Hacker News new | past | comments | ask | show | jobs | submit login
Ask HN: How do your enterprise customers pay you?
184 points by zackliscio on Feb 19, 2015 | hide | past | favorite | 117 comments
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?

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.

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. :)

> 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.

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/ http://www.platformblack.com/ or even 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).

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

More like raise the price by 200%. The number of overzealous indemnification clauses and other nonsense makes dealing with enterprise customers worth at least that much.

Interesting point re: T&Cs because I often find that the PAPERWORK is the worst part of enterprise deals - not the time to get paid.

It's shocking how many big companies will send me book-length MSAs, T&Cs, etc and expect me to just sign it. A lot of them have some scary-sounding clauses in them.

It seems especially weird for a buyer of a SaaS product to have their own T&Cs.

Recently I was asked to sign a 30 page T&C doc from a potential customer - and I just said no. To my surprise, they said "ok no problem, we'll just use yours".

I tried this again with 2 other customers, and so far it's worked 2 out of 3 times. On the one that didn't, I'm still kind of in limbo - waiting for a PO nearly a month later... Based on your comment, it sounds like I'll be waiting a while :\

In the EU there is the better payments directive to handle exactly this problem; big companies dragging their feet with smaller suppliers. The law requires NET-30 unless otherwise specified and anything above NET-60 in a contract is normally considered unconscionable. Of course the big companies can fudge that by complaining about issues with supply or by querying amounts, not enough description of supplied services, SLAs etc and delay it that way; but the big companies do run the risk of the regulators coming down on them.

So how does it work in reality? Do big companies violate these directives? Do the regulators fine them?

The key phrase in his statement is "unless otherwise specified". Whenever an enterprise is dealing with a supplier -- and it doesn't matter whether it's software, electronic componentry, services, or anything else -- there is no such thing as an acceptable boilerplate contract or TOS... that is, unless the supplier is bigger than you and refuses to negotiate. Apple is notorious for bullying their suppliers for example, and Foxconn has gone so far as to purchase their own iron mine in order to control as much of their supply chain as possible. It typically takes 4-6 different groups (I feel like all this should be, and probably is documented somewhere... like every company's sales manual. You end up talking with the manager whose group requires the service/product, someone above or parallel to them as a sanity check, someone in the company's supplier management team, someone in the accounts payable org (to get your banking & credit details), someone in Legal to review contracts, a stamp of approval from one or multiple execs, and then finally whomever has to input the purchase request.) within an enterprise looking at it to get an approvable contract, and then another week or two to figure out whose signature it needs to have.

As long as money is flowing and there is no obvious abuse, no one really complains an regulators don't get involved. The wheels of commerce and all that.

Perhaps more apropos is the answer to a different version of your question, regarding a different EU directive: EU 95/46/ec (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:...). This directive covers data protection and proscribes quite a few things that make licensing or operating SAAS services challenging in the EU. Some enterprises take the tack that "well, Safe Harbor covers us." and do whatever they want. Others are ultra-conservative and refuse to use SAAS services that aren't explicitly compliant with 95/46/EC. And, since it's a directive and not actually a law in any country (except perhaps maybe slightly Sweden... which is also quite a bizarre situation, having a FB data center there and all), it's clear as mud how it would actually be enforced, or what enforcement would look like.

To close, I will tell you that The Street looks very closely at the payables/receivables numbers & ratio, just like they care about inventory turns and other supply chain metrics. It's a big, and bad, deal when a large enterprise doesn't pay more slowly than they receive payment (in aggregate).

I could tell a lot of stories but that would be ... career limiting.

> since it's a directive and not actually a law in any country

What? EU Directives are requirements on member states to bring in laws. That data protection directive has been implemented into national law in every EU member state…

> (except perhaps maybe slightly Sweden... which is also quite a bizarre situation, having a FB data center there and all)

Pretty sure Facebook is (legally) based on Ireland, and under Irish Data Procection law (which is the implementation of the EU DPD in Ireland).

> 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.

This one really makes me laugh. Can I use the same excuse when I am late in delivering your order?

Yes, you can but they're still the big fish and we are the small one. Chances are you'll get hurt and they won't. Pick your battles wisely.

Really? And here I always thought enterprises pay at the last minute (or late) in order benefit from inflation. If you have lots of money, then even benefiting from a 0.0001% inflation is worth it.

It's a combo of all those things: inflation, improving the cash flow cycle, and even internal rate of return (i.e. for those 60 days the money is hopefully being used in a capital efficient manner).

