Debate I have with an Employee, Opinions Please

[zebest]

Debate I have with an Employee, Opinions Please, Billing and Collecting

I have been in business for over 10 years and one of my employees is fighting me over how to collect the businesses money. Currently for all businesses we do net 30 and require 0 up front.
I believe this is terrible and want to change it immediately. My employee states it is unprofessional to collect any other way.
We are about to sell 10k in computer hardware and I am reluctant to do net 30. Once again my employee swears this is the way to do it.
I want to settle this once in for all. How do all of you collect money? In this last case scenario I am going to put 10k of my money up for 30 days, I believe this is the worst idea ever and I don't think anyone does this without some money down?
Please share how you collect money. Net 30, Payment upon completion? Do you collect all money for hardware up front?
Thanks,
Chris

 

[brandonkick]

YOU have been in business for 10+ years. Has your employee ever ran a business? Does he have any education or research to suggest any merit in his claims?


Personally, I don't run a shop so take my advice with a grain of salt. Some of the people on here who do run their own businesses may be able to give you some better advice but this is my .02


I wouldn't front that big of a cost, no way. It's too much money IMO. First you need to ask yourself if you could front it, and then you need to ask yourself why you would want too even if you could. Are you making money off of the "financing" arrangement or are they just getting interest free credit off of you. I know if you go to a bank for a loan over a certain amount, they want some kind of collateral and a cosigner. They want to be as sure as possible that they will get paid, and so should you.

If it's a good customer then you done tons of big ticket work with in the past and they have a good track record for repayment, then it's an idea. But it has to be beneficial to you. Even a 30 day loan means you have 10K wrapped up for an entire month. Many shops do not have the ability to do so, and I'd imagine a lot of the ones that do have the ability wouldn't do it anyway.

From my point of view, you have too much to lose. Far too little reward for the risk.

 

[FoolishTech]

I will do net 15 or net 30 depending on my costs. I have no problem floating a PSU for 30 days but when you start talking anything with a K after it, I'm not floating my costs period. At that point I require a deposit up front, either half of the job or at least enough to cover my costs, whichever is greater, and net 30 for the rest.

 

[ajm]

It all depends on your relationship with clients and the trust you have with them. The majority of my business clients pay in 7 days of date of invoice with the exception of maybe 5 clients whom I bill at end of the month and this gets paid immediately. The very few residential clients who call me pay end of the job. The majority of my new clients are through referrals and recommendations from existing clients so I think I either have good clients or am lucky.

In over 6 years of business I have had to write off one invoice for less than £300 and that was a from a good client who unexpectedly passed away and I did not bother to chase it up.

However since beginning of 2013 I have seen some of my clients paying a bit late than normal - about 5-7 days late and a gentle reminder ensures that a cheque is in the post or they transfer the monies direct to my account.

Keep an eye on your cashflow as working capital is crucial to any business.

 

[nlinecomputers]

Labor I will do Net 15, but only for select clients and all new clients are Due on Receipt. Most hardware is a least 1/2 down or order and 1/2 delivery. Something that large would be all up front on everything.

As for your employee: Two simple words will solve your problem. "You're Fired."

Unless he owns the company he has no business saying anything. Frankly he shouldn't even be aware of the billing status. It isn't any of his business.

 

[phaZed]

I have a max no-pay up to $200 for parts. Sometimes I'll stretch it to $250 if required. Otherwise ALL PARTS are purchased ahead of time. Service costs may be billed for net 30 (for good, recurring customers only).

There is no way I would front thousands of dollars for someone else.
If they want to buy the equipment, whip out the cash so we can get it done. Simple as that.

 

[Martyn]

The problem is you can have all the trust you like with a client and get on really well but you have no idea of his companies finances to take a risk. I once laid out £500 for a client for parts plus my labour. Never again. They did pay me but I hated the wait .

 

[MotzTech]

I have a max no-pay up to $200 for parts. Sometimes I'll stretch it to $250 if required. Otherwise ALL PARTS are purchased ahead of time. Service costs may be billed for net 30 (for good, recurring customers only).

There is no way I would front thousands of dollars for someone else.
If they want to buy the equipment, whip out the cash so we can get it done. Simple as that.

I second this, my limit is a little lower though. If someone needs 10k worth of equipment and doesn't want to pay upfront, get them connected with a leasing agent.

 

[glricht]

Take a look at Tony Scarpelli's excellent article "Streamlining Your Computer Business" recently posted to TN's home page.

 

[nesrinamb]

Jobs that size its customary to actually get at least a 10% down payment.

Plus most people simply dont like writing 10k checks so a little now and the rest later is also better in their mind

 

[pctutor]

most people simply dont like writing 10k checks

All the more reason to get the payment up front.

And I agree with others - you should tell your employee that you as the owner set the policy. Unless he wants to front his own $10k of course.

 

[seedubya]

As for your employee: Two simple words will solve your problem. "You're Fired."

