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Arbitrary change in payment terms
Thread poster: Ildiko Santana

Ildiko Santana  Identity Verified
United States
Local time: 07:49
Member (2002)
Hungarian to English
+ ...

MODERATOR
Apr 15, 2011

Dear Fellow Translators,

I have been experiencing a new trend lately which I have already discussed with a few colleagues, in private. Most share the opinion that we should fight this new trend, so I thought I'd ask for your input. In just the past 2 months, I have received word from various agencies on their 'updated' payment terms. What used to be net 15 or net 30 is now net 45 or even net 60. I say "word" because these clients don't even bother sending me any notice on such changes; I only find out about the new scenario when I remind them of certain payments being past due. The immediate question is, can they legally do this? Arbitrarily change their payment terms, without notifying their vendors? Then there is the question of whether to submit to such changes or insist on my preferred terms (i.e. net 15 or net 30, obviously) and if they refuse, end the working relationship (in some cases we go back many, many years). I am also curious as to any of you have experienced this trend recently and, if yes, what is your response? And lastly, when it comes to certain agencies lowering their rates, I am with those freelancers who stick to a set lower limit and refuse to work for peanuts. Should I follow this approach when it comes to the wait for getting paid (for jobs that are usually needed 'by yesterday') even at the risk of losing these clients?

Many thanks in advance for your comments!
Ildiko


 

Tom in London
United Kingdom
Local time: 15:49
Member (2008)
Italian to English
Lucky you Apr 15, 2011

Consider yourself lucky. In Italy, where most of my clients are based, it is generally assumed without question that the standard period for payment is 90 days.

It would be pointless to object, since this practice is so widespread in Italy that it is considered normal.

The main thing is to have clients who do pay, and luckily mine do although sometimes after 90 days they need to be reminded. After 90 days it's sometimes difficult to even remember what the job was. So it's important to be very efficient about invoicing and book-keeping.

As for agencies that set rates, I'd say drop those agencies. It's you, not they, who should be establishing your rates, based on what you think you ought/deserve/need to be earning.

Never accept work at below your own standard rate. But go above that rate for anything particularly urgent or problematic, or that involves you in time-consuming additional tasks such as extracting text from PDFs etc.

In other words think "up", not "down". And don't let agencies act as though they were your employer. They're not.

------------

It goes without saying that in exchange for all of the above you need to consistently and reliably produce really fantastic translations that maintain the highest standard, every time.

[Edited at 2011-04-15 17:00 GMT]


 

Ildiko Santana  Identity Verified
United States
Local time: 07:49
Member (2002)
Hungarian to English
+ ...

MODERATOR
TOPIC STARTER
thanks Tom - here's the bonus question Apr 15, 2011

I appreciate your input and feel for you! Let's throw in the bonus question then: name another industry where X provides services to Z, and Z is not required to pay for said services for several months. Or, put it this way: name another industry where you are able to order, receive and enjoy instant services and your provider generously agrees to wait several months for your payment.

 

Tom in London
United Kingdom
Local time: 15:49
Member (2008)
Italian to English
Anything. Apr 15, 2011

ildiko wrote:

I appreciate your input and feel for you! Let's throw in the bonus question then: name another industry where X provides services to Z, and Z is not required to pay for said services for several months. Or, put it this way: name another industry where you are able to order, receive and enjoy instant services and your provider generously agrees to wait several months for your payment.


Answer: anything in Italy.

Try eating at a restaurant and then telling the restaurant "I'll pay you three months from now".

icon_smile.gif


 

Emma Goldsmith  Identity Verified
Spain
Local time: 16:49
Member (2010)
Spanish to English
My local dentist Apr 15, 2011

ildiko wrote:

name another industry where you are able to order, receive and enjoy instant services and your provider generously agrees to wait several months for your payment.


The situation in Spain matches Tom's description of Italy pretty closely.
Our local dentist offers similar terms. Any dental work worth over €300 can be paid for over 6 months, in monthly instalments, interest free.
They have a thriving businessicon_smile.gif


 

Noni Gilbert  Identity Verified
Spain
Local time: 16:49
Spanish to English
+ ...
One good story for the record Apr 15, 2011

One of my clients changed payment terms from 30 days to 60 days. Grumble and groan you may say, but at the same time, she put up my rate. Yes, you are reading that right: SHE put up my rate!

