This is known as the "Blockbuster Video" model for treating customers for being late. How did that model work out for them?
Dude, these are your CUSTOMERS. Yes, don't be a doormat and YES it sucks waiting 3 months for a check when you expect it in two weeks. But sending 10% a week interest notices for being as little as 1 day late is going to backfire on you. No matter how great you are.
And what will potential customers think of blog posts like these...
The real boon to the netflix model is that it doesn't make you consider individual decisions financially. Once you're on the service, deciding to see something, or keep it longer, or whatever, doesn't have financial implications, so you don't even think about it.
Once you're on the service, deciding to see something, or keep it longer, or whatever, doesn't have financial implications, so you don't even think about it.
Well, it does, though maybe people don't think about it. It's the "health club membership" model. Pay for stuff you don't use.
Just like people figure out they never go to the gym, at some point though some people (such as myself) realize, hey I'm paying each month for Netflix but I don't bother getting new movies (or get anything I really care for), so why not cancel and go for the a la carte Redbox.
When you are in the position of not being paid, you have no practical ability to distinguish between the two at the time. You are not the omniscient narrator.
Also, I'm not advocating being some sort of deliberate jerk or something. You should treat not-customers well too, because someday they may be customers, and that's probably especially likely in this case. But they have ceased being customers at the point of nonpayment, and it's important to understand that.
>> you have no practical ability to distinguish between the two at the time
That's BS. You talk to your customer and tell them payment is due. You then act accordingly based on the legitimacy of the response. Believe it or not, there are quite a lot of organizations that just pay on their own schedule (i.e., 60 days after receipt of invoice, regardless of terms), but they do pay.
Going adversarial at the first moment of non-payment (i.e., "they have ceased being customers at the point of nonpayment") is just a sign of inexperience and honestly, ignorant of how businesses typically work.
Read the original article again. If you tell him about those things up front, he'll work with you.
If you don't realize how easy the "check in the mail" excuse is for people whose job it basically is to sell you on that, consult for five years and check back with me.
This isn't adversarial. This is how payments work. Adversarial is not making payments you agreed to make. Adversarialness has already arrived. You need to react to that fact. Again, that doesn't mean "go directly to lawsuit, do not pass go", but you do need to correctly understand the situation.
The thing is the people who sign the contract aren't often working in the Accounting department and don't have a clue.
I've been consulting for over 10 years and have never not been paid. First, I don't take on every prospect who offers me a project, secondly, I don't overreact on late payments because I don't live "paycheck to paycheck".
On longer projects, I always state up front that I'll just stop work if an invoice is overdue by 60 days. I don't ask for deposits or make counterproductive late penalty threats. But the main reason why I get always paid is that all my customers need to pass my smell test. You can usually tell a nickel and dimer from the first meeting if you know what to ask and look for.
From what I've seen, the people who have the biggest issue with late payments are those who live hand-to-mouth. I've always told new contractors to make sure they have 3 months or more of living expenses before they even start contracting to accommodate payment cycles or interruptions.
--edit-- Hand-to-mouth is the worst situation for a contractor, because they're going to take on whatever projects are dangled in front of them, because of the urgency to pay the bils. When you do that, you end up with the customers with the worst payment records.
Some of it is gut feel. If a person's first impression on me is that they're a douchebag, they get an instant "thanks but no thanks".
But there are some more concrete clues. If they ask for bulk discounts on hours, if they ask to negotiate the rate up front, if they seem to talk "bigger" than they need to, if they think the work you do is "easy", if they act like they're doing you a favor by offering you a chance to bid on the business, etc., those are hints that money will be an issue or that they don't really value your services.
I never, ever, deal with small local businesses - i.e., those that don't seem to have owners with corporate backgrounds. Smaller business owners tend to not be accustomed to throwing around >$100/h for services. I'm generalizing, but if they're paying their staff $10/h, they expect 10 times the output for $100/h. IMO, those guys are trouble, run, run, run away if you can, because you'll get nickeled and dimed out the wazoo.
I'm not a fan of the 10% every week thing, but as someone who co-owned a web development firm, I can tell you we had a very simple contract with very clear terms about payment. If a big company wants to pay us on their own terms, then the agreement gets amended and everyone's happy. If they decide, after signing the contract, that they want to do things their own way, then sucks for them we wouldn't work on the project until we got payment.
So make sure your contracts say what you want them to say, and mention payment terms. If you're working with a larger company, chances are they'll mention the terms they use for payment. Either adapt your contract for that client, or find someone else to work with.
Be very careful in this situation, it's very easy for both sides to get confused which payment terms they are using. Make sure there is a single definitive contract for the project. Many companies you'll work with will assume they are using their standard terms, make sure it's clear that they are using your contract, and your terms.
Not when your have to pay the rent {insurance, child support, tax bill, etc} every month.
In fact, most of the more important creditors we have to keep happy to in order to keep our lives functioning are far less lenient -- and have far more recourse to make our lives miserable if we don't pay up -- than most freelances are with their clients.
I think the notion of having a steep penalty isn't necessarily bad. My problem is how he implements it. It's totally unreasonable to charge someone %10 if they're 15 minutes late. It's even more unreasonable to implement the same penalties for someone who is 15 minutes late and someone who is 7 days late. If he is going to be that strict, he should charge per day and not per week.
Think about it. If I forget to pay and he charges me %10, I'm probably going to wait the whole week to pay him just to make life harder for him as payback. This system over-punishes people who have just made mistakes and encourages and enables his customers to antagonize him.
If a client up-front with me and tells me that they will be late paying, then I'll usually happily give them extension. The problem occurs when clients ignore the invoice, or think that they can get away with paying it at their leisure (whenever that may be).
In practice, my clients have either negotiated better contracts paid on time (I've not had an issue with any client who's negotiated); or paid up the original amount as soon as I mentioned activating this clause.
I think a "city library" model would work better. Patrons don't get get to borrow books until they've returned or paid for the old ones. So as a freelancer, you would stop working until they pay you.
Dude, these are your CUSTOMERS. Yes, don't be a doormat and YES it sucks waiting 3 months for a check when you expect it in two weeks. But sending 10% a week interest notices for being as little as 1 day late is going to backfire on you. No matter how great you are.
And what will potential customers think of blog posts like these...