Really? You'd fire someone for having an opinion? I want my employees to have opinions. Otherwise they're just sheep. Just so long as they don't make decisions above their responsibilites it's all good.

As for the OPs issue - are you going to lose business if you don't extend credit? If so, then give the credit so long as you are confident it will be repaid. If not, then why would you give it? You only extend credit or decline it for sound BUSINESS reasons.

EDIT: I quoted today for a job that will run €14K or so for a pharmacy client. Their industry runs on 30 day credit and all suppliers are expected to match that. I don't give the credit I don't get the job. I will give the credit. Just for comparative purposes - I have 2.5 employees and currently have €40K outstanding. Some days it's a bit scary but my turnover is quite high now.

 

[nlinecomputers]

Really? You'd fire someone for having an opinion? I want my employees to have opinions. Otherwise they're just sheep. Just so long as they don't make decisions above their responsibilites it's all good.

As for the OPs issue - are you going to lose business if you don't extend credit? If so, then give the credit so long as you are confident it will be repaid. If not, then why would you give it? You only extend credit or decline it for sound BUSINESS reasons.

EDIT: I quoted today for a job that will run €14K or so for a pharmacy client. Their industry runs on 30 day credit and all suppliers are expected to match that. I don't give the credit I don't get the job. I will give the credit. Just for comparative purposes - I have 2.5 employees and currently have €40K outstanding. Some days it's a bit scary but my turnover is quite high now.

For having an opinion, no. For getting into an argument. Yes. Hey I am the owner. If I reject your idea that is my right and once I've made my decision that really should be the end of it unless there is new information to consider. Letting some disagreement fester is not good for business.

 

[16k_zx81]

The problem is you can have all the trust you like with a client and get on really well but you have no idea of his companies finances to take a risk. I once laid out £500 for a client for parts plus my labour. Never again. They did pay me but I hated the wait .

I think Martyn makes a really good point here.

Agree with others about charging an up front fee/ percentage for anything with a K after it. It makes sense to build protection against default into your billing practices.

As for your employee's advice, as has been said already, unless he has been running his own business for many years he has no basis to tell you how to run yours. That said, if you do opt to change your billing practices to something more conservative based on this discussion, he can take some credit for questioning your initial position. People who are able to think critically can be interesting to have around - even if he is not 'right' all the time - having him open a debate like this could lead to very useful strategic developments

At least he cares enough about the business to go up against you on your position. That, in itself, is a potentially very positive characteristic, IMO. (As long as its done respectfully and does not detract from the general day-to-day of the business, as Nline says)

Jim

 

[4ycr]

I read a blog post a while ago from Richard Tubb about the difference between small & large it firms

One point he make is in invoicing for parts. The small firms tend to do it on net terms but all the large firms get payment up front. I have started getting payment upfront for large items and even for one computer. My customers don't complain and just pay up.

 

[PCX]

Regardless of what side you stand on, you need to get a grip on your employee. If you are arguing with him to the point of posting a whole thread on the matter, then you are arguing with im too much and it may be time to let him go. There is nothing wrong with him being entitled to his own opinion, but if he cannot accept your policies and way of doing business, then send him on his way.

That said, as an employee, I constantly argued with my father (who at the time was a contractor) about pricing because he was way too cheap. I ended up being right, but I also had a different relationship with him. In either case, you should value and respect the opinion of your employees, but only to the point of consideration, not submission.

 

[Markverhyden]

I don't really do much hardware sales. But for me to do the net thing the customer has to have a history with me first. New customer? I don't care how big they are. Payment when services are rendered. In the case of hardware? No way I would float 10k as a small business. Way too much risk. Something small, like a PS or HD, I will if it's a good customer.

 

[Xander]

I have been in business for over 10 years... Currently...we do net 30...
I believe this is terrible and want to change it immediately.

This is the part I'm not understanding. If you believe your own business practice is terrible, why did you start doing it in the first place?

 

[oldtech]

Perhaps our experience will serve as an illustration. In '07 we had a client go under that by all appearances was sound, showed good credit, good references. We had a tad over 500K in hardware and services out to them and they were given net 30 terms. They filed for bankruptcy at day 29. Being far down on the creditor list we got pennies on the dollar and a bunch of now used equipment.

Since that time we require hardware to be paid for in full at time of order and services upon completion of the project/acceptance. Admittedly selling hardware is not our main focus but when and where it makes sense we do it.

There are exceptions to the rule of course but it 99% of the time we adhere to the above.

It has not hurt our business at all - cash flows are up considerably and we have had solid growth in each year since making the change.

 

[mkeathley]

I run a shop and have quite a few business clients. Soem on contracts, some on the break/fix model. I require payment up front. I sometimes have folks question this. I don;t care, I'm not in this to lose money.

I have had a customer who could not afford the 10K. Thats ok, I hooked them up with a leasing company.

I'm nto sure why soem folsk expect this from small business. If you goto Best Buy and order a new PC, they do not do NET 30. Either you pay upfront, before they order it, or you pay with a Best Buy or other credit card...