers are paying a few thousand dollars a month, so
I'm sure they're avoiding paperwork compared to the million-dollar-purchase-
order payments.

------
BjoernKW
I'd say it very much depends on the country and the price range.

In Germany for example by the far the most common method for business payments
is invoice / bank transfer. Up to a certain amount (about €500) credit card
payments are accepted, too though (because that's what middle managers in
larger companies commonly are allowed to spend on their own account without
asking for permission).

In the US paying with credit card is much more common even for business.

Then again, enterprise pricing can easily exceed the usual credit card limits.

Larger companies like to pay annually, smaller ones especially startups are
more likely to pay monthly for obvious reasons.

------
damoncali
Whatever the contract says. But if you have a long term deal, I would
recommend quarterly, or preferably annual billing. Dealing with checks is a
pain. In my experience, big co's are no more or less likely to pay on time
than anyone else. But they don't tend to pay early.

If it's small recurring billing, just have them use a credit card. Even then,
annual billing is preferred - it cuts down on the requests for invoices from
their accounting departments in addition to the obvious cash flow advantages
of collecting a year up front.

------
Flemlord
Seller of financial services software for large wealth managers here. Checks
or wires, annually or quarterly in advance. 3 year contracts with a minimum of
$10k in annual revenue.

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GolfyMcG
We sell to large healthcare companies for anywhere from $1,000's to $100,000's
and it's almost exclusively checks in the mail.

------
ryanelkins
Every customer of mine pays through a bank transfer.

Some pay monthly, some pay the full contract upfront. We offer a discount for
those that pay upfront so it's the customer's choice.

Most of our customers pay within 15-30 days. Our invoice says Net15 but some
customers insist on different terms. It's just another negotiation point for
us. Often the company policy is something like Net60 and the people we are
talking to can't change that.

Whatever the terms end up being, some customers are really good about sticking
to them, and some aren't. Sometimes a customer doesn't pay for 2-3 months and
then we get a deposit for all those payments lumped up at once.

In almost all cases, the people making the payments have no relation to the
people who bought your product. They most likely don't even know them or even
work in the same state (or country). The bigger the company the more likely
this is.

Once you've worked with a particular customer for a while you at least have a
good idea of how they pay.

------
ci5er
In the US: Up-front, monthly or annually (for a discount), ACH. On one of my
current projects, we gave a _MAJOR_ discount to our first two customers for
3-year contracts paid up front. The projects were large enough that this
almost (for certain definitions of 'almost') funded the product/service
development.

If the customer wants different terms, we stick GE-Capital between us to deal
with the impedance-mismatch.

Outside the US, similar structure (not ACH, of course), and usually with
either DB or HSBC there to work out any mutual trade-finance/payment-timing
issues standing between us.

Sticking a bank in-between works well on a number of fronts, and one is that
the client doesn't owe you -- they owe the bank. It's not free, but saves a
lot of hassle for international deals. Even domestic.

------
koddi
This will vary by contract size and type, but for us, it's a split down the
middle of monthly check or wire on annual contracts. In our experience there
is a line somewhere around $1000/month where credit cards aren't commonly
used.

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XERQ
Not quite a SaaS company, but I'll chime in anyway. For SSD Nodes we've done
"trials" for enterprises with an explicit expiration date where the service
gets disabled if we don't receive their payment. This tightens our AR and
incentivizes them to push the payment through their channels faster.

Sometimes a dev from a large company will test us on a smaller package with a
company credit card and expand from there after we push them through the sales
funnel.

Most of our enterprise clients pay using either ACH or check, while the
remaining typically use credit cards.

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superflit
I will say something that is very unusual but I hope other fellow HNers do the
same...

They pay me in CASH inside a cool envelope.

And it feels great seeing real cash, the volume and smell.

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BallinBige
High ticket ACH is the way to go. (5k or above)

Fee's to the merchant will be less < 1%.... The key is finding a processor who
will take on that risk

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BRValentine
We try to get as much as possible up front, with a minimum of half of the
first year up front. After that it's monthly or quarterly payments, depending
on what we negotiate. So far all payments have been by check.

For context, we're early stage with a handful of initial customers, mostly
small companies. Deal sizes in the five figures per year.

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whiskykilo
Always wire payments. My consulting clients are mostly based in Europe for
their HQ's, so they don't believe in checks. They also are very timely, within
5-7 days of a NET30. Like clockwork.

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kvanderd
fwiw -

Worked at a startup that served only fortune 1000 companies. Always late,
late, late, late.....

Good side: Repeat customers. Getting in the door is hard but once you're in it
is easy to stay in if you're doing a decent job.

Bad side: After 6 months of doing business with them you would finally get
your first check. For a startup even with millions of dollars in the bank this
sets your burn rate on FIRE.

------
mpr3
>$1k/month is by wire/cheque. Below that is credit card.

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BorisMelnik
check, sometimes wire. some of the ones under $5k/monthly will do credit card
or do net 30/60

~~~
petercooper
They cut a check _every month_? Or do you group it up into invoicing every
3/6/12 months?

------
hackerboos
BACS transfer in the UK.

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mariogintili
Annual contract here

------
OceanPowers
monthly billing on the 1st, 30 day net.

------
smacktoward
Slowly.

------
curiously
here's a related question.

what if you are a sole proprietor? do I start incorporating and setting up a
business bank account now before they ask for the details?

~~~
throwaway8490
In the USA, banks will only accept one or two checks for deposit to your
personal account if you're using a fictional company name before demanding you
create a business account.

You don't need to incorporate to create a business account, but you have to
register your fictitious name locally. Costs about $40 at various places
around town and they handle all the paperwork and announcement in a newspaper.

For taxes, you just keep all receipts and file a Schedule C. When depreciating
equipment, you need to know the day it was bought.

Also, check if your city requires city taxes. Some do, some don't.

~~~
curiously
okay well im in Canada

~~~
roel_v
Don't rely on the internet for this sort of stuff beyond what you can find on
the website of your chamber of commerce. Spend 2 hours with an accountant,
they'll tell you all you need.

------
bvanslyke
Bitcoin, overwhelmingly.

~~~
blumkvist
Enterprise customers?

Please wake up from your wet dream.

~~~
shillster
Microsoft's data centers have been used for mining for over a year and its
been used by internal teams to compensate people outside the company (working
with open source vendors) and its a very convenient way to bypass the age old
fight for money in the budget.

