Debate I have with an Employee, Opinions Please

[indy-pc]

I think these sorts of policies and practices CAN be influenced more by local practices than industry or even global practices. What works in a large city may not work in a very rural area. YMMV.

With that said, I service residential clients almost exclusively so I've never dealt with a job of the scale that you're talking about. In my experiences, I pay for the parts out of pocket and collect the cost + markup + labor upon delivery. I also have a signed document from them that says that payment is expected within 30 days of completion or their equipment belongs to me (and I can sell it to recoup my costs). I've never had this happen, so I don't know how much water it would actually hold. I've never been burned, but I've also never been out more than $60.

If I were doing something more costly (say, a custom PC build), I would certainly require "something" up front. The amount I required would be dependent on the total cost and my trust in them. Regardless, I'm getting some money in my pocket before I tie up a "large" amount of my money with no guarantee of repayment.

 

[SprinterTech-WI]

Our "rule" is if it's under $5K in hardware then we charge 50% of retail for the hardware upfront, remainder due 30 days after installation.
Over $5K in hardware is 75% upfont, and over 10K is usually about 90%

 

[Jerry the Computer Guy]

I used to use a business credit card to purchase hardware and software for jobs. I told myself I'd repay the cards as I got paid by clients. I had a boom, then things slowed down. Then the economy tanked. The money ended up paying other bills instead of covering the costs... I'm STILL paying for that mistake.

Now, I require payment up-front for all hardware and software purchases. This includes my markup (the bill is itemized). I do make exceptions, but only 1) for clients I have known for years and know they will pay and 2) when the job is scheduled to be completed within the next few days. I'm not a bank and every penny I have to wait for costs me more. Between Square, PayPal, Chase QuickPay (and other banks' variations), there are very few excuses for not collecting now.

I also used to think charging at-cost for parts was ok... until I ran the numbers. Basically, if you're not making a profit, you're losing money. If you're extending credit to others at 0%, you're actually paying the interest for them. This is great for them (no-risk, interest-free loan), but is completely unacceptable for the one making the loan. I will not risk my business on the word of someone with no vested interest in keeping my doors open. The risks of running just my own business is enough... I don't need to shoulder the risk for someone else as well. You want to extend credit? Look into offering branded credit cards or check out PayPal's "BillMeLater" service. The former, I haven't checked out. At least with the latter, PayPal assumes the risk and you get paid right away. (Haven't used it yet, myself... I encourage research.)

Net 30 may be the "norm", but so are CEO bonuses in the wake of mass layoffs and corporate "lobbying". Doesn't make it right. Remember than "legal" and "ethical" or two separate things. A big business that requires Net 30 is literally bullying you into gambling with your entire business (including your employees) by dangling big $$$ in front of you. The business landscape has changed. The old ways are defunct and no longer serve a "greater good". Your employee is wrong. Period. There may be exceptions, but this is NOT the way to stay in business. (My paranoid side also makes me wonder what his interest is in making this deal... I get the feeling he's fighting pretty hard for it. Why?*)

High-stakes gambling is for investors and addicts, not business owners.

(* I've probably been watching too many spy movies and crime dramas. "WHAT'S THE MOTIVE???" hah!)

 

[Screwloose]

I am curious as to the employees job role ... is he going to make money off of this somehow? ( comission? Bonus? ) is he like a project manager for you for large installations and this will affect his paycheck if this business is lost?

I see a lot of people questioning why this employee should have the audacity to give feedback or even go to bat for a customer.

I have been in the same position where I argued with my boss about some part of a business deal ( sometimes very heatedly ) because it would have an impact on my pay.

Now if the guy gets the same pay/hrs no matter what then I would say that he needs to worry about his work and let you run your business.

 

[brandonkick]

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.

How did I miss this! Half a million in financing is just crazy, let alone the small beans mentioned here!

If half a million was a "write off" for me, I'm pretty sure I would be able to retire with what I had. The interest rate on 2 million is enough for me to be able to live off of ($60,000) semi-comfortably.

You and me both, heck for $60K a year I could live very comfortably. But I honestly do feel that those who make less money learn to make due with less money. So of the "you live the according lifestyle" kind of thing.

 

[mikeroq]

Now if the guy gets the same pay/hrs no matter what then I would say that he needs to worry about his work and let you run your business.

Where I work, my co worker was reduced to 3 days a week. Bit of a decline going on here. So in my world getting money in this door is important to me. Our sales/income go to my paycheck. I need 90% of what I make here to stay afloat. But I can't change the ways of my boss, but I try to give him my opinion on most things.

 

[mkeathley]

I'll give ya'll another example. My Dad just emailed me wanting me to build a custom desktop for him. I will require he pay for the parts up front...LOL.

 

[Screwloose]

I'll give ya'll another example. My Dad just emailed me wanting me to build a custom desktop for him. I will require he pay for the parts up front...LOL.

That is hilarious ... did you tell him you had to do this because you werent 100% sure he wasnt a flight risk?

 

[Screwloose]

Where I work, my co worker was reduced to 3 days a week. Bit of a decline going on here. So in my world getting money in this door is important to me. Our sales/income go to my paycheck. I need 90% of what I make here to stay afloat. But I can't change the ways of my boss, but I try to give him my opinion on most things.

Of course .... business has an effect on your paycheck so you want to also look out for your own interest. That is where I was going with my entire post. If the tech has an invested interest then yes he is going to go to bat for a customer.

Anytime I have worked on any kind of incentive/comission structure I take a much greater interest in how the business deals with customers but if this is not the case then it is one thing to make your opinion known and quite another to argue about it...

