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Pay on time incentive

Posted by Michael Bloch in web development (Monday March 15, 2010 )

Do you have trouble getting paid by some of your clients? You may want to consider an idea in use by Australia’s postal service.

It can be rather demeaning to have to go cap in hand to a client to ask to be paid for work you have already done and where the payment is overdue. It seems to be an acceptable business practice these days to let invoices go past their due date which is probably fine for big suppliers to handle, but for the little guy it can really throw the cash flow out and create hardship.

I received my post box renewal a couple of weeks back and at the top was a “Full payment due” price and then a different “pay on time” figure – around 20% less. While I’m a stickler for paying bills on time, it was additional motivation not to let this fall past the due date.

The trick here is the “pay on time price” is the actual price. The full price is the actual price + late fee.

Some years ago I mentioned to my accountant I was considering adding “bookkeeping fees” for overdue payments and his response was “Good luck with that”. He also said he wasn’t sure if it was legal, unless it was agreed upon on entering a contract with the client.

The other point is that if you’re negotiating a contract, the more “thou shalts” you add, the greater the chance the potential may be scared off from doing business with you, thinking you’re some kind of control freak.

However, what Australia Post has done is used a carrot instead of a stick by changing wording, and I think it’s a really good idea. It may seem a little silly to reward a client for paying on time, but if that price is what you would charge anyway, why not?

Next time you’re negotiating a contract or creating a proposal, give the idea some consideration. Make your “pay on time bonus” price what you would usually charge, whack on 10% or whatever and make that the “Full price”. At least if you still have to go cap in hand to some clients to get what you are owed, you’ll be paid a little extra for the trouble and the client will also see an opportunity to “save” money by doing what they should be doing anyway.



 

 
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