I run an engineering consulting firm. We've got six employees, and work on 2-5 projects at a time for large businesses (100 million gross revenue on the smaller side, several of the fortune 500 on the large side). Cost will range from $10k to $50k a month, typically billed monthly. Payment terms range from net 30 to net 90.
Presumably due to the huge difference in size between these companies, they feel they can pay their bills whenever the fuck they want. This is mostly a rant, but if anyone has anything useful, it's always welcome. I'm about to give up and walk away because I just can't keep doing it anymore. Right now I've got $175,000 in accounts receivable, with 2/3 that past due – and $2,300 in my checking account.
90% of the time, they make us sign their contract, and won't let us use ours or let us make any changes. When they do let us make changes or let us supply the contract, they do what they want anyway. I'm a principled person who believes in honoring your commitments and this is painful on many levels.
- oil company (over $30 billion annual revenue). They let us supply the contract. Net 30 terms. 5% late fee on any past due balance, and an additional 3% per month. $75,000 payment in question (two month's service). We send them notices 10 days prior to due, 2 days prior to due, day due, 5 days past due, and 10 days past due. At that point I submit a $3750 invoice for late fees, which is immediately rejected. I get a notice, "as a matter of policy, our company does not pay late fees". Hmm, I'll have to remember that line with all my creditors. I'll spare you the blow by blow, but finally got our payment, 35 days late, and never saw a penny of late fees.
- pharmaceutical company 1 (over $30 billion annual revenue). They required us to use their contract, no changes allowed. Net 90 payment terms, no late fees. We submit a $45,000 invoice, and on day 91, there's no money (they use ACH). I contact their AP, and they say there have been delays and we will receive payment "in the next few days". Again I'll skip the details, but on day 105 I stop all work on the project, and let our primary point of contact know there won't be any more work or communication on the project until we have our money. He flips his lid. We finally get our money on day 110, and work resumes. They finish out the current phase of the project and cancel all future work.
- distribution company (over $750 million annual revenue). They required their own contract. It's got a "disparaging clause" where if I say anything bad about them publicly, I must repay the entire contract amount, pay them the entire contract amount as punitive damages, and pay them the actual losses from the disparaging remarks, as determined by them. So I need to be careful. They actually had net 30 terms in this otherwise insane contract. Sent reminders day 20, 30, and 35. Anyway, we finally see a partial payment on day 45. Remainder of money doesn't come in until day 60. They also refused to do more work with us due to us stopping work from days 45 to 60.
Anyway, I've got a half dozen more stories like this. But I'm feeling sick just from thinking about all this. I've even had two clients straight up refuse to pay – but the amounts in question ($10k, $20k) lawyers tell me I'll spend more in fees than I'll get back.
I knew running a business would be difficult, but damn. Anyway, fuck people who don't pay on time!