 

[devlynh]

Democracy

Beyond basic business considerations, your employee is confusing your business with a democracy.
Businesses are not democracies they are dictatorships. Sounds crass and politically incorrect but it is the truth. If he wants a say in business decisions he needs to put some "skin in the game", otherwise he needs to be quiet and do the job he is paid to do.

 

[Dragnix122507]

To Respond to the "Fire the Employee" Advice

As the Manager of a Small IT Consulting business myself, I would like to say I highly value my employee's input. It doesn't necessarily mean that it is always correct or what we end up doing, but I take the input nonetheless.

That said, we don't know the exact situation that the Original Poster has with his employee. It is possible he has a similar view to me and also highly values his employee's input. I don't think that it's fair to fire the employee for debating with the owner of the business. In the end it's the business owner's decision and perhaps this employee understands that, but has found information contrary to the owner. Just because the employee is not the owner doesn't mean his/her input should be suppressed, much less fired over it. Often times an owner will trust another person in the business whether they be a manager or otherwise and values their advice.

Just my two cents.

I also have to say, it is funny that the original topic almost got dismissed over the issue of employee/owner relationship...

 

[brandonkick]

As the Manager of a Small IT Consulting business myself, I would like to say I highly value my employee's input. It doesn't necessarily mean that it is always correct or what we end up doing, but I take the input nonetheless.

That said, we don't know the exact situation that the Original Poster has with his employee. It is possible he has a similar view to me and also highly values his employee's input. I don't think that it's fair to fire the employee for debating with the owner of the business. In the end it's the business owner's decision and perhaps this employee understands that, but has found information contrary to the owner. Just because the employee is not the owner doesn't mean his/her input should be suppressed, much less fired over it. Often times an owner will trust another person in the business whether they be a manager or otherwise and values their advice.

Just my two cents.

I also have to say, it is funny that the original topic almost got dismissed over the issue of employee/owner relationship...

This.

In summary, I think that floating relatively large lines of credit is risky. The reward is low for such a thing. In my opinion, there is little reason to do it.

I won't give any type of credit. I realize that I'm not a formal business... but they don't get the goods/service until they pay for them. I'm not readily willing to eat even a single nickle. I understand it happens, but I want it to happen as infrequently as possible.

@ Employee / Employer relationship

If my previous (and now secondary part time) employer listened to me, he would be worlds ahead of where he is now. He would literally have to do little to nothing and be making six figures plus. I'm talking sleep as late as you want, do as little as you want (most days is already nothing) and basically just sit back and collect the paychecks. Instead, he is on the verge of being out in the street. That's his choice. I've tried to give him advice which he refused and I left it at that.

 

[PDXMicro]

I think this subject has probably been beaten to death already, but I figured I would give my .02 worth... I would take the employees opinion into account, but for what it's worth, it's your business, not his/hers. Employee's should be heard, but not to the point of arguments. If your employee is literally arguing with you, he or she needs to understand who's the boss. There IS a hierarchy when it comes to employment - and that hierarchy extends into respect - period.

I've done big jobs in the past ($15k+) and even big corporations of which I've done jobs for do not expect me to cover the costs up front. I generally do what most here have said and bill for my costs up front, and the rest is billed at the end of the job. At the most, your labor is at risk and the material costs are covered. If the company/person has a problem with you billing a portion of the job upfront, they will let you know and you can work out something to their satisfaction or turn down the job.

It boils down to what you're comfortable with - and the more uncomfortable you become, the more risk your putting on your business. I personally stay in the comfortable zone

 

[Tony_Scarpelli]

... one of my employees is fighting me over how to collect the businesses money

This is more than differing opinions IMO.

net 30 and require 0 up front.
I believe this is terrible

This is the crux of the matter.

want to change it immediately.

We are about to sell 10k in computer hardware and I am reluctant to do net 30.

We collect 100% upfront at the time of doing the job. On special orders we get cash on delivery for 1 $699 computer or for a network of 10 computers and $10,000 particularly with a new customer we get 50% deposit with the order.

If you cannot afford to lose $10k you cannot afford to loan $10k IMO.

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?

I think about 98% of us collect the cash on hardware up front and to tell you the truth most small businesses cannot take the cost of purchasing this much equipment out of our daily operations, even if we wanted to, for 30 days.

Good Luck Chris.

 

[nlinecomputers]

This is more than differing opinions IMO.

That is my interpretation as well which is what prompted my FIRE HIM comment.

Opinions are welcome. Bickering after I made a decision isn't. Now if the problem is that the OP hasn't firmly laid down the law, has waffled and isn't consistent with his own policy then it is understandable that his employees bicker with him. Maybe you guys run your shops differently but when I had employees when I said something was to be done a certain way that was the end of the discussion.

 

[hightechrex]

I charge full price on all parts UP FRONT. Labor is charged upon completion of work. Have not had a single complaint

 

[brandonkick]

That is my interpretation as well which is what prompted my FIRE HIM comment.

Opinions are welcome. Bickering after I made a decision isn't. Now if the problem is that the OP hasn't firmly laid down the law, has waffled and isn't consistent with his own policy then it is understandable that his employees bicker with him. Maybe you guys run your shops differently but when I had employees when I said something was to be done a certain way that was the end of the discussion.

I suppose I kinda did miss that part a little. If the OP made a choice and his client was still giving him guff over it then yeah, warn the employee that a decision has been made and if that doesn't convey the hint then perhaps some more serious reprimanding is in order.