I'd say it's mostly because "that's how it's always been", and because they can.

That's how it's always been, because before computers, it typically took 7-10 days to process through company procedures and banks.

And the cash flow cycle / rate of return is laughable in today's ZIRP environment. Especially if you are bigcorp, you can pay at Net+0 and take a loan at ~0% (+/- 0.1%) yearly, which translates to ~0.02% over 2 months, if you so wanted -- and no one would notice.

When I did contracting, I would happily give a 5% discount to get Net+0 -- in fact, a couple of times I raised my rate 10% a-priori and offered a 10% discount if they paid Net+0 instead of Net+30 (the latest I was willing to accept). None eventually accepted; One tried to get it through their bean counters and couldn't - the Net+X for X>30 is so deeply ingrained into most accounting departments that it can be considered an axiom, regardless of how little financial sense it might make in a given case.

swombat is right, and to add one small bit: when we pay late, it is nearly always due to an unforeseen lapse or issue with payment, and that's it. To give you an idea, we have over 8,000 suppliers, where our spend ranges from <$100/yr to $>1,000,000,000/yr. That's a lot of terms and payments to keep track of, and things occasionally break (on our end or the supplier's). For big customers with whom we use standard B2B EDI transactions, we have multiple internal instances of different B2B platforms and work heavily with those suppliers to test an ensure stability, and we coordinate with their engineering teams on upgrades, outages and configuration changes. Ditto that on the bank interfaces.

How does this trick save you money? I'm not really clear on the details of enterprise payments.

It's designed to help the enterprise customer not you; i.e. they aim to get paid for services or products that you provide that they resell (directly or indirectly) before they pay you.

Example; one day 1 you provide a service to enterprise customer (the clock starts ticking), on day 2 they resell that service (with added value etc). The enterprise customer's customers either pay upfront (B2C), day 5 through 9 for customers paying by credit card, bank transfer etc, or pay on day 32 (B2B). Then on day 60 they pay you. So in the case of B2C your enterprise customer has cash in the bank earning interest for between 51 to 60 days, and for B2B customers for 28 days. So they always have a positive bank balance (no need for a rolling line of credit and risks involved), and they earn some extra cash because of it.

EDIT: further technical info.

The technical accounting term for this is positive cash flow. The opposite (paying you providers before getting paid by your customers) is obviously negative cash flow (like a old fashioned mom and pop shop; they buy the stock before their customers pay for it. Please note that modern supermarkets work nothing like this).

It's an interest free loan from their suppliers. They also give interest free loans to their customers, so it's a two way street.

Ultimately, they want to get more free loans from their suppliers than they give to their customers

Just to reinforce this, I worked with a F50 which offered vendors standardized tiers of quicker payments, in return for discounts which were (much) more than whatever their expected interest income would be. The terms weren't negotiated, they were just spit out of spreadsheet based on the interest rate.

I understand the importance of "cash flow", but the real goal seemed to be shaving every nickel to maximize profitability on the deal.

The relative importance of cash flow vs. income is dependent on the availability of capital. A business might take that 2% discount IBM offers to pay now vs. in a month if they are out of working capital and worried about making payroll.

Yeah, I've heard that Carrefour does it that way

I cannot bring myself to upvote this wonderfully informative post.

You don't have to upvote it, but if you ever want to chat about this kind of stuff, shoot me an email. I'm happy to answer questions and offer advice.

I find myself working for a startup enterprise consultancy as my first employer now that I've changed careers and entered software development. One of the primary factors in our success as a company is down to just getting paid, which is not usually an intractable problem, but it is a thing to reckon with. I don't handle that part of the business, but the realities of corporate AP/AR have come close to shutting us down as we endured some lean months there in the first year. Meanwhile, our corporate clients keep chugging along...

Interesting. Thanks for the insight in to your world :)

Happy to share. :)

I really hate it when Enterprise customers force us to compete unfaithfully with banks to finance them.

On the plus side, there's also often very little motivation for the person doing step 2 "provide a PO number" to not sign up for a dollar amount that comfortably covers your expected "interminable amount" of time you'll be providing their purchasing department with credit. You _do_ need to anticipate and factor it in up front though - you can't come back 4 months into the process and say "hey, the price just retroactively went up because you're so slow paying!".

The missing step here is the 'internal champion'. It's usually possible to speed things up if someone within the company is able to push things. I've done this for certain suppliers when we've negotiated favourable terms so I spent an additional 2hrs figuring out exactly who I had to nag to get it expedited.

Of course, it's easier not to care but you can make it a negotiating item (if that's part of your sales process).

