Never Be a Customer's Doormat
inc.com
inc.com
It has either been simple ego or a sort of test to gauge just how far the small company is willing to compromise itself.
>"The small company marshals all its resources to create a detailed proposal (requirements, SWOT, etc.) which, when completed, ends up as an RFP that goes out to a dozen vendors, or maybe just to threaten their existing vendor with some fake competition."
Yep, this is Procurement 101. I've seen folks who are too lazy to bother doing a cursory search and replace to clean up the vendor name and logos.
There should be some technological way to determine if your copyrighted work is being used honestly.
When I worked as a consultant doing software customisations, they were always done in (at least) two statges. Proposal and design work was a separate contract from implementation. It was made clear to the client they could go elsewhere for implementation. They rarely did.
The former may stay with you for life. The latter will use you until you say no.
It is very rare that it's a large company who needs the largesse of a small entrepreneur to stay in business, though.
I see this in treatment of individuals as well as costs. Many clients assume they can bully and abuse consultants. "We're your biggest account, so please work the next few weekends and we'll help you get the next project." You can't earn a trusted relationship without a first project, and the slippery slope starts.
The key for any small business is actively screening your prospects. It's hard to turn away any business, but if you screen for "How is this person to do business with" it can save aggravation along the way.
The key is you have to deliver on what you say will. Then you can earn the respect.
1st, I offer 2% sconto (discount/allowance), if they pay within 7 days. Customers who can count, and have no cash flow problem normally use this 2% discount.
2nd, I'm using a factoring bank, for those customers who payed late the first time. The bank will pay me immediate and has good attorneys to get the money from the bad customer. Factoring will charge a margin comparable to 3 month EURIBOR.
Normally a customer who has been contacted by my factoring bank phones back within a few days, claiming that they will pay next invoice immediate to get rid of the shame of a factoring bank registering a bill debt.
I'll then try the next (3rd) invoice in normal way. And if they dont use the discont and pay within 7 day, I'll stop doing business with them, regardless how much they beg me to complete the project.
My time is to valuable to fight bad customers.
This of course only works, if you have a real contract with the customer. So getting the paperwork right is always the zero step.
"A quick note to say that I am really disappointed that you have still not paid me the [..] that I'm owed for the work I did for you. In the grand scheme of things, it's not a lot of money, but actually I think that this is more a matter of respect.
I have always been there at the drop of a hat to sort out any problems you might have. I love working with you and have always taken our relationship as more than just client/supplier. But if I can't rely on you paying promptly or it takes several attempts and reminders to get my money, that's not good business.
I'm not saying that I don't want to work with you, I do. But if I don't receive what I am owed within the next couple of days, I will have to think twice about helping you in the future."
Never hesitate to ask what's rightfully yours.
If the late payment decision comes from the project stakeholder, the person who deliberately engaged you, your contact at the client, then really your relationship is over when they decide to mess with you. Do a standard collections process with them, then terminate the relationship.
If the late payment decision comes from a procurements or payables department, as is often the case, then they don't care about any of the emotional appeals in your letter; in fact, they don't even care about threats of reduced availability or flexibility. People in those departments are compensated for deferring and reducing payments; they aren't measured by how well they maintain the actual customer relationship. Do a standard collections process with them.
You might consider informing your client contact of the dysfunctional payments department, but I haven't seen that produce reliable results (again: the incentives of the procurements or payables people aren't aligned with those of your client contact).
It's important to understand why you aren't getting paid. Here's another fun thing to know: like it or not, sometimes its your fault; if you're working with a company with a formal payments process and you don't follow that process to the 't', you're going to get paid late no matter what you tell them.
> if you're working with a company with a formal payments process and you don't follow that process to the 't', you're going to get paid late no matter what you tell them.
There is a class of clients for whom I allow 6 months to be paid, namely where the money comes from an academic funding agency's grant that is administered by a university. Just have a day each month where you make sure that there is progress being made on your slow invoices, and don't be afraid to use the 'phone.
Toyota (a company that generally has its act in order) once paid my consulting bill twice, and then next month paid late. Both times I brought it to their attention and it was rectified immediately. Both times the project stakeholder had no idea, he had just approved them. Left hand doesn't know what the right hand is doing.
