Billing Client for Exchange Rate Losses on Overdue Payment
Thread poster: kifriedman

kifriedman  Identity Verified
United States
Local time: 14:37
Member (2004)
Spanish to English
+ ...
Jun 10, 2005

My client is 40 days past invoice date and scheduled to pay in Euros. The exchange rate between the Euro and the Dollar is worsening daily, costing me money, and the value of the payment has already lost $77 since invoice. Am I justified in billing this company for money lost by their payment delay? And if so, how could I possibly collect it?

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cendrine marrouat
English to French
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Did you sign a contract of sort? Jun 10, 2005

I think that if the client signed a contract or that you specified in one of your emails that you would charge the client for overdue time, you can do that.
For the rest, I don't really know. Maybe a collection agency?


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kifriedman  Identity Verified
United States
Local time: 14:37
Member (2004)
Spanish to English
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TOPIC STARTER
Have emails but no contract Jun 11, 2005

No, unfortunately, I have no signed contract. I have only the emails that passed between us with the arrangements and agreements for pricing and payment, subsequent (rare on her end) correspondence, and delivery receipts. I first agreed to work for this company when I saw that their one report on the Blue Board was a 5. First delayed payment was ostensibly due to their paying only by bank transfer, whose fees would have devoured my entire check and then some. After a l-o-n-g drawn out correspondence, this was resolved to my satisfaction, though months late. I undertook this second job after being assured that with the bank transfer thing arranged, everything would be just fine. Meanwhile, the PM claims she works endless hours but rarely responds to anything and on payment issue is mute.

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Williamson  Identity Verified
United Kingdom
Local time: 19:37
Flemish to English
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Working for Europe: A lucrative business. Jun 11, 2005

If you are paid in Euros, you get a profit on the exchange rate, don't you? If you get paid 1 Euro, you actually get 1.22$. Working for the European market must be a lucrative business for American translators nowadays. The other way around, being paid in $ means a loss of about 20%.
Yes, of course, you are justified paying that company for their payment delay. But on what legal grounds?


[Edited at 2005-06-11 05:53]


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Mark Xiang
Local time: 02:37
English to Chinese
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This is also an issue that concerns me Jun 11, 2005

I have raised a similar topic. Check the following for details.

http://www.proz.com/topic/33190

Mark


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Ralf Lemster  Identity Verified
Germany
Local time: 20:37
English to German
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Missing certain key variables Jun 11, 2005

Hi Williamson,
If you are paid in Euros, you get a profit on the exchange rate, don't you? If you get paid 1 Euro, you actually get 1.22$. Working for the European market must be a lucrative business for American translators nowadays.

This assumes that Karen's quote was based on currency parity - which isn't very likely, given that the euro has been trading above parity for quite some time.

That said, as long as payment is - eventually - made in euros, I think it will be difficult to charge a currency translation adjustment, unless such damages were agreed upon at the outset.

Best regards,
Ralf


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Harry Bornemann  Identity Verified
Mexico
English to German
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Pragmatic solution Jun 11, 2005

Karen Friedman wrote:
...And if so, how could I possibly collect it?

You can take your loss into account when you will calculate your rate for the next project for this client.


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Konstantin Kisin  Identity Verified
United Kingdom
Local time: 19:37
Member (2004)
Russian to English
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I doubt it Jun 11, 2005

Unless you pegged your contract to the exchange rate or made any mention of this issue in your initial agreement. I would simply suggest improsing an overdue payment penalty to cover your losses.

Harry_B wrote:
You can take your loss into account when you will calculate your rate for the next project for this client.


Next project? Really? :0


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Lars Jelking  Identity Verified
Israel
Local time: 21:37
Member (2006)
English to Swedish
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Interest clause. Jun 11, 2005

It is common practice to include a fee for delayed payment in an invoice. This is usually done by specifying a certain percentage per month. Between 2% and 2.5% is a common rate, and the resulting “punishment fee” is calculated for the days between invoice to and including the day of payment (with 30 days/month). I is of course still a gamble to set the percentage to cover eventual currency fluctuation, but at least the “big” currencies do not move THAT fast.
The problem of how to get the customer to pay is however still unsolved. Besides the very expensive way of collecting service, any suggestions?