They can speed things up if they want to. I hope you're not providing your service for free for 9 months. At some point you need to give them a deadline. It's easy with SaaS, as you can just flick off the switch if they don't pay. Obviously with a large, important customer you don't want to immediately deactivate their account if they are overdue by a day, but you have to have a limit!

Can confirm! My company's typical turnaround time when requesting a PO for non-critical stuff is probably 10-14 days (and trust me, it irritates EVERYONE!), but if someone absolutely has to be paid or something absolutely much be obtained ASAP, we break all our internal rules and can get same day POs. This is obviously not something to be abused, but I wanted to emphasize that you're right.

I encourage everyone to write into their terms what will happen if payments are late. It would be insane not to.

Also, it is a jerkwad thing to do (for some definitions of the term) to right in a destroy clause into your terms (e.g. "When you stop paying maintenance on this software, you must stop using it.") but it really does lock in large enterprises who frequently don't even remember the name of the guy who set the thing up in the first place, and can't imagine committing current resources to figure out how to stop using it.

I feel like I sound either really bitter about my job or that I'm a really awesome enterprise IT manager. :D I'm not sure which is closer to the truth.

This is my strategy for my desktop software, I always make sure the purchasing department and users know ahead of time what is about to happen.

I typically bill a 3-year license on an order form in advance, which basically follows this procedure. It gets settled several months after invoice. For services, I provide a statement of work and an invoice.

Perhaps unexpectedly, I did 2% 10 Net 30 for gov't, and I was almost always paid on time.

aren't late fees the solution to this? I don't know exactly how you have to set it up in the signing contract, but if everyone's always paying you late then putting a "after 60 days a 20% late fee is applied" seems like a good way to either get paid or get more revenue (and in any case get your invoice taken seriously).

In college I was part of a junior enterprise (basically an outsourcing firm for students), and we figured out really quickly that the due date was the pay date after consistently applying late fee logic. Saved us a lot of back-and-forth.

In theory late fees would work well but in practice a large enterprise dealing with a small supplier is likely to do one of two things:

1) Flat out refuse to agree to late fees. They get removed from the deal or the whole thing is off.

2) Simply pay the original amount and ignore whatever late fees you have added on. Don't like it? "Speak to accounts", "we don't have a process for that", "these fees aren't on the paperwork that I have here", "speak to your point of contact", "I don't know anything about that", repeat.

It all comes down to who needs who more. A large company has a mountain of suppliers to choose from and they are often fairly easy to replace. They have potential suppliers trying to get in the door all day long so if you don't like it you can show yourself out. Meanwhile a small supplier only has a relatively small set of large customers they could possibly do business with and they are very hard to get.

> putting a "after 60 days a 20% late fee is applied" seems like a good way to either get paid or get more revenue

That is laughable. The only thing it gets you is ignored. The most aggressive late fee I've ever seen agreed to in any contract is 1.5%/mo starting on day 121 (original was 2%/mo on day 31). Any company I've worked for that has had more than $100MM or so in revenue has simply refused to sign any contract with any sort of late payment penalty, but they would sign 2/10 net 30 contracts all day long. Some companies even require that their accounting department follow any terms for a discount.

Another interesting question: Who decides in the Enterprise that the given price makes sense? And how it is done...

You mentioned six-figures - it can be low, mid or high six.. So does anybody thinks about this there? :)

It depends who's asking, whose budget it hits, what the capex forecast looks like (if it's capex at all), whether the street is currently favorable toward opex (typically reported as "SG&A cost" or "administrative overhead") at the corporation, and how badly the company needs what you're selling. Internal politics weighs heavily, especially in prioritizing spend. Some things that are really important get ignored just because the stakeholder can't sell it to their exec sponsor. Some things that are complete wastes of money are bought because of the opposite. Sales is freaking hard and the only consistently successful way to work with large companies is to bend over backwards to get to know them as well as they know themselves... almost to the point that you're consulting for them.

NET 30 baby

The customer believes that it paid NET 30 ("You received the check within 30 days of us deciding to send you a check. NET 30!") and that I can speak to Legal if I want to press the issue, which (naturally) I don't.

As near as I can tell, this is just priced into everyone's expectations.

It's really sad that it has come to this. I hang out on a forum where the guys are thrilled when they get a Net 30 check within 45 days.

I have a customer (my only semi-regular customer, sadly) that pays like clockwork. Seriously, I've learned that I can go to the mailbox 32 days after I sent an invoice and their check will be there. I hope it lasts!

