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First-come, first-served type of agencies
Thread poster: Baran Keki

Kay-Viktor Stegemann
Germany
Local time: 23:47
Member (2016)
English to German
Interest? Jul 9

Tom in London wrote:

Paul Dixon wrote:

..... there is hefty interest on top.....


That's why (some) agencies pay as late as possible. They want to earn the interest on the money they are keeping from you. Imagine you are an agency with outstanding payments, due to a large number of translators, amounting to a total of, say, € 20,000 in any month. If you put that €20K in a high-interest account or investment for 3 months, you'll be earning a tidy little sum.

That's why they do it.


High-interest account? There is no such thing. In the present state of the world economy, interest is a thing of the past. Your "tidy little sum" of interest for €20K for three months can be anything between €10 and €50, if at all. It would be a really stupid agency to go to such lengths for this kind of peanuts.

The real issue is liquidity, not interest. Companies that delay their own payments normally do this because of bad liquidity planning - they simply try to wait until their own outstanding payments (by end clients) are in. This is very shortsighted approach, but it is more fear than greed.

[Edited at 2020-07-09 11:31 GMT]


Dan Lucas
Sheila Wilson
Nathalie Bullen
IrinaN
Chris S
Veronika Hoffmann
Teresa Borges
 

DZiW (X)
Ukraine
English to Russian
+ ...
Vicious circle: Maximum profits at minimum costs Jul 10

Depending on the jurisdiction and communication, it’s quite possible to negotiate favorable terms, including top-up and higher interest rates. For instance, as a loyal client, I phoned a familiar bank manager and they could offer me some 1.8%-2.2% fixed/mature for a hefty 3+ month $10,000+ deposit [with an opt-in prolongation]. As a loyal client of another bank, I could get 0.88% max on almost any amount and have it back any time. Indeed, just ballpark numbers, yet I’m sure one always can do... See more
Depending on the jurisdiction and communication, it’s quite possible to negotiate favorable terms, including top-up and higher interest rates. For instance, as a loyal client, I phoned a familiar bank manager and they could offer me some 1.8%-2.2% fixed/mature for a hefty 3+ month $10,000+ deposit [with an opt-in prolongation]. As a loyal client of another bank, I could get 0.88% max on almost any amount and have it back any time. Indeed, just ballpark numbers, yet I’m sure one always can do much better. And you can, if you dare.

However, I really doubt that an agency practicing FIFO earns that little (unless you missed the last zero), considering their +75% markup, prepayment requirements, imposed services, low translators’ rates and other fattening tricks on ‘their’ translators--let alone the accrued amount [even from scratch, Month #3 will triple the total, accumulating the balance] and overdue payments for translators [if the naive/needy agrees to some three months, he will surely tolerate four, five, or even nine months and twelve too, if any].


While the liquidity matters, the issue is such low 'standards' (1) badly abuse non-businesspersons, (2) drastically underplay the profession, (3) considerably lower freelancers’ self-esteem, and (4) mindlessly cultivate Marxists Pavlov's sheepish disposables, (5) sinking the ‘Normal’ down and dumping the average translators’ rates at the alienated market.

"Gosh! Somebody got the cheap offer again! Why not me?! May be it's ok now?"

For me it’s still about greed, fear, and isolation versus knowledge, critical thinking, and common sense: Either adapt or disappear, as always.
Just about the right time to make a choice, perhaps?
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LIZ LI  Identity Verified
China
Local time: 06:47
Member (2008)
French to Chinese
+ ...
Clientele Jul 11

It depends on the clientele of such agencies.

Scenario 1:
IF 8 out of 10 of these assignments are general contents,
then chances are 8 out of 10 of their translators may be able to do the job.

Scenario 2:
Instead of selling the quality of their translation, they are selling the speediness.
And that's how these agencies differentiate themselves in the market.

Scenario 3:
Sophisticated notification system.
Only qualified t
... See more
It depends on the clientele of such agencies.

