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Discount for "early" payment.

Joined
Nov 19, 2007
Location
marysville ohio
One of my customers decided to help me out, (their terms) by changing their terms to 60 days net. Supposedly this helps us both out. My customer is HUGE in comparison to me, they offer to hook me up to a company called C2FO. These guys offer to pay us lowlifes that need the money a way to get paid "early" in exchange for a discount on the invoice. Anybody run into this BS?
 
One of my customers decided to help me out, (their terms) by changing their terms to 60 days net. Supposedly this helps us both out. My customer is HUGE in comparison to me, they offer to hook me up to a company called C2FO. These guys offer to pay us lowlifes that need the money a way to get paid "early" in exchange for a discount on the invoice. Anybody run into this BS?

See "factoring of receivables". The game has been played since before Sumer had their little water problem.

Wise providers of goods and services do it for THEMSELVES.

"2% 10 days, net 30" was the gold-standard textbook approach for Donkey's Years. ADDING interest beyond 30 days came soon after.

You don't need a nickel's worth of third-party "help" to make that part work. The math is a few built-in box-ticks and a number in any Accounting & Billing package or service-provider's option set.

If the buyer has already bent you over the parts washer tub, dry, for net 60?

That has become your "new normal" already.

Be happy they don't then run it to 90 ...or beyond.

I'd get an interest charge into place for slow pay. Then at least you have a record of something you waived as a courtesy to a good customer... if even you choose to waive it at all.

The other "gold standard", BTW, was fiscal common-sense. That once a(ny) receivable goes past 90 days, larger and larger reserves are meant to be established on YOUR books for the increasing probability it will becomes a 100% loss. Past 180 days, one might turn them out to a collection agency for fifty-cents on the dollar MAXIMUM. If you still sell to that slow-pay? Your rates have to keep climbing. If they absorb that increase? There's HARD PROOF they are financially unsound, badly managed, or both. Find replacement customers, and FAST.

Healthy customers, by contrast, GRAB those 2% discounts like free money. Because - to them - they ARE.

To YOU - that uptake means at least the cash is flowing in to keep the damned lights on. And your paperwork costs less for not having to chase the buggers and keep entering the debt on the books, then set up reserves, etc.

I did say "Healthy", so net 60 is a warning flag, already. They don't have to go broke. All they have to do is go stupid-greedy. Eventually YOU go broke and they simply move-on to the next victim.

That, too, has been going on since Sumer had their little water problem. Some call it "feudalism".

Same thing, Corporate or Political. Them as has, takes. Them as don't, quakes.

Victim as withdraws consent no longer is.

A victim.
 
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See "factoring of receivables". The game has been played since before Sumer had their little water problem.

Wise providers of goods and services do it for THEMSELVES.

"2% 10 days, net 30" was the gold-standard textbook approach for Donkey's Years. ADDING interest beyond 30 days came soon after.

You don't need a nickel's worth of third-party "help" to make that part work. The math is a few built-in box-ticks and a number in any Accounting & Billing package or service-provider's option set.

If the buyer has already bent you over the parts washer tub, dry, for net 60?

That has become your "new normal" already.

Be happy they don't then run it to 90 ...or beyond.

I'd get an interest charge into place for slow pay. Then at least you have a record of something you waived as a courtesy to a good customer... if even you choose to waive it at all.

The other "gold standard", BTW, was fiscal common-sense. That once a(ny) receivable goes past 90 days, larger and larger reserves are meant to be established on YOUR books for the increasing probability it will becomes a 100% loss. Past 180 days, one might turn them out to a collection agency for fifty-cents on the dollar MAXIMUM. If you still sell to that slow-pay? Your rates have to keep climbing. If they absorb that increase? There's HARD PROOF they are financially unsound, badly managed, or both. Find replacement customers, and FAST.

Healthy customers, by contrast, GRAB those 2% discounts like free money. Because - to them - they ARE.

To YOU - that uptake-up means at least the cash is flowing in to keep the damned lights on. And your paperwork costs less for not having to chase the buggers and keep entering the debt on the books, then set up reserves, etc.

