in Business

Complaint #1: “I can’t pay you until I get paid”

I’ve worked with a lot of people over the years, and this post is the first in a very short series of posts about weird business practices. These complaints aren’t about anybody I’ve been working with lately. They’re more of an observation about a lot of situations I’ve happened upon.

The first scenario is this: An ad agency hires my company to assist them with a project and we handle the project and get it done, even taking a part in meetings and conference calls. The trouble begins once it is time to be paid. For some reason the ad agency is having a difficult time getting paid themselves and so they hold off paying my company. Saying, “we’ll send you a check as soon as they pay us.”

Now, this is where I get a little riled up. Let me explain. The arrangement was not that my company and the ad agency would be partnering on this project. Instead, we’re working for the ad agency. Because of this, it is the obligation of the ad agency to pay my company whether they actually get paid or not (as long as we did our job).

If I wanted to accept this situation, I would have expected to receive payment directly from the client, not be paid through the ad agency.

This whole business about not being able to pay my company until they themselves are paid is bogus. The implication the client sends is that I’m somehow responsible for that client paying as well. In all reality, I may have given the ad agency a reduced agency rate that I wouldn’t have given the client directly. This is because I can safely assume that I will be paid and that the agency will assume most if not all client communication issues.

And yes, I treat the contractors we work with on this same standard. If my company chooses to hire you to do something, we’ll ensure you get paid for your work. If I can’t get my client to pay me then it’s my own fault.

I must be from the stone ages, because I see more and more people who don’t get this simple concept.

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11 Comments

  1. I agree completely. If an agency wants to hire you they should have money in the bank to cover you no matter what happens. If not then they should refer you directly to the principal client and you can choose to assume the risk.

    From my experience on the advertising side of the web I’ve found that agencies that can’t pay affiliates (websites, email list managers) on time because their clients are holding back the cash don’t stay in business for very long.

  2. I agree, this is doing my head in.

    I got contacted by a design company down in London to come up with some mockups and upon the subsequent approval of the mocks I was asked to do the full XHTML+CSS coding obviously for extra payment on top of the original cost.

    So after a few days work I submitted the final work to get a check over then approval from the client and after a few hours of alterations for minor bits I was done, zipped it all up and emailed it over along with an invoice for what really isn’t a large sum of money. An email landed in my inbox 3 days later to say that I’d be paid once they get paid… kinda pissed me off at that but I thought fair enough, the invoice does say 30 day payment time then a 10% late payment fee for each week after that date. 3 weeks rolled by before I heard from them again, an email of “oh they aint paid us yet, you’ll get paid soon” and on day 31 I emailed them to say along the lines of “30 days are up, its a 10% fee for each week which I don’t receive payment in, if I’m paid in the next 72 hours I’ll waive the 10% fee.” And the standard “They aint paid us, give us more time, you WILL be paid blah blah blah”.

    Then after 7 weeks, a payment in my bank account from the company for half the amount excluding the late payment fees. Well now I’m really fizzing, another email from me with a fresh updated invoice which includes half the original invoice plus the last few weeks of fees. No reply.

    Until last week when I got an email saying “client has paid, invoice settled by accounts department you’ll have money by next week” that exact text nothing else, no hello, no apology. Checked my account this morning what d’ya know, half the original invoice. And no late fees which by now are near the full cost of the original job.

    Does my head in that companies think they can get away with this crap. The few times I have had to get someone else to do ANY work for me I paid them as soon as they were done, regardless of wether it made me overdrawn on my bank account they were paid within 2 days of me getting the work from them.

  3. I don’t suppose having a signed contract would help to alleviate this sort of thing…..

  4. I’d have to add a +1 to this as I’m going through this right now with someone and it’s been dragging on for a year now. The head scratcher is that this person will email me and respond to me until I remind them about the outstanding balance of their account. After I do that they disappear for up to months at a time.

  5. Wow. I always demand half of the cost BEFORE I even start work. I also get a signed contract that is iron clad and nowadays I even get a company credit card as a guarantee. Think that’s being too strict with my clients? Even a company (which I can’t name here) with a national brand name recognition tried to stiff me and they ended up paying my late fees which were 400% more than the original invoice because the thought since I was a small company that they could screw me, but one of my other clients (of whom I am also a client) is a Department of Justice attorney who can be a bulldog for me. In summation, CONTRACT, DEPOSIT, WORK, SIGN-OFF, BALANCE DUE IN 15 CALENDAR DAYS. That’s how you stay in business potnahs!

  6. @Armand. Great tip. I’m definately making a note of those points. CONTRACT, DEPOSIT, WORK, SIGN-OFF, BALANCE DUE IN 15 CALENDAR DAYS.

  7. As has been suggested, it’s not a matter of the agency not _understanding_ the concept, it’s a cash flow issue.

    And yes, you’re not _actually_ in a position to hire anyone you can’t pay, but in reality many, many companies are that cash-flow-tight even after years of being in business.

    I’ve accepted projects that were 30% up front, 30% upon delivery, and 40% when my client got paid, but only with a couple of clients that I know personally, trust, and am willing to help. Without that understanding up-front, though, it’s just really unprofessional business practice.

  8. I don’t think this is a cashflow issue, at least, in the situations I’ve been in. The people have the cash on hand, they just have it in their mind that I’ve partnered with them in the risk that the client might not pay.

  9. By the way for contracts and forms I’ve found Business and Legal Forms for Graphic Designers off a Squidoo lens. They have editions for both US and Canada. I bought it but haven’t yet had to enforce a contract from it. Has anybody had any experience with this book in particular?

    @Armand – Good idea with getting the credit card number as insurance, but couldn’t they just screw you out of payment with a charge back?

  10. I hate to say it but i pay my employees based on when we get paid. It usually works out okay but when the client dropped the ball a few weeks ago things got a bit tight. We are trying to get out of the “spend money to make money” phase. But those are employees and we have an understanding from the start regarding that. Sub-contractors would be a different case altogther. Unless it was specified its would be a risk you have to take, getting paid late by a client.

  11. If it’s not a cash-flow issue, then I’m right with you, they suck! 🙂