There are still some people with a great sense of fairness out there in the industry.



[Edited at 2011-04-16 10:30 GMT]


 

Jan Willem van Dormolen  Identity Verified
Netherlands
Local time: 16:49
English to Dutch
+ ...
Questions... Apr 15, 2011

ildiko wrote:
The immediate question is, can they legally do this? Arbitrarily change their payment terms, without notifying their vendors?


That will depend on the country. Each country has different laws. For my country it would be out of the question.


Then there is the question of whether to submit to such changes or insist on my preferred terms (i.e. net 15 or net 30, obviously) and if they refuse, end the working relationship (in some cases we go back many, many years).


That will depend on how dependant you are on the agency. I have said yes to certain agencies and no to others. Funny thing, some of those who I said no to, accepted this and still use the old payment terms with me.


 

JaneD  Identity Verified
Sweden
Local time: 16:49
Member (2009)
Swedish to English
+ ...
Sounds ideal Apr 15, 2011

aceavila - Noni wrote:

One of my clients changed payment terms from 60 days to 30 days. Grumble and groan you may say, but at the same time, she put up my rate. Yes, you are reading that right: SHE put up my rate!

There are still some people with a great sense of fairness out there in the industry.



Does she need any Swedish-English translators, I wonder?

Jane


 

Lingua 5B  Identity Verified
Bosnia and Herzegovina
Local time: 16:49
German to Serbian
+ ...
Net 60_European standard Apr 15, 2011

I have never ever experienced net 60 from a U.S. client, not even 45. However, it's a standard with European agencies.

 

Lingua 5B  Identity Verified
Bosnia and Herzegovina
Local time: 16:49
German to Serbian
+ ...
It's not the same. Apr 15, 2011

Emma Goldsmith wrote:
Any dental work worth over €300 can be paid for over 6 months, in monthly instalments, interest free.


That means they begin getting paid the same month when the service is done, not three months later.


 

Jan Willem van Dormolen  Identity Verified
Netherlands
Local time: 16:49
English to Dutch
+ ...
Strange... Apr 16, 2011

Lingua 5B wrote:


I have never ever experienced net 60 from a U.S. client, not even 45. However, it's a standard with European agencies.


Standard in Europe? Hardly. A European directive imposes a 30 day payment term on all trade between EU companies. There is a loophole in that directive however, which some agencies take. But not 'standard', not the majority, not by far.


 

José Henrique Lamensdorf  Identity Verified
Brazil
Local time: 11:49
English to Portuguese
+ ...
They are my partners - making the shift Apr 16, 2011

Tom in London wrote:
... don't let agencies act as though they were your employer. They're not.
------------
It goes without saying that in exchange for all of the above you need to consistently and reliably produce really fantastic translations that maintain the highest standard, every time.


Definitely!

Last year I made the decision to abandon working all agencies whose payment terms were beyond 30 days. My rationale was that I specialize in translation, therefore I should be an amateur in financial services. If I were to lend money, I should do it at much higher interest rates than banks doing it as their core business - indeed, lower interest rates how they attract business. In other words, if I were lending money at zero interest rates - like too many translators do - I'd be attracting the bank industry clients instead of translation clients, therefore visibly deviating from my intended core business. Do banks offer translation services? Not that I know of yet.

Then I thought it over: the translation scenario. Just as I need time to translate anything, it is fair that the agencies I work for - as well as their end clients - have some time to review whatever I've delivered. Two weeks should be more than enough for both of them to do it, as well as for payment to hop its way back to me, considering that time zone differences might cause overnight delays. So that would be my payment term: two weeks! Anything beyond that would imply lending them money, which I have ruled as off-limits for my core business, viz. translation.

Yet I still had clients whose payment terms were between two weeks and 30 days. I'd keep them, yet I warned them that they would have lower priority status than the two-week ones, as well as possibly some limited availability in times of high demand. Those commenting on it considered it fair.