Scenario 1:
IF 8 out of 10 of these assignments are general contents,
then chances are 8 out of 10 of their translators may be able to do the job.

Scenario 2:
Instead of selling the quality of their translation, they are selling the speediness.
And that's how these agencies differentiate themselves in the market.

Scenario 3:
Sophisticated notification system.
Only qualified translators get these notifications, and PMs are able to prioritize certain freelancers in getting them earlier by changing some configurations within their system.
If you never succeed in being the 1st, then you might not be the favorite of their PMs.

It could be other reasons, but first-come-first-serve doesn't obivously save money for agencies.
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Paul Dixon  Identity Verified
Brazil
Local time: 20:47
Portuguese to English
+ ...
Interest on bills Jul 18

The hefty interest I meant was the interest charged on outstanding bills, not interest through investments. In Brazil, official interest (used for many investments) is 2.5% a year, but banks, etc charge up to 20% a MONTH or even more on outstanding debts - and if the Government is involved the fines go as high as 150% depending on what you're owing. And of course if you are 60 days waiting to be paid, there is a good chance that some bills will be left outstanding.

 

Samuel Murray  Identity Verified
Netherlands
Local time: 23:47
Member (2006)
English to Afrikaans
+ ...
@Kay Jul 18

Kay-Viktor Stegemann wrote:
High-interest account? There is no such thing. In the present state of the world economy, interest is a thing of the past. Your "tidy little sum" of interest for €20K for three months can be anything between €10 and €50, if at all. It would be a really stupid agency to go to such lengths for this kind of peanuts.


While I agree that some agencies may be holding on to your money due to cash flow problems, I also think the idea of holding on to your money to earn interest is a valid possibility. Remember, interest saved on borrowed money is also an income. While an agency might get only 2.5% interest on an investment (that's €125 on €20k for 3 months), they may be paying 25% on an overdraft (that's a saving of €1250 on €20k for 3 months). Calculation according to here.


Tom in London
 

Kay-Viktor Stegemann
Germany
Local time: 23:47
Member (2016)
English to German
Where do you get your interest rates from? Jul 18

Samuel Murray wrote:

Kay-Viktor Stegemann wrote:
High-interest account? There is no such thing. In the present state of the world economy, interest is a thing of the past. Your "tidy little sum" of interest for €20K for three months can be anything between €10 and €50, if at all. It would be a really stupid agency to go to such lengths for this kind of peanuts.


While I agree that some agencies may be holding on to your money due to cash flow problems, I also think the idea of holding on to your money to earn interest is a valid possibility. Remember, interest saved on borrowed money is also an income. While an agency might get only 2.5% interest on an investment (that's €125 on €20k for 3 months), they may be paying 25% on an overdraft (that's a saving of €1250 on €20k for 3 months). Calculation according to here.


Samuel, I cannot see where you get the idea of this kind of interest rates. Please show me an offer of a reputable bank in the eurozone that will pay 2.5% interest for short-term money without any strings attached. The reality is more like 0.5%, and you will be lucky to get that. Keep in mind that negative interest is a reality for higher volumes in the eurozone. Of course you can get 2.5% from the bank of St. Nowhere Island on a currency that devalues 10% a month.

Regarding overdraft, that's exactly what I was talking about. An agency that needs to resort to overdraft obviously has a liquidity disaster and will be out of business quickly. A legitimate agency with a functioning business model will have a credit line with a bank to cover the time difference between outgoing and ingoing payments and pay very modest interest on that.


 

Samuel Murray  Identity Verified
Netherlands
Local time: 23:47
Member (2006)
English to Afrikaans
+ ...
@Kay Jul 18

Kay-Viktor Stegemann wrote:
Please show me an offer of a reputable bank in the eurozone that will pay 2.5% interest...