I did say "Healthy", so net 60 is a warning flag, already.

These guys are the 3rd largest railroad in the States with 3rd quarter revenues In 2018 of 3.13 billion and net income of 894 million. They don't need to fuck around with me. But their is profit to be made if you dick around all of us amoeba. After all what are we going to do about it? It's like bringing your fists to a gunfight.
 
These guys are the 3rd largest railroad in the States with 3rd quarter revenues In 2018 of 3.13 billion and net income of 894 million. They don't need to fuck around with me. But their is profit to be made if you dick around all of us amoeba. After all what are we going to do about it? It's like bringing your fists to a gunfight.

Call me lazy, I always took MY companies to some other gunfight.

Esterline Medical, I kicked all the Yew-Ass Hooverment Agencies off the customer list and onto COD or go pound sand. Those were ALWAYS slow-pay.

Irony is, for SOME purchases, "COD" actually saves a buroturdsy a goodly chunk of admin costs, their OWN end. Experienced old Warrant Officer, Walter Reed Medical Center put me wise to that about 1971 when he BEGGED us to put them on COD. Then explained why it served the patients faster and saved the taxpayer money.

Cost of the "standard" Federal Procurement paperwork otherwise added $134 and over three month's delay to a $17.50 spend for two day delivery.

That sort of overhead is where the "$600 toilet seat" legend got started. It was for-real, massive overheads even had the toilet seat been free.
 
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The work I do for them is easy, for me anyway. I earned 163.00 / hr on what I did today. It is piece work, so it varies a bit. So it amounts to about 3000.00 / year for me. They will never go COD so maybe it is time to fire this customer.
 
The work I do for them is easy, for me anyway. I earned 163.00 / hr on what I did today. It is piece work, so it varies a bit. So it amounts to about 3000.00 / year for me. They will never go COD so maybe it is time to fire this customer.

$3,000 net?

Have a look at "contribution margin". Also "opportunity costs".

Might be well worth keeping. Or shed two years ago.

Those are the sort of equations one should always have a good feel for without having to do much "new" math but ever' once in a while.

Just as a Machinist comes to have a "feel" for what will be involved in the part, a "Merchant" has a feel for what will make money, break-even, waste it.

Or -the most important of "crash landings" to be avoided? Putting better prospects, entire, at risk.

EX: A different job that earns only half or less that $163 rate.. but runs at the level of $40,000 a year. For five years. And is paid in 45 days or less, every time.
 
$3000.00 a year is like $60.00 a week. Figure out what your interest would be on that amount and add it to each invoice. Or tell them YOUR terms are net 30. If they can't deal with that internally and get you a waiver, you are sorry but you will no longer be able to do their work. At that annual amount, if you lose them it's no big deal.
 
$3000.00 a year is like $60.00 a week. Figure out what your interest would be on that amount and add it to each invoice. Or tell them YOUR terms are net 30. If they can't deal with that internally and get you a waiver, you are sorry but you will no longer be able to do their work. At that annual amount, if you lose them it's no big deal.

Nah. Just set new terms:
In the interest of efficiency, our Delivery Date commitments are now being individually customized to each customer and task.

Subject to adjustment, initial quotes will compute lead times to match number of calendar days between issuance of the most-recent invoice and posting of settlement with our bank.

Please be aware that existence of any outstanding invoice not yet visibly queued for settlement may give rise to an open-ended delivery date.

Meanwhile, CCF terms apply, ALL scheduling.

"CCF" - Cash Comes First - is how I made my bones, one Day Job. Paid faster than anyone else in my industry. GOODS, plus Invoice in by Tuesday, paid by Thursday. GOODS plus invoice in by Thursday, paid next Tuesday. QC step in between, of course.

What with "Just in Time" scheduling, odds are we had already sold the goods and booked the payment by the time we cut those checks.

Always got the best quality. Always had folks willing to drop whatever else, pounce on my tasking. Always got their best price as well. Our biz reliably paid them, their staff, their materials costs, their utility bill. WHATEVER they faced that could not wait for long.

Simple. We KNEW we were NOT a bank. We did not expect our contractors to be our bank.

