FREDERICK PEARCE's blog
... Business Mentor and Personal Coach
   " Building businesses, building lives, building wealth."

WEBLOG Houston, Texas: April 11th, 2010: A recent discussion about how to deal with clients who pay late, led to some pointless suggestions. It is easy to lose sight of the problem and get further from a solution as frustration builds.
There are only three ways for contractors to get paid:
.. 1. Pre-payment — Some types of businesses can ask for and get pre-payment, payment with order, payment on commencement, or partial up-front payment in the form of a deposit or "to purchase materials" - roofing contractors, for example.
.. 2. Payment on completion — Some businesses can ask for, and get, payment immediately the work is finished - auto repair, for example.
.. 3. Payment some time after completion — Most everyone else who hasn't established either of the above two methods of doing business.
The concept of charging interest for late payment is pointless and worse than useless. Even a 12% interest rate on $5,000 for 60 days is only $100. Asking for an extra $100 after the event is likely to annoy the payer to your detriment and still not pay for your time chasing the payment week after week.
When preparing bids for work, one should include all the costs of the job, including additional financial carrying costs, if those can be expected. If that makes you uncompetitive, then you must find ways to be more efficient. Ignoring known costs to make a bid competitive is the mark of an amateur and a recipe for business failure.
Alternatively, build your business around a different payment method - like asking for a deposit or prepayment.

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