Should translators give credit to clients?
Thread poster: ExScientiaVera

ExScientiaVera
Faroe Islands
Local time: 10:18
Danish to English
+ ...
May 5, 2013

Should translators give credit to clients?

If a translator can get past the issues of trust with giving a client a line of credit, wouldn't a line of credit for invoices to be debited to be easier to manage, provide a smoother form of income and provide a more predictable increase of accounts by applying monthly or yearly interest instead of late day fees?
I am considering, once I found my own business, opening lines of credits for company customers to cover several projects, and asking them to pay a monthly installment instead of lump sums. The stability of income over several months, not having to rush with an invoice to a singular project when I have other projects waiting on me, the automatic adjustments to inflation interest rates provide, and elasticity credit provides for my customers, who need the credit to start a project, are all attractive reasons for me to extends lines of credit.

What are the downsides for a translator in providing lines of credit?


 

Christine Andersen  Identity Verified
Denmark
Local time: 11:18
Member (2003)
Danish to English
+ ...
Not more than 30 days May 5, 2013

Most clients in northern Europe pay 30 days from the invoice date or 30 days from the end of the month, and that is quite long enough IMHO.

The EU is in fact trying to combat long credit terms.

http://ec.europa.eu/enterprise/policies/single-market-goods/fighting-late-payments/

Small businesses are already struggling with clients who in practice demand and get credit, and it causes serious cash-flow problems in many industries.

It is quite simple to sit down once a month and make out all invoices for assignments carried out during the month, if you don't want to invoice each one immediately.

If you do more than one job in a month for agencies, they are very happy to receive monthly invoices. Some already state in their terms that they pay 30 days after the last day of the month in which the invoice arrives. It is a good idea to get invoices off before the end of the month, unless you are happy to wait 30 days longer....

I do it that way, and it means I am already giving 45 days' credit or more for jobs done in the first half of the month, and that is plenty! Luckily some clients pay fast, once the invoice arrives.

At the moment, interest rates in the EU are very low, but when the economy picks up, they may rise again, and then you will actually be losing money by giving long credits. Let the banks provide credit - they're geared to it!

The longer you wait for payment, the easier it is for clients to invent issues and refuse to pay. Many clients are OK, but there are also plenty who do not appreciate how much work goes into translation, and think they are paying an awful lot for a few pages of words!!!

However flawless your translation is, everything can be said in different ways, and some clients will cause hassle. They are less likely to do so if they have paid up and there is no real cause for complaint.


 

Woodstock  Identity Verified
Germany
Local time: 11:18
Member (2005)
German to English
+ ...
That's all fine and dandy in theory, May 6, 2013

but only in theory. Try it if you are so inclined, but I think that only after you are actually running your business will you be able to determine which accounting method works best for you. Personally, I wouldn't experiment in the way you suggest, for the reasons Christine has already outlined very clearly, and particularly with regard to the statement that we are not banks. I'll leave the fancy accounting to them, thanks very much, and stick to the conventional method of monthly invoicing, with 30 days payment date.

Edited for clarity

[Edited at 2013-05-06 13:22 GMT]


 

Sheila Wilson  Identity Verified
Spain
Local time: 10:18
Member (2007)
English
+ ...
Wouldn't suit me May 6, 2013

ExScientiaVera wrote:
If a translator can get past the issues of trust

I trust some of my clients to pay for my services, certainly. Some would go a long way to avoid a situation where I wasn't paid, and some clients have gone to enormous lengths to get round US sanctions etc imposed on their countries. But I don't trust the economic situation and I don't see how any of my clients can give me a guarantee that they won't become insolvent. We hear a lot about private citizens running up debts because of too much credit granted to them, and company owners are liable to do the same thing if they are faced with temptation.

I can only say that in my own private life, I have several bank accounts in several countries, and several debit cards, but I have absolutely no credit cards; and I prefer to keep things very simple with my clients, too. OTOH, I don't invoice my regular clients for every job I do during the month, as that would be an expensive nuisance for both parties. Like Christine, I make sure their monthly invoice is dated during the current month (last working day, normally) and sent to them by email that day. Payment is by the end of the following month. That's more than enough credit, IMHO.


 

Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 11:18
Member (2005)
English to Spanish
+ ...
Not a good idea May 6, 2013

If and when a customer's management would approve such an idea (i.e. having to pay you even if you did not do anything for them in a particular period), which I really doubt, to me this would be like acting as a bank, but without a bank's resources to assess credit worthiness.

To me this looks like a complication, and not an improvement from issuing your monthly invoices and having them paid regularly.

[Edited at 2013-05-06 12:44 GMT]


 

ExScientiaVera
Faroe Islands
Local time: 10:18
Danish to English
+ ...
TOPIC STARTER
Some companies need credit May 6, 2013

To Tomás,

The payment is for services that have been rendered but not fully paid for by the client.
The payment is for an outstanding balance the client has with the translator.

Several companies operate credit lines in business-to-business relationships, where a company has a period of activity that surpasses their standing capital. Construction is a key example, where builders will often have several running sites and risk the client choosing to either negotiate the price after the work is done or default completely. I was working on such site, where the owner and customer decided he could refuse to pay the bill, hide behind a lawyer and live in the house anyways. Two years down the road, that customer still has not paid and his family is enjoying the house and a couple of luxury cars.
Another company that sub-contracted work to the same builder liquidated after we had done the all the work to put down the concrete for a gas station.
My boss could either pay the bills for materials or he could pay his employees. Without the credit lines he has with his suppliers, he would have been forced out of business.

I will take your point, that few agencies would enter such an agreement, and reconsider how I will market the idea. I understand it is not the norm in this field.

[Edited at 2013-05-06 18:28 GMT]


 

Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 11:18
Member (2005)
English to Spanish
+ ...
Three reasons against it: risk, risk, and risk May 6, 2013

ExScientiaVera wrote:
Some companies need credit

Then they should go to a bank and request a line of credit. Banks are prepared for this kind of thing, and are in a better position to assess the risk of a particular customer. They have full departments for that, while you only have the customer's word for it.

No, it is not the norm of independent professionals to finance other companies more than the customary 30 days, or more days if you negotiate such terms. And I think it is so for a reason: you cannot control what your customer will do or what will happen to them, and put you in an unnecessary risk.

If what you are thinking (and I don't intend to operate your mind on this, please let us know) is that offering agencies such a credit will put you in a better position among other translators in your language pairs, I have to say that agencies will only hire you if you comply with the expectations in terms of responsiveness, quality, attentive work, and good business partnership in general. I do not think that giving them credit will reduce their expectations in these areas, and if you ever run into issues with them... the fact that they owe you money and your generosity financing them will not make them any more sympathetic with your position. Having odd pending amounts (no matter in whose favour) does not help a healthy business relationship, in my opinion.


 


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