doctorhandshakeWhat Being Ripped Off Taught Me
> A contract is toilet paper
It isn't, but you can't get blood from a stone and squeezing costs money.
It sounds like the entity that the contract is with has no real assets and/or is based in a jurisdiction which is hard to enforce judgements in. That's a case where you need to get paid up-front, which is the real lesson in this article.
Be paid or don't work.
I am so deadly serious - do not continue working if your invoices are late.
You don't have to be a jerk about it, just explain to your primary contact that you need to be paid and you pick up tools again when the money has arrived.
BUT it is on YOU to properly negotiate reasonable payment terms. And if you don;t know or don't trust the client then require payment in advance until a stronger commercial relationship can be settled in. Do not be a baby - go research business contracts and payment terms.
Do not be afraid to lose business from companies that are squeamish about paying you - in fact actively avoid such companies.
> Do not be afraid to lose business from companies that are squeamish about paying you - in fact actively avoid such companies.
My boss said that the ones who have negotiated the best deals are the ones that are late paying, complain about just about every bill and will write angry letters when my boss index adjust pricing.
He said it taught him to never offer a really good deal for a regular customer (ie where the upside isn't very obvious).
A professional knows what they're worth and what they need to deliver. On-time payment according on an agreed-upon schedule is table stakes. That's the most fundamental requirement. Nothing happens without that.
Sadly this is true and lesson anyone who has worked freelance has probably learned - either that or I'd wager they no longer do freelance.
Its easy to say don't be afraid to lose business, but when you're starting out, the economy is rough or all you have are the one or two clients, that's a different matter entirely.
One thing I've learned is that you always have to do the leg work, you can't assume someone will do the right thing or keep their word.
Develop a system where even bad clients, can't do too much damage i.e. upfront deposits, milestone-based payments. You have to control cash flow risks, if you are gonna take risks know what risks you're taking and when to get out.
> Sadly this is true and lesson anyone who has worked freelance has probably learned - either that or I'd wager they no longer do freelance.
Sadly, while this is true, there are plenty of folks still doing freelance who have not learned this, and there always will be. It's just one of those lessons that quite a lot of people have to learn from experience, even after reading posts like this. The exact same reason why companies will continue to get away with taking advantage of freelance work.
>>companies will continue to get away with taking advantage of freelance work.
Think of ¡all the exposure! doing this free labor for us will give you! /s
or:
I'll cook you dinner if you do this days of work for me /serious?!
There are also bad suppliers who don't do their leg work. I've "fired" some companies who did great work for me because they couldn't be bothered to send a bill - I know I owe someone some money, but I don't know how much as despite begging they won't tell me how much or where to send it (I only have a phone number) - this bill could get larger, and they can come after me at any time for it...
Please don't be them. If you do good work make sure that you get your bills sent on time.
Agreed. Another important lesson I learned when delivering code to a non-profit org, and them asking me to convert my final invoices into "donations" to the org.
So true. And I'll add, no matter how trustworthy you believe the other party to be based on reptutation, relationships, or otherwise-- they should understand requiring assurances. The worst backstabs are from the people you know and who should know better. And a lot of people will justify it to themselves if they get in trouble. They will continue telling themselves that they are fundamentally good people and it just didn't work out as they rip you off for a lot of money. If they say the equivalent of "why don't you trust me?" that's a red flag.
We’ve also learned this lesson the hard way. These are now the clauses we require in every project we do:
- Payment is due X days after receipt of invoice, or immediately after the consultant has addressed any quality issues, whichever is sooner
- Late payment shall incur interest at 8% above the BoE base rate and a late fee of 100 GBP as per the UK Late Payment Legislation. Partial payments on invoices shall apply to late fees, interest, and then principal, in that order.
- In the event of a late payment the invoice for the next deliverable shall immediately fall due.
- The consultant shall be entitled to shift deadlines on deliverables in the event of a late payment as a result of any work disruption, without incurring any liability.
- Payment shall be made in X currency, or an exchange rate at X date on Oanda.com shall apply.
- The client is responsible for any bank fees incurred by their, or any intermediary bank. In the event of a SWIFT transaction it shall be made with the OUR payment code.
- The jurisdiction in the event of a conflict shall be England and Wales. Neither party shall be bound by arbitration.
- The client and consultant shall both indemnify the other up to the total value of the contract and shall not under any circumstance be liable beyond X GBP.
We also no longer share downloadable links of our deliverables until they are paid up. They get a view/comment only link for reports/data etc.
We’ve found that clients that aren’t willing to accept these terms won’t pay you either way.
We determine the net days on the invoice based on the credit rating of the client. Ironically, the good clients pay within 2-3 days normally, and the difficult ones are very “long tail”. About 1% of contracts tend to fully or partially default on their payments.
We’re in a particularly credit poor industry but our average delay due to late payment is 23 days. Those clients where we stop delivery pay on average 11 days sooner than those contracts where we don’t stop delivery.
This is based on around 2,000 invoices sent over the last 5 years.
Oh and another lesson! Ensuring that each deliverable invoice is small enough that it falls under the simplified claims procedure (in the UK it’s 10,000 pounds) greatly simplifies collection.
It costs something like 80 quid to file for recovery in court and in our experience invoices are immediately paid up when a “Letter before action” is sent.
You burn the relationship, but arguably you probably don’t want it anyway.
It seems like none of these terms would have saved OP though
I think OP needed "emergency service is cash up front".
In a different domain, this is the painful lesson of almost anyone who tries to help people in a bind -- you can try to help, but yours is unlikely to be the advice that sets them straight, so you shouldn't get too invested with unproven or, especially, proven unreliable actors.
>> "emergency service is cash up front“
Neatly distilled I believe you are correct
> Ironically, the good clients pay within 2-3 days normally, and the difficult ones are very “long tail”.
Why ironically? Isn't that exactly what you'd expect?
Good lessons in here, but the part about giving up on legal action because they told him they’d dissolve the entity is questionable. This is where it pays to have a good relationship with a lawyer who will be up front about your chances and the cost of legal action. The sum discussed falls into the difficult range where it could take enough hours to try to collect that you’d be worse off than where you started if the lawyer can’t deliver anything.
However them dissolving the entity and moving their assets and IP around is also not free and will incur overhead, if they actually did it.
Threatening to dissolve the entity seemingly admits that they do have something worth collecting against. In my experience the companies who run out of money just tell you that they’re out of money and they also start losing key employees and your email contacts because they’re not getting paid either. If the company continues to exist and they’re threatening you to not sue, that might be a sign that they do have the money but they’re relying on intimidating contractors to not try collecting it.
Legal action is not free, so all of this has to be weighed.
EDIT: I should explain how I know this. Younger me took a job with a startup that got in over its head with spending but the CEO didn’t want the party to stop. His strategy was to stop paying any vendors and use the remaining cash flow to only pay past invoices for vendors that we needed something from (more work, more product) or anyone who looked like they were going to sue us. If someone got lawyers involved, they got paid. Needless to say I didn’t keep that job very long.
Very very important to get something up front; sometimes half up front doesn't always work for long projects, but you can scope out tranches where if you dont get paid for the first section of work, you walk away.
Has saved me from wasting my time on loads of projects before.
Reading the thread, I think most of us who have worked contracts here have been burned one way or another