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  • john_harrington
    replied
    Sec Trainer,

    It always amazes me that some people do not know what 2-10 N30 means. Even Harvard MBAs!!

    Leave a comment:


  • SecTrainer
    replied
    Originally posted by Bill Warnock View Post
    And soon Richard they expect that you peform a service out of your boundless generosity.
    Enjoy the day,
    Bill
    Beware "contract creep", as clients casually ask would you do this, would you do that, etc. and you don't feel that you can say "no". Pretty soon, the services you are actually performing look nothing like the contracted services.

    The right answer is: "Why yes, we'll be delighted to do that for you. Let me run some cost numbers past my boss, and I'll get back to you on what the added charge will be."

    This answer clearly carries the message that you are a business and you don't perform services for free, and yet you are NOT refusing the service either. But it's funny...when you make it clear that you will charge the client for the added service, the request often simply evaporates. For some reason, it's not that important any more....but they would have been tickled to death if you'd been suckered into doing it for free.

    Sometimes we're afraid to be businesslike, thinking it will alienate clients. Quite the opposite is usually true; prove you're a business professional and you'll gain at least the grudging respect of your clients.
    Last edited by SecTrainer; 09-09-2007, 01:12 AM.

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  • Bill Warnock
    replied
    Originally posted by hrdickinson View Post
    I always adopted "Payable Upon Receipt" and started calling by 30 days. Net 30 without a discount, late fee or something, is crazy. They're at 40 before you know it!!
    And soon Richard they expect that you peform a service out of your boundless generosity.
    Enjoy the day,
    Bill

    Leave a comment:


  • hrdickinson
    replied
    I always adopted "Payable Upon Receipt" and started calling by 30 days. Net 30 without a discount, late fee or something, is crazy. They're at 40 before you know it!!

    Leave a comment:


  • N. A. Corbier
    replied
    From my experience, both being taught by other owners and my own company, "net 30" translates to, "I can pay within 60-90 days before they stop delivering services and/or cancel my contract for cause."

    A sliding scale discount up to the "normal" due date makes more sense than "we'll give you Net 30." "Everyone" gives net 30, which people abuse because it makes economic sense to abuse it.

    Leave a comment:


  • hrdickinson
    replied
    Originally posted by SecTrainer View Post
    Richard -

    Another "quick tip" on getting invoices paid on time was taught to me years ago by an old IBM comptroller - namely, using discounts instead of just net-30 billing.
    S.T.
    That is a good tip. Up until a few years ago, it was rarely done in our industry, for whatever reason. However, in the last five years or so, I have seen more companies doing it with good success.

    Leave a comment:


  • hrdickinson
    replied
    Originally posted by Bill Warnock View Post
    Richard I received your newsletter and appreciate its contents. Thank you for making it available to all of us.
    Enjoy the day,
    Bill
    Bill, thanks for taking the time to sign up for it on our website!

    Leave a comment:


  • SecTrainer
    replied
    Richard -

    Another "quick tip" on getting invoices paid on time was taught to me years ago by an old IBM comptroller - namely, using discounts instead of just net-30 billing.

    The economics of discounted billing terms (for instance, "2-10, net-30" which means that the client may deduct 2% of the bill if paid within 10 days, otherwise the full amount is due in 30 days) seems almost counterintuitive, but here it is, in a nutshell:

    As an example, let's take a bill for $10,000. If paid within 10 days, the client can deduct 2%, or $200, from the bill.

    1. MOST CORPORATE CLIENTS HAVE A POLICY TO TAKE ALL DISCOUNTS unless they are cash-strapped and having credit trouble(and that's another story for another day). In other words, DISCOUNTED BILLS GET MOVED TO THE FRONT OF THE LINE OF BILLS TO PAY.

    Why? Well, by NOT taking the discount, they are, in effect, paying you that 2% to keep the money in the bank for 20 extra days. Since there are roughly 18 twenty-day periods in a year, this translates to paying you 18 x 2% or 36% simple interest, and no corporation "borrows" money at such rates. In fact, if necessary, they will borrow the money on their open credit lines at a few points over prime rate to pay you, and still come out ahead.

    2. So, then, aren't you the "loser" by the same 36% by offering the discount? Not really! This is one of those situations that is not a "zero-sum game".

    You get the cash, less the discount, in your hot little hands in one-third the time that you would get it otherwise. In fact, some corporations (even the "good" ones) do not even pay their "net-only" bills in 30 days, so you might actually be getting the cash in one-fourth, one-fifth or one-sixth the time you would otherwise receive it.

    ...and (this is the key)...you put that cash to work, so what you actually are giving up isn't the discount, but the discount MINUS the time value of the cash in terms of your current cash turnover.

    You might have heard the catch-phrase in business that "Cash is King". This is one of those truisms that is actually true, but it turns out that it is often "more true" for you - especially if you're running a small company - than it is for your client. Cash is king!

    By way of a simple example, let's presume that you have one client, and you have biweekly salaries to pay, but you're billing net-30. How do you meet that payroll when you haven't been paid yet? Well, you have only a few options:

    1. Take the money out of cash reserves, if you have any. This will cost you whatever interest the reserves would be earning in a money market account.

    2. Use a line of credit from the bank, if you have one. This will cost you whatever interest rate the bank charges for such credit.

    3. Factor your receivables. A "factoring firm" is a company that gives you money today on your outstanding receivables. Of course, they give you less than the net amount of the bill...and not just 2% less, either. So, this, too, will cost you money.

    So...that $200 you "surrendered" by offering the discount in order to get $9800 cash to meet your payroll isn't really $200 at all. It is $200 minus whatever you would have to pay to meet your payroll from other cash sources.

    Discounted billing turns out to be very, very smart financial management, particularly for the small to medium sized company. And, on the other side of the coin, take discounts on your own payables when a vendor offers them, too.

    One precaution, though, is NEVER to allow a client to get away with taking the discount if they do not pay you within the discount period. Some will try this once, until you re-bill them the amount of the dishonored discount PLUS a hefty penalty charge.
    Last edited by SecTrainer; 09-08-2007, 01:29 PM.

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  • Bill Warnock
    replied
    Richard I received your newsletter and appreciate its contents. Thank you for making it available to all of us.
    Enjoy the day,
    Bill

    Leave a comment:


  • N. A. Corbier
    replied
    I'm sure the SIW Staff thanks you for the unsolicited recommendation, as well as the other vendors (Hi!) of the forum.

    Leave a comment:


  • hrdickinson
    replied
    Security Newsletter

    The September edition of our newsletter is available at:

    http://www.hrdickinson.com/newsevent...tter_0907.html

    In this month's edition, we included a recommendation of S.I.W. Forum.

    Leave a comment:


  • hrdickinson
    started a topic Security Newsletter

    Security Newsletter

    We would like to invite all members of and visitors to SIW to sign up for our free monthly newsletter, "Security Management Essentials". You can read the August 2007 edition and sign up for future editions by clicking here: http://www.hrdickinson.com/newsevent...wsletters.html

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