Incentives are everything in economics.
I have a question. I have a friend which does interest on late payments. Not sure what his interest is like, but say something like 1-2% penalty for late payments. Do you recommend that or think it's a good idea?
This is good advice. I'm a PM in a large firm that engages vendors/suppliers. If a supplier that was important to the project was having payment issues I'd certainly escalate to a contact in Payments. It might have no effect :-) but I'd have a go.
"Dear [Customer POC],
Your account has a past due balance of $XXXXX.XX. This payment was [agreed/scheduled] to be made by XX/XX/XXXX, in accordance with [our/your] Terms and Conditions. If this balance is not paid before YY/YY/YYYY, we will follow with the appropriate legal action. Please send payment to [address].
Sincerely, [you]"
You want this to look official and direct. Be brief, and don't be afraid to reference legal action even if you don't intend to sue; "appropriate legal action" leaves the next step up to your discretion while still making a material threat to the delinquent customer.
If your customer is a single person, or a very small business, your more emotionally targeted approach will work well. However, with large companies, you need to give them clear-cut rules with consequences outlined if they should break them. Lawsuits are expensive for big companies as well.
Running a support organization is hard because people who have both social skills and technical skills are... well, they are very, very valuable, and quickly price themselves out of what you usually pay support. Most people focus on one or the other (the technical or the social) - so usually you end up hiring either socially optimized folk and try to automate (or teach) the technical side, or take the technically optimized, and try to put a level one 'shield'(of folks with social skills) in front of them)
You also get huge levels of burn-out in support. I think this gets worse the more you try to stick with policy (as opposed to "just help the customer") - at least for me, it's really rough when I'm supposed to just get the guy off the phone, rather than solve a problem. Even in the best of times, doing support is rough; everyone you encounter has a problem with your service. The phone support desks for larger services are usually places people go to become cynical.
My /goal/ (and I don't achieve this goal very often) is to go out of my way for customers who ask in a way that is easy for me to deal with on a logistical/emotional level (yeah, emotions are important here; I have... limited support resources) - and then to be more "well, this is policy" for the more aggressive, harder to deal with customers.
The hard part is that the customers who are best of all... those who don't ask for any extra attention at all, are the hardest to give something 'extra' to.
(now, I can identify about 10 ways that I'm failing those customers right now... I'm just saying, it's harder to know what people want when they are not aggressive about it... but those are the folks who burn the least customer service resources, both in the 'use' and 'burn out' senses.)
The guy did wonders - worked really hard and delivered excellent product, on time.
He issued us with an invoice.
We didn't pay.
He followed up - asked why we hadn't paid.
We hadn't paid because his paperwork didn't conform to "what we needed" in some obscure bureaucratic way.
It took him a few weeks of back-and-forth to get his payment.
Needless to say, he declined all our other offers of work, and we got worse quality product, from less flexible suppliers, at greater cost in future.
Payment departments can harm your company.
1) Never back down to a larger company. As soon as you give in and give them a break, you're going to be a doormat. Always be the squeaky wheel.
2) Always get everything in writing. They offer you a verbal deal? Say not until we both sign it and its on paper. Both companies and sales people will always balk at having something you can show a judge in a small claims court if its just an empty promise. Then you have something to hold their feet to the fire if it doesn't work out.
3) Always, always, always be willing to walk away from a deal. It's a big account? You could save yourself hours of frustration and use that energy to find several smaller companies. Or you could fine another larger company who will treat you better. Nothing is worth being someone else's patsy, nothing.
In cases where this can't be done or isn't practical the next best thing is being able to provide contemporaneous notes of conversations, dates and times with people you have spoken to. I don't mean to be a little old lady "what is your name?" or anything like that.
I've used these many times in the past (not in court because it never got to that) in order to get something from a higher up by building a credible case and trail of evidence. This is known as "memorializing" that is you take and keep notes which you can use at a later date.