I thought of the currency in your and my posts more as a placeholder than an indication that the discussion is about specifically European agencies. I did not mean to imply that 2.5% is possible in the EU at this time. Paul mentioned Brazil. My example is from South Africa, but really the percentages don't change the argument -- credit always attracts higher interest than debit.

An agency that needs to resort to overdraft obviously has a liquidity disaster and will be out of business quickly. A legitimate agency with a functioning business model will have a credit line...


While researching my previous post I tried to find out what, exactly, is the difference between an overdraft and a credit line (or revolving credit), and my conclusion was that they're essentially two separately defined vehicles to accomplish the exact same thing. From a logical perspective, a credit line is simply a type of overdraft, and vice versa. The biggest differences are that non-banks can also offer "credit lines" and that banks prefer business accounts to use "credit lines" instead of overdrafts. A credit line typically has stricter requirements attached to it, making the bank more money, but that does not mean that a business using an overdraft instead of a "credit line" is in bad shape.

Different banks would do this in different ways, but to show just one example: with my local bank in South Africa, the minimum monthly repayment for an overdraft is always the same amount, regardless of how overdrawn it is, but for a credit line it changes depending on how much credit you're using at that point (but it's always less than that of the overdraft, even if you max it out). So, for a business with lots of assets to use as collateral, it would make sense to get a credit line instead of an overdraft, but for a business whose main assets are people and contacts, a credit line may be too expensive to arrange in the first place.


 

Kay-Viktor Stegemann
Germany
Local time: 23:47
Member (2016)
English to German
Overdraft Jul 18

Samuel Murray wrote:

Kay-Viktor Stegemann wrote:
Please show me an offer of a reputable bank in the eurozone that will pay 2.5% interest...


I thought of the currency in your and my posts more as a placeholder than an indication that the discussion is about specifically European agencies. I did not mean to imply that 2.5% is possible in the EU at this time. Paul mentioned Brazil. My example is from South Africa, but really the percentages don't change the argument -- credit always attracts higher interest than debit.


That is true, of course. Regarding the currencies, translations normally are billed and paid in leading currencies like USD or EUR. Even your example agency from South Africa will do most of their business not in ZAR but in USD or EUR, so that any interest calculations, be it for credit or debit, should be made in this business currency. Or do you have agreed on ZAR rates with them? In all probability they will bill their clients in USD or EUR and do their internal calculations in that currency.

While researching my previous post I tried to find out what, exactly, is the difference between an overdraft and a credit line (or revolving credit), and my conclusion was that they're essentially two separately defined vehicles to accomplish the exact same thing.


There might be different definitions on that, but normally "overdraft" means that the balance of your account is even below the agreed credit line, which is allowed by some banks to a certain extent, but comes with severely higher interest rates. "Overdraft" is an unplanned credit extension, while a credit line is planned and agreed on beforehand with the bank. That's why I said the liquidity of such a company is out of control when it uses overdraft. Interest rates like the 25% you mentioned are practically impossible with a regular credit line, at least in EUR or USD.

Different banks would do this in different ways, but to show just one example: with my local bank in South Africa, the minimum monthly repayment for an overdraft is always the same amount, regardless of how overdrawn it is, but for a credit line it changes depending on how much credit you're using at that point (but it's always less than that of the overdraft, even if you max it out). So, for a business with lots of assets to use as collateral, it would make sense to get a credit line instead of an overdraft, but for a business whose main assets are people and contacts, a credit line may be too expensive to arrange in the first place.


When the agency has a solid business, it can use its outgoing bills as collateral for such a credit line and should get better interest rates than for overdraft. There are specialized banks for this kind of business, for example factoring banks that will even buy the outgoing bills against a discount on the invoice total.

Anyway, we can agree that agencies will be able to save some interest by withholding payments to translators for an extended time span, but I think that in low-interest times like these, this is not a big factor in the overall calculation of a business. Translators have good reasons to avoid overly long payment terms, but mostly for the risk involved, not for interest considerations.


 
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