Several years ago I was providing marketing-communications services on contract to a very large B2B publishing company. I had worked for the company for roughly 8 years, and they had paid my invoices like clockwork, at 20 days. Life was great!
But then the company hit hard times. Advertising revenue plummeted for their print publications, and online revenue didn’t replace it. A company sales rep told me at the time, “For a print-ad order that brought in $5,000, I now have to work 40 times harder for an online ad that’s worth $500.”
That’s when I knew old media was dead.
Anyway, over a 6-month period the payment of my invoices got later and later. First it was 30 days, then 45 days, then 60 days, and finally 90 days.
This was bad news for my cash flow (and horrible for my psyche), because the client represented roughly 50 percent of my revenue.
As the company’s payment performance declined, I made sure to let my editorial contact at the company know what was happening; I sent her updates at least once a week.
She was very good about trying to get answers from accounts payable, and eventually they gave her an explanation: employees were the first priority for being paid, and contractors were going to be paid 60 days after the invoice due date.
This meant that since my terms were “Net 30,” they were going to pay me 90 days after I produced the invoice.
I’m not a bank that’s handing out no-interest loans, so I did two things:
1. I changed my terms from “Net 30” to “Due Upon Receipt,” in order to be paid at 60 days instead of 90 days.
2. I asked the editorial director to appeal to a vice president. She did, arguing that I was an important part of their publishing team, and my tiny company and my invoices shouldn’t be treated the same as those from Waste Management or the U.S. Postal Service.
Both tactics worked. Instead of being paid 90 days after issuing my invoices, accounts payable said they were going to pay me at 30 days. And that’s exactly what happened.
This is what I learned from the experience:
1. Generate invoices as soon as you complete your work. “As soon as” means within an hour of finishing the work.
2. Make “Due Upon Receipt” your standard operating procedure. Don’t give anyone terms, unless there’s a very compelling to reason to do so.
3. Be vigilant and hard-nosed about your receivables and make noise when you’re not being paid on time.