Hi, my husband & I own a small business w/ 5 employees (including ourselves). We've significantly grown over the past couple of years, but we have less money. Our business is custom marine canvas. Our average project is in the $5000-$10,000 range, as the yachts we build custom projects for are quite elaborate. We lease space from a large corporation that sub-contracts us for a lot work, so we definitely need to be on good terms w/ them, as they are one of our biggest customers. The problem is that once we started renting space from them (remember we are our own business entity), their payments have become slower and slower and it is killing us financially. Before we leased space from them, their checks from out of state arrived within literally 5 business days of our job completion. All of our other customers pay us within 2 weeks completion (which is acceptable), most providing a 50% deposit. To date, they owe us almost $30,000 for work done in the past 6 weeks---I just received a check in the mail for $1200 covering 2 of the smallest invoices from 7 WEEKS AGO. Granted, they do pay eventually, but we know that no boat leaves this building until they're paid their money on the spot (which part of is our money!). My husband tells me not to get "nasty" with them; we might lose their business and not be able to keep our employees busy. Should I require that with every PO I receive from them a 50% deposit on the very large jobs? What if they say "no"? Any ideas/feedback/info. You can give me will be greatly appreciated. Thank you!

Most business will expect, unless they have a contract to other terms, to expect invoices to be paid within 30 days of being billed. I will be honest with a lot of larger companies, 60 days is not really unusual. I know with places like the city of atlanta payment is even sometimes 90 days and medicare is often even worst.

But normally what you do is set up a agreement with them or listed on your invoices to them, that after 30 days interest will be added to the invoice.

So I would be sure my invoices have a penalty for non payment within 30 days and bill for the amounts

Before you started renting from them, their payments came quickly. What has changed? Is it a coincidence? i.e. has something gone wrong from their end? If not, it almost sounds they're taking advantage of the situation. But I hesitate to say that without knowing the entire situation. I just find it odd that they used to be able to pay so quickly and now it's getting slower and slower, ever since you started renting from them.

Regardless of the reason, it's hurting your business for them to pay so late. You may want to stay on good terms with them since you rent from them and they provide a lot of business, but it isn't going to do you a lick of good if you don't get paid in a timely manner, and start having cash flow problems because of it. You always have to deal with the lag of pay, and all companies have to deal with this issue. Your incoming cash flow has to stay ahead of the outgoing cash flow. (That's even a reason not to grow too fast.) How much lag will depend on the business. (Paying w/in 2 weeks sound fast to me, but I've not dealt with that particular business before.)

I would first of all, take a good look at your own cash flow and see if there are problems from your side in handling your cash. Second, I would also talk to them and find out why the payments are slowing down and explain the situation and that this is causing problems. You don't need to get "nasty" as your husband calls it. Who of you is better at being diplomatic -- you need to get the point across without chasing them off. No, you don't want to lose their business, but as I said, their business isn't doing you any good if you end up in trouble because of late payments. Remember that they also risk losing a tenant and a supplier. If you keep letting them get away with it, they'll continue to do it. (Especially if they think they have a "hold" over you or think you're push-overs.) Discussing the issue with them certainly can't hurt.

If it's typical for other customers to pay 50% up front, why does this customer not do this? Is that typical for your business? I've seen situations where bills are behind, and new work required up front payments until bills that were behind were better caught up. If they suddenly stop paying and you've already paid for your expenses, you could end up in serious trouble. All companies have to deal with late payments, or not payment, but when it's one of your biggest customers, that's a problem. (Big customers can also be a disadvantage.)

Just my opinion...

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Originally Posted by jenni9

Hi, my husband & I own a small business w/ 5 employees (including ourselves). We've significantly grown over the past couple of years, but we have less money. Our business is custom marine canvas. Our average project is in the $5000-$10,000 range, as the yachts we build custom projects for are quite elaborate. We lease space from a large corporation that sub-contracts us for a lot work, so we definitely need to be on good terms w/ them, as they are one of our biggest customers. The problem is that once we started renting space from them (remember we are our own business entity), their payments have become slower and slower and it is killing us financially. Before we leased space from them, their checks from out of state arrived within literally 5 business days of our job completion. All of our other customers pay us within 2 weeks completion (which is acceptable), most providing a 50% deposit. To date, they owe us almost $30,000 for work done in the past 6 weeks---I just received a check in the mail for $1200 covering 2 of the smallest invoices from 7 WEEKS AGO. Granted, they do pay eventually, but we know that no boat leaves this building until they're paid their money on the spot (which part of is our money!). My husband tells me not to get "nasty" with them; we might lose their business and not be able to keep our employees busy. Should I require that with every PO I receive from them a 50% deposit on the very large jobs? What if they say "no"? Any ideas/feedback/info. you can give me will be greatly appreciated. Thank you!

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Yes, Just in case the client changes their mind you won't be losing out all together.