Do you ever consider charging more as a premium for the delay?


> For example, a big company happily using the $250 a month plan could, quite possibly, be happy to upgrade to a $5,000 a month contract if you offered them the right incentive. (Twenty times as much, you ask? No, transitioning from "pocket lint" to pennies. Stop thinking like a human. Think like a corporation. Corporations are like humans whose smallest increment of currency is the largest paycheck you've ever received.)

> This is important: Enterprise pricing is discontinuous with normal pricing. If the $250 a month plan entitles you to 500 foozles and an Enterprise needs 5,000 foozles, that costs thousands or tens thousands of dollars per month. If an Enterprise only needs 500 foozles, that costs thousands or tens of thousands of dollars per month. If an Enterprise only needs 50 foozles, that costs thousands or tens of thousands of dollars per month. This is partially justified by the amount of pain you're signing up for by doing an Enterprise sales process, but is mostly just pure, naked price discrimination. Enterprises are not price conscious. Don't attempt to sell them based on your price. ( For prices customarily contemplated by software companies.)

A relative of mine has a business which sells to very large companies. One of them pays so much later than even the normally egregious large companies that they get a "special" price, which takes into account the cost of not getting paid for say 120 days. (This company is large enough that it's one of the 30 companies in the Dow Jones Industrial Average [0]).

Related, how many days you have to wait to get paid after you've spent money supplying the thing is called the cash conversion cycle. For a business selling to enterprises, maybe it's 90 days from doing work or building a widget and shipping it until they get paid. Dell back in the day would charge your credit card as soon as you bought a computer, and then only pay its supplier some time later, so that they had a negative number of days, I think around -5; in effect, their suppliers were loaning them money.

[0] http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average [1] http://ycharts.com/glossary/terms/cash_conversion_cycle

We (enterprise buyers) would never agree to that. In all contracts I work on, there is a lengthy back and forth between lawyers working out the terms. Something like a premium fee if we are late on a net 30 payment would be a deal-killer. We know it takes a long time to process payments. I don't intentionally delay, nor am I encourage to delay - it is just that the wheels of SAP turn really slow.

This is one of the things where mathematics gives way to linguistic manipulations.

If you add a "late fee", it's a no go. But if you get an "early payment credit that will appear on your next invoice", it is ok.

Don't know if this is still the case, but for a long time, merchants couldn't add a "credit card fee" (even though they pay it at 2-3%). However, they could give a "cash discount".

Mathematically (and financially) equivalent. Yet somehow different.

One of my companies sold to hospitals. They are the WORST with payables. Unbelievably bad. It was terrible. We eventually were coached by a very friendly client who had pity on us.

We ended up raising prices something like 30% and offering discount terms like 15 day 30% discount.

They never once paid on time for the discount, although we would sometimes get paid in 30 days at the higher rate. (Typical pay rates at the time were Net-180 to Net-270).

So, price it up, and show it as a discount. A good customer inside an enterprise should be sympathetic; if you're good, you can turn it into you and your customer against the customer's payables department. You can say "tell me the real story on payables", and "I have to get paid faster than that or I need more cash than we talked about" to many of them.

I was wondering about this! Has anyone tried it?

I know in my industry (pharma) we offer "prompt pay" discounts to our customers. 2% 30 net 60 for example (payment due in 60 days, get 2% off is paid in 30).

Of course a huge corporate has a lot more leverage with regards to terms than a small contractor.

How does that work? Do you send out the first invoice at 98% cost, wait 30 days, and send a second 2% invoice if the payment still isn't there?

You send an invoice at 100% and put at the bottom 'if paid before xx/xx/xxxx, amount is really $x.xx'.

Obviously this depends on local regulations. For example, in Belgium the rule is that the basis for VAT does not include the 'prompt payment discount'. E.g.: invoice is 100, 2% 10 net 30. How much is the VAT @ 21%? It's 0.21 * 98, so your invoice can say 'total payable before xx/xx/xxxx: 98 + 0.21 * 98, after that: 100 + 0.21 * 98.

I had a long, drawn-out argument with a supplier once whose very accounting manager didn't understand this concept. They would have me pay VAT on the 100, because otherwise, according to them, they'd be giving me 'a discount on the VAT' (that sentence doesn't make any sense whatsoever). So I called the tax office, PLUS an accountant, to confirm the right way for them to bill me, and they still didn't believe me (or rather - didn't understand me). So just to shut me up, they said 'we'll give you another 2% discount' facepalm

Tangential to the discussion above, I guess, just venting ;)

Good question! With a lot of our discounts we do a chargeback. That is, they pay 100%, then we send them the 2%. Not sure if the prompt pay discount works that way though.

an easy way to do it is to apply the credit to your next bill

if you offer a 2% discount on a 500$ service for paying in < 30 days, then you could give 10$ credit on the next bill

In my experience, this results in MegaCo taking the 2% discount, and still not paying within six months.

