Payment Terms

if their terms are net 60, it means they pay in net 120

"Our terms are net 30. If you aren't able to do that, we'd be happy to put you on prepaid check or credit card terms"

Most of my commercial customers paid 30days, a few paid 45days and several paid electronically (never got an actual check).
Resi's would pay anywhere from 5-30days.

I suspended service to ikon.
my invoices stated 30days , they were @90 days
I said 💩 , so I waited for a big storm and i
Quit.

We aren’t a bank. Direct clients are at most net 30. We also know and agree to payment terms before discussing pricing.
On sun work sometimes it’s net 60 but we know before discussing payment rates and I build it in to float the work.
To me net 30 or more means they aren’t planning ahead enough and constantly playing catch up on bills OR they want to make you carry costs while they generate interest on the $ in their account.
Either way I didn’t get into business to slow others to make extra $ off my back just because they feel like it.

Pay the bill or see ya!

I'm not sure about Michigan, but in Wisconsin we have the right to get 1% per month late fees as long as its in their contract.
Its probably too late to amend the contract.
Would your clients go elsewhere if you put the late fees in the terms of your contract?

Kvston said:

To me net 30 or more means they aren’t planning ahead enough and constantly playing catch up on bills OR they want to make you carry costs while they generate interest on the $ in their account.
Either way I didn’t get into business to slow others to make extra $ off my back just because they feel like it.

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Net 30 is a pretty normal term outside of residential workings. Most government is 30-45, healthcare is 30-45, once you get into private big business 60 days is not uncommon at all to see.

I assume you must pay your sub contactors before you get paid?

Mark Oomkes said:

One of our customers sold a building, molds, contract for work, etc to another plastic mold company. Original company has always paid within 30 days net.

New company's terms are 60 days. I call BS. They aren't waiting 60 days for paychecks.

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OK, to be serious for a second...

I am assuming that you need a new contact with them since obviously the old one did not carry over...

Give them two or three prices on your proposal...

$xxx if paid Ner 10
$xxxx if paid Net 30
$xxxxx if paid Net 60

Slow pay customers only pay slow because they can. Typically the only spot that I will find that takes the discounted pricing is the private money, healthcare and public will typically select what their terms typically are and they don't care... they are not spending their own money.

We have one a big corp who is net 60, no problem if you let me know before hand which they did. It probably takes at least 30 for your invoice to reach the final person who pays the invoice, just the ways of a large corporation I assume.

My brother in law runs a machine shop and my brother a trucking company, we have chatted about payment before and they were both surprised that most of our clients are net 30 and pay on time or early.

I guess if they pay after 60 every time then you don't need to worry about non payment, just the first payment will be "late"

Philbilly2 said:

Net 30 is a pretty normal term outside of residential workings. Most government is 30-45, healthcare is 30-45, once you get into private big business 60 days is not uncommon at all to see.

I assume you must pay your sub contactors before you get paid?

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I pay when I get paid without delay on construction.
Most of the snow I pay when the invoice is validated so I know I’ll get paid. I know what it means to run a small business to I try to pay asap.

Do they pay net 60 days or review the bill in 60 days. I have been down that road before.
Seems the bigger the company, the longer they think that they can make you wait to get paid.

Net 30 and net 45 are pretty common with bigger companies.
Several eyes have to look at an invoice before a check is issued.
Here's how we did it:
The accounts cut checks on the 1st and on the 15th. If we got an invoice before the 10th, we tried to get it paid by the 15th. (It didn't always happen)
The invoice would hit my inbox, then I'd approve it and assign it to whatever job.
Then my boss (the owner) would approve it and it got sent to the account. (Sometimes they got kicked back to me for more information).
Typically, I'd roll through invoices once a week. My boss did the same.
5 days turn around is pretty good considering the process.
When I think about life before scanning and emails, when a big stack of invoices went through the fax machine, it amazes me how we could turn them around that quickly.
Every cog had to mesh for this to happen.

Kvston said:

I pay when I get paid without delay on construction.
Most of the snow I pay when the invoice is validated so I know I’ll get paid. I know what it means to run a small business to I try to pay asap.

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Consider yourself lucky.
I'd have subs calling the office because they dropped off an invoice on the 10th and there wasn't a check in their mailbox on the 16th.
This was just the small subs, one in particular who was also a farmer and wasn't very successful at that either.

I have it figured for Net 30.

It's kind of a clusterfoxtrot...company that sold was paying the bills for the new company until March 23. They billed them...whatever. Their building is surrounded on 3 sides by the selling company. It would be stupid for them to hire someone else, but never underestimate the stupidity of some people. But I can easily plow around them, mow around them, etc. And as I get older, I really don't care.

They haven't signed a summer contract yet. Not a big deal either.

Had a woman and her husband that owned a bunch of rentals. They paid late consistently. They also paid about 25% more than the going rate once I discovered their inability to abide by the terms.

Another multinational company that is at 45 days, they pay more than normal as well.

I think I'll send them another contract with 60 day terms. Not that it matters since they haven't done anything with the 30 day contract.

We typically work the finance charges in on the front side

m_ice said:

We typically work the finance charges in on the front side

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Thanks for your input...

Kvston said:

I pay when I get paid without delay on construction.

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Kvston said:

To me net 30 or more means they aren’t planning ahead enough and constantly playing catch up on bills OR they want to make you carry costs while they generate interest on the $ in their account.
Either way I didn’t get into business to slow others to make extra $ off my back just because they feel like it.

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So if you don't get paid for 30 days... you do or don't pay your subs for 30 days?

On the subject of being a bank, way back when 20 plus years ago we switched from invoicing our contracted work at the end of the month to the beginning.

It made a huge difference in cash flow. we still invoice salting, etc either once or twice a month if it was a big month but plowing, shoveling, mowing, etc all goes out beginning of the month. We also invoice extra work over $XXX upon completion as well. I think we started that about the same time.

I can still remember JAA preaching how important cash flow is(he was not the reason we changed our invoicing cycle)...even more so than profit. And some fella on lawnsite just said the same thing last week. And I still laugh about it. Yeah, it's important, but more important? Not so much.

Mark Oomkes said:

even more so than profit.

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Wait, so lawn jockey's actually know how to calculate profit?