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kifriedman  Identity Verified
United States
Local time: 14:37
Member (2004)
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TOPIC STARTER
Lucrative business? Not exactly. Jun 11, 2005

Williamson wrote:

If you are paid in Euros, you get a profit on the exchange rate, don't you? If you get paid 1 Euro, you actually get 1.22$. Working for the European market must be a lucrative business for American translators nowadays. The other way around, being paid in $ means a loss of about 20%.
Yes, of course, you are justified paying that company for their payment delay. But on what legal grounds?


[Edited at 2005-06-11 05:53]


This project was quoted to me at a price in Euros which, when converted to USD at the time, was at the low end of where I would have accepted it in dollars. The reason I agreed to do it was that because it was some 17,000+ words, I thought the quantity would overcome the pricing when all was said and done and also because I was told that there would be a large volume of similar work to be done after this one. The dollar and Euro were long-time stable against each other then. Just recently, after the EU/Euro issues, the value of the USD began to deteriorate fast, and now I am caught in the undertow due to their delay. If the two currencies approach or achieve parity, then I will have been grossly underpaid for the job.


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messier
Local time: 20:37
French to English
it's the economy folks Jun 12, 2005

One way or the other we're all going to have to pay for the US trade deficit.

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Samuel Murray  Identity Verified
Netherlands
Local time: 20:37
Member (2006)
English to Afrikaans
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It's a gamble and you both should know it Jun 13, 2005

Karen Friedman wrote:
My client is 40 days past invoice date and scheduled to pay in Euros. The exchange rate between the Euro and the Dollar is worsening daily, costing me money, and the value of the payment has already lost $77 since invoice. Am I justified in billing this company for money lost by their payment delay?


Would the client have been justified in paying you less if the currency worsened in the other direction? Would you have accepted his excuse for paying you less if he had said "Yes, but you still get as much as you would have gotten if the exchange rate stayed the same"? I know that I wouldn't have accepted that.

If you don't want to feel the effects of currency fluctuation, you should quote in your home currency. Even if you quote in your home currency, you can still give clients room to pay in their own currencies, as long as the resultant exchange equals the home currency amount you charged for.

A penalty for late-payment is not uncommon. However, the purpose of this penalty is to cover the loss of potential interest on the money in your bank account (or potential interest you'd have to pay if you loaned money to cover the expected income). For this reason the penalty should be roughly the same as the interest you'd pay on an overdraft account at the bank (varies from country to country).

The penalty is not meant to cover currency fluctuation.


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kifriedman  Identity Verified
United States
Local time: 14:37
Member (2004)
Spanish to English
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I'm afraid you have missed the point entirely. Jun 13, 2005

My complaint is *not* that the currency is being devalued. As you say, that is the risk one always takes. It is that the client's *footdragging* is *exacerbating* the devaluation. Had the client paid on time, of course the professional action would be to take the money at whatever the exchange rate at the time and say thank you. By delaying and delaying and delaying, the client (probably knowingly) dangles the translator on a string as the final payment becomes more and more worthless. THAT is what I find unacceptable and reprehensible and what has prompted the question.

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Samuel Murray  Identity Verified
Netherlands
Local time: 20:37
Member (2006)
English to Afrikaans
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It makes no difference to the client, though Jun 13, 2005

Karen Friedman wrote:
My complaint is ... that the client's footdragging is exacerbating the devaluation. ... By delaying and delaying and delaying, the client (probably knowingly) dangles the translator on a string as the final payment becomes more and more worthless.


The client gains nothing from not paying. Or rather, he gains only on interest received from his bank; he gains nothing because of the new exchange rate. After all, hee is still liable for X amount of money in the agreed currency.

However, this may be a good lesson for all of us to include a subclause for gross currency fluctuation in the late payment clause of the contract. This is a global market and clients must understand the consequences of bad business practice on a global scale, so to speak.


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