Logic behind long payment terms
Thread poster: Baran Keki

Baran Keki  Identity Verified
Turkey
Local time: 08:39
Member
English to Turkish
+ ...
Jan 13

It looks like more and more translation agencies are extending their payment terms. 60 days and its pathetic euphemisms (such as running month plus 30 days or 45 days) are increasingly becoming the norm in this business.
I wonder what kind of sense it makes from accounting perspective to set such extended payment terms? If you are going to pay (and therefore lose) the money to the translator what is the point in prolonging the inevitable?
I understand that most translation agencies
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It looks like more and more translation agencies are extending their payment terms. 60 days and its pathetic euphemisms (such as running month plus 30 days or 45 days) are increasingly becoming the norm in this business.
I wonder what kind of sense it makes from accounting perspective to set such extended payment terms? If you are going to pay (and therefore lose) the money to the translator what is the point in prolonging the inevitable?
I understand that most translation agencies take care of their in-house personnel first and then settle the accounts with their freelance translators, but many of them were perfectly capable of doing that within 30 days about 1 to 2 years ago, now why do they need an additional 30 days? Do they actually hope to make some money on interest during that time?
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Armine Abelyan
Robert Forstag
 

Thayenga  Identity Verified
Germany
Local time: 06:39
Member (2009)
English to German
+ ...
Making money Jan 13

Perhaps not so much on interest, but rather by saving the interest any financial institution would charge for a loan.

Agencies can pretty much rely on the fact that translators, well, most of them anyway, don't charge interest for the money they are freely loaning to the customer. And it's not hard to do the math here. Just take the bank's interest rates in any given country, divide them by 12 - because they are usually annual rates -, multiply them by 40, 60, or 90+ days - don't f
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Perhaps not so much on interest, but rather by saving the interest any financial institution would charge for a loan.

Agencies can pretty much rely on the fact that translators, well, most of them anyway, don't charge interest for the money they are freely loaning to the customer. And it's not hard to do the math here. Just take the bank's interest rates in any given country, divide them by 12 - because they are usually annual rates -, multiply them by 40, 60, or 90+ days - don't forget to include the number of days the payments might be late - and then multiply the result by an X-number of translators.

Even though this is an indirect way of making money, it nevertheless adds up in the long run, perhaps even enough to pay the rent for an office for a few months.
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Kevin Fulton
 

Tomasz Sienicki  Identity Verified
Denmark
Local time: 06:39
Member (2007)
Danish to Polish
+ ...
Don't accept such payment terms Jan 13

If the agency suddenly stops paying, you lose 60 or 90 days worth of work for them. In some cases it can be a lot of money and time – and it's not just