Nearly everyone else got it wrong on BOTH. Most still DO!

They kidded themselves they were making more money at gaming each other than we were making simply delivering more goods faster and at lower cost to more customers, more often, "at a combat speed"..

Commerce is just one more form of warfare, after all.

Humans compete. For everything, ultimately. Air, water, land, food, access to mates.., who gets to have the most free time, the neatest toys..

Everything.

So the reverse is true, as well. Warfare is just one more form of commerce.

Repeat range, Batallion, fire for effect !

:D
 
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Fast payment (30days or less) = priority service
Slow payment and having to ask 10 times after due date = not a priority, or take your panics elsewhere.
 
The work I do for them is easy, for me anyway. I earned 163.00 / hr on what I did today. It is piece work, so it varies a bit. So it amounts to about 3000.00 / year for me. They will never go COD so maybe it is time to fire this customer.



Na, you don't need to fire the customer, you need to learn how to play poker. You simply explain to your customer that as the Vendor you set the payment terms, not them.
Explain that extending payment terms is a courtesy on your part allowing them to avoid having to bring a check when they pick up their parts.
Now the poker part comes in from the fact that they could well decide to take their work elsewhere. A lot of that will depend on how hard your services are to replace.
 
3rd largest "railroad" ???

I thought you did racing cars....

Yes, it's a normal thing these days, I know of a company that even offers early pay,
based on a complicated formula. The sooner you want it, the lower the dollar amount.

Time you want paid, multiplied by some crazy daily changing factor based on the current price of Kavorkian whale spooge (traded only on the new zealand exchange)
 
3rd largest "railroad" ???

I thought you did racing cars....

Yes, it's a normal thing these days, I know of a company that even offers early pay,
based on a complicated formula. The sooner you want it, the lower the dollar amount.

Time you want paid, multiplied by some crazy daily changing factor based on the current price of Kavorkian whale spooge (traded only on the new zealand exchange)

I'll weld for the railroad as well.
 
They owe you the money, You set the terms.

"2% 10 days, net 30"
is really common.
As said most companies jump on that 2%.

Some companies do a 90 or 120 day, but then the suppliers charge more built into the base rate.



Don't go anywhere near the third party, the customer probably get a % for the referral somehow.
 
Lots of good advice, especially the part about them being the customer and you are the vendor.

I don’t do work for most companies locally, they are 90-120 days.

Should be answered with a quick call to their office, my terms are 30; you can do whatever you need to do on your end, to get me a check in 30.

But if it isn’t a big part of your yearly income, but you want to keep the prospect of work, I would raise your rates accordingly. I’ve done that on several jobs that I knew the customer wouldn’t pay for 90 days.
 
I've found that customers who want 60 days, really want 60 days to think about it, and then another 60 days to pay it. I've found CC the best way to go with these people. It costs me 3%, but the money's in my account tomorrow.
 
I've found that customers who want 60 days, really want 60 days to think about it, and then another 60 days to pay it. I've found CC the best way to go with these people. It costs me 3%, but the money's in my account tomorrow.

How do you handle charge backs?
 
I got one of those letters from a customer and it pissed me off big time, but they are normally smaller fairly high return jobs so them paying slow is not going to cause me major problems. I had to turn off my emotional response and think business wise. My customer was already paying on 60-90 days so it really didn`t make a difference. They already paid a higher hourly rate due to them paying slow wanting rush service all the time and the jobs not being particularly big. I must admit the temptation to send back a snarky email was high.

$3000 a year I assume it is not one bill per year. Is a $1000 invoice being a little late going to make that much difference to your cashflow. Sounds like it is lucrative work, if you start being belligerent about it they might be forced to start shopping around and they are likely to find someone who has no idea what you are charging for the work and will end up doing it for half what you are charging.

Your contact at the company is stuck in the middle between you and the accounting dept. If you have to raise your prices 2% which it tons with current interest rates that's not a big deal for him or her, its easier than looking for someone else to do what you are doing. If you start asking for treatment different from all their other suppliers, the internal hassles could make it easier to just find a new supplier.
 








 
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