This is not simply "well I spoke to Fred J. and he told me that..." it's keeping complete track of back and forth with various individuals and interactions what they said and when. Many times someone higher up will simply judge whether the events could have happened [1] and the person on the other side will not have exact notes (why would they?). In any case it has worked for me.
And if it gets to court you have at least a leg to stand on, sound like you have your act together, and can present at least a cohesive case of your version of the events.
[1] Edit: Important that you don't exaggerate. The person higher up will judge the validity of the entire exchanges by whether they feel the lower level person would possibly promise or say what you claim. The more it sounds like what you said happens could have happened the more likely you are to get what you want in the end.
Not that I have had to put this to the legal test, but there is then this sort of written documentation, accessible to both parties, of what has been agreed and when. Having everything in an email folder is easier for me than keeping a log book.
As far as "legal test" things rarely make it to court (even with contracts). At the point that's happened you've already lost. They are normally settled before that for anything of a small nature. Anything larger (and it's hard to define small but I know it when I see it) needs a contract.
I work at a mid-size software consultancy. In our region, the company's reputation is that of a trustworthy and flexible partner, with good engineers.
Our customers are mostly large companies (5k+ employees). It is not uncommon that, for a new project, we already start working for them before anything is on paper (more specifically, before an official purchase order was prepared by the customer). Middle management at the customers love this, because they usually hire consultants for urgent problems, but their internal bureaucracy prevents them from getting a purchase order out fast enough.
So, if your reputation is strong and customers will want to get back to you, I believe that point 2 becomes less important.
I once asked one of our managers why he didn't immediately get a particular verbal agreement on paper. He said "we have to work on trust anyway. We really don't want to get caught in a lawsuit, since it'll cost us a lot of money and energy - if there's a lawsuit, we already lost. So, we simply only work for customers that we trust".
The only case that I know of where we didn't get paid was when a customer went bankrupt. No amount of paper would've saved us there.
I have a friend, that was hired by a large media company to do some 3D models that the media company was hired to create to Siemens.
He never bothered in making all the proper papers, and just worked away.
Now Siemens got the 3D work, and ran away with the money... And how you can sue Siemens? They are so huge that if you attempt that they will make you go bankrupt in lawyer costs only.
This is typically known as starting work "at-risk". You're right that it's a great way to show you're a good supplier. Usually starting work at-risk comes with the caveat that if the customer doesn't sign the contract and/or issue the PO in 2-3 weeks then work will stop.
You are very lucky to be able to pick and choose your customers and work with only those that your company trusts. Not all industries have that option open to them.
I had an experience that went much further than the "pay us what you owe now or else" stage. At some point I want to write that up so that people can see how to pursue a debtor past that point and what pitfalls to look out for.
Funny thing is, word gets around real fast that you go after people who try to play you - and you get better customers because of it.
One of our clients is a huge company (it is a conglomerate, that in several areas it has the first place in market share), and it works by making a price contract with you, and while the contract is in force, you must sell for the price set on the contract start.
My mother got good in negotiating those contracts, and not allowing the client to push us around, and this resulted into a profitable relationship, but we know that this big client left several of our competitors utterly destroyed, it leaves a wake of company destruction...
It is because many companies, several bigger than my parents (my parents company have no employees, and sell small amounts of stuff used mostly for emergency repairs stock), believe they are too small, and that such big client is awesome and they must then take their first term of the contract at loss to attract the client...
The problem is that after the contract expire, the client just refuse to raise the contract much above inflation, thus if you accepted a past contract at loss, you have suddenly to play hardball to Chuck Norris level to get profitable again, since the person let themselves get pushed around in first place to get the client, they usually don't negotiate enough, and of course, get abused in the way that the client repeteadly orders lots of stuff from them until the losses are too big and they fail.
We learned better, we made clear to that conglomerate, that we won't sell at loss, we prefer to not sell at all, than selling at loss.
It's crazy that one has to actually put this down, but that's perfect sense. Selling nothing is more profitable than selling at a loss.
Sometimes, such reputation does most of weeding-out of clients with the intention of empty promises. Setting your market value too high isn't recommendable, but setting it high is definitely important.
(Skip to 1 minute in to skip intro.)
To wit: "Fuck you. Pay me."