Deep inside me, I felt this could cause a drop in my workload. To my surprise, it didn't. While I continued serving my good clients that already were in the two-week term, I found myself facing a higher demand from a whole new breed of clients who value my services and treat me like a valuable business partner.

This led me to project the image one level beyond. Just as there are many amateur translators around bundling financial services (viz. interest-free money lending) into their translation services, in order to make the latter attractive, there are agencies specialized in outsourcing to these people, which have to do the same, otherwise their offer won't attract customers. This thing grew so big over the years, that it overshadowed a considerable portion of the translation-only business in some regions.

I think I managed to step out of that. If my bank eventually starts offering translation services, I might reconsider my position..


 

Krzysztof Kajetanowicz (X)  Identity Verified
Poland
Local time: 16:49
English to Polish
+ ...
cost Apr 16, 2011

My three cents: we generally overestimate the importance of payment terms, especially in today's economy. Getting paid a month late costs you half a percent of your fee or less (unless you have to borrow, and very expensively, in which case it might be 1 percent).

 

José Henrique Lamensdorf  Identity Verified
Brazil
Local time: 11:49
English to Portuguese
+ ...
It varies from country to country Apr 16, 2011

Krzysztof Kajetanowicz wrote:
My three cents: we generally overestimate the importance of payment terms, especially in today's economy. Getting paid a month late costs you half a percent of your fee or less (unless you have to borrow, and very expensively, in which case it might be 1 percent).


It depends on where you are. In Brazil, monthly interest rates are around 10% for either rolling debt on credit cards or overdraft guarantee loans. It's possibly the #1 most profitable country for banks, and banking is the #1 most profitable business here. If you invest that money at lo- or no-risk with a bank, most likely you get around 1% per month, so this gives you the complete picture. Here, time is money for sure!


 

Samuel Murray  Identity Verified
Netherlands
Local time: 16:49
Member (2006)
English to Afrikaans
+ ...
If you want to fight it Apr 16, 2011

ildiko wrote:
What used to be net 15 or net 30 is now net 45 or even net 60. I say "word" because these clients don't even bother sending me any notice on such changes; I only find out about the new scenario when I remind them of certain payments being past due. The immediate question is, can they legally do this? Arbitrarily change their payment terms, without notifying their vendors?


You seem to think that one must not just accept this. My opinion is that as long as you don't get cash flow problems, long payment terms should be quite all right. However, I agree that it can lead to temporary financial difficulty if a large client or a large number of clients suddenly take longer to pay. Agencies should not change the terms without telling you (though for some of them you may have signed a contract allowing them to do just that).

One method of fighting it (or at least reduce nasty surprises) is to add a column to your standard "jobs accepted" or "invoices sent" spreadsheet about payment terms, and check the PO carefully every time you fill in a row of data, so that you spot sudden changes in payment terms quicker.

I think that if a client decides to pay later than what was agreed, then you would be free to charge interest. Even if the client claims that the later date is now his usual payment terms, you should charge interest if the "new" payment terms were not known to you when you accepted the job.

Whether these clients will pay the interest is anyone's guess. We who work in an international environment are unfortunately at the mercy of the goodwill of the client when it comes to enforcing payment terms. The trick is to balance your work load in such a way that you don't have a shortfall.

Added:

In some countries the usual late-payment interest rate is set by law (if not agreed by the parties involved). A bit of Googling confirms that the United States has no such law.

UK law states that you can charge up to 8.5% intererest (applied daily but calculated annually, i.e. not compounded monthly) starting from 30 days after the payment was due... and by law a UK client can't make you to sign away your right to this interest (a clause in a contract attempting to do this is automatically invalid). None of this needs to be mentioned in the PO, invoice or contract -- it automatically applies.

In the rest of the EU, the rule is that interest is charged at ECB+8% (currently that's 1.25+8=9.25%) for business-to-business payments that are more than 30 days late. Additionally, EU law states that the maximum payment term for business-to-business is 60 days (unless the client can prove to a judge that a longer payment term is not grossly unfair to the translator). However, individual EU countries have until 2013 to codify this (both the late fee and the maximum term), so EU clients in some countries may not be under this law yet.



[Edited at 2011-04-16 16:06 GMT]


 
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