Friday, February 25, 2011

Net Outrageous!

There was a fella whose name escapes me on the Colbert Report a few back complaining that many companies were paying later than usual. Like Net 60 or 90 instead of Net 30 or 15. In other words, corporations are getting forced loans from their suppliers and contractors. One way to fight this is to insist that the company pay interest on any balances still due after 15 or 30 days of invoicing. And the interest rate should be what YOU lose by not having the money, not the Fed Funds rate, the prime rate, etc. So more like 10% than 1%. Most corporations can of course get loans at a lower rate than a small business person can so they will likely pay up in a reasonable time. Of course they might not do any more business with you too in which case you might let them play their Net Outrageous game but increase your fee at the first opportunity. If they ask why your fee went up, dispassionately explain that your costs have increased because your clients pay so slowly these days but then offer them a discount (back to your usual fee) if they pay promptly, as you define it. Technology these days is such that Net 5 should be the norm, but that is another topic.

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