We've added in a late payment fee that gets added on every month a payment is late. As soon as that first notice goes out saying "You now owe us $X,XXX MORE!" people seem to magically send checks. You have to have that in the MSA/Contract of course.

Yea obviously. Sales absolutely hates when they get their commissions frozen because the customer hasn't paid in 3 months.

Given that @patio11 can have "late" checks, I presume there's already such a thing in place. The problem is what you do when they let 30 days fly by. Many of the recourses available to you aren't worth the risk of losing the client by being a hard-ass.

I've found very few Enterprise customers comfortable with NET 30 terms. We're an interactive agency any deal we do is worth a considerable percentage of our annual income so we don't get too hung up on payment terms unless we're in a cash crunch. NET 30 is "nice" but if you can't do a deal because the terms are NET 60 instead of 30 then you need to figure out why cash is so low...

I've had 45/75 and once 90 day terms forced down my throat. That being said a lot of my clients who have really long payment cycles can be very flexible with us on billing milestones (like 50%+ up front - heck we've had 90% "down" in decembers).

These days all my invoices are done electronically and I have to be honest at least for us we don't often get bills more than a day or two late. I have however learned when we were smaller that generally if something was more than 4-5 days late something was off on the invoice being processed. I stopped giving folks leeway more than about 3 days before I started hounding folks. YMMV.

Agreed. Net75 and Net90 usually only happen when there is something else in the deal that's favorable to the supplier (like a down payment, or a consulting engagement, or co-marketing, or similar). They get something, we get something.

Bigger company less they care about due dates on the invoice.

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.

> 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.

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).

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

Then 1% for 4 days should work equally well, right?

The other common game is the "our fiscal quarter/year is about to end and if you sign by X date we'll be able to give you Y discount." Since most of the time enterprises don't accelerate for anyone, especially a small contract, this bluff is pointless and if your sales guy gets called out for bluffing, they'll be disinclined to do business with you in the future. But, on the other hand, it can sometimes work, and work VERY well. One of our suppliers negotiated with us to sign a 3yr, $5m+ deal rather than a 1yr, $1.8m deal simply by telling us we could lock in pricing if we committed to the longer term. Since it's a SAAS service, they'll getting a ton more money up front, at no extra cost to them. ... Or are they... this is the customer I mentioned in a different comment, where we negotiated quarterly instead of annual payments. It's a great example of a BATNA: we got favorable terms that impact our cash flow much less, plus guaranteed pricing for 3 years on a large opex budget item, and they locked us in for 3 more years with guaranteed on schedule quarterly payments. Everyone loves smooth (as opposed to peaky) sales forecasts.

Marking invoices with 2%/7 NET 30 or any variation thereof is definitely a great practice.

The shorthand means X% discount if paid in Y days, with full amount due in 30.

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...

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.

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).

> 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?

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

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

That, a long with many many other things that become a matter of getting a rubber-stamp from some stakeholder that is protecting a fiefdom, but doesn't really have anything to do with why that software is being bought.

Although, legal review is always a good idea to make sure you understand what you are agreeing to.

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.

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

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 :/


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

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

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???

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.)

I liked the system in New Zealand, in the US it's still the 1970's for payments.

Can you elaborate the New Zealand's system?

Everyone has a bank account number for deposit that can be public, just like a telephone number.

To send money, you log in, paste the number and amount, and hit the send button. If both parties use the same bank, the transfer is immediate, otherwise, it happens at 10pm that night.

There are no "~$25 Wire fees" or delays or other nonsense, which makes tiny bank transactions possible, like here's $1.25 for a cookie, as well as paying rent a breeze. Just like it should be.

When I came back to the US and had to write a paper check again (that wouldn't clear for a week) I was quite disgusted.

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.

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.

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. :-)

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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

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

They cut a check every month? Or do you group it up into invoicing every 3/6/12 months?

BACS transfer in the UK.

Annual contract here

monthly billing on the 1st, 30 day net.


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?

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.

okay well im in Canada

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.

Bitcoin, overwhelmingly.

Enterprise customers?

Please wake up from your wet dream.

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.

Twist: OP is a drug dealer.

Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact