Terms of Endearment

Terms of Endearment

I’ve been getting a LOT of requests for help lately with payment terms. It seems as if the recovery is opening up business, but accounts payable (purchasing, etc.) has been given Ming the Merciless-like powers to keep the wallet closed.

Never negotiate or reduce fees (without removing value). You can negotiate terms, but do so on your terms.

For example, offer a 10 percent (or whatever) discount for payment in full on acceptance of your proposal. That will trigger a rule in many firms that any discount must be accepted.

If you’re offering more standard terms, e.g., 50 percent on acceptance and 50 percent in 45 days, then make it clear that “acceptance” means with the signed proposal or the oral agreement. Include a first invoice with your proposal. Send the invoice several weeks ahead of the start date if it’s scheduled for the future.

When a client says, “We have a 60-day mandatory payment rule,” ignore it. Here are two solutions:

1. I know you can approve a manual check, and our agreement is 50 percent payable upon acceptance. If your internal mechanisms aren’t geared for that, then simply create a check outside of the system.

2. If you insist on maintaining a 60-day delay, despite the terms of my proposal, I have to remind you that I am a small business and cannot accept those kinds of delays (because it’s more likely to be 90 days or worse if they’re telling you 60). Therefore, the fee for the engagement, which is now based on current use of my money, will have to be increased by 10 percent. I’ll create an addendum for us to sign. Of course, if you can arrange immediate payment, then I can honor the quoted fee.

Let’s be clear: Just because you’re dealing with a corporation which has rules doesn’t mean that you can’t have rules. And your “rules” should include the fact that you can’t pay your mortgage with promises, that your money is worth less the longer it takes to travel to your account, and you are not obligated to take risks of non-payment.

If the buyer and you have a trusting relationship, and you have conceptual agreement on a project which shows a strong ROI for that buyer, he or she will find a way to get you paid properly, unless you capitulate because someone cites a “rule.”

Here’s my rule: I’m very valuable, and you get what you pay for when you pay for it.

© Alan Weiss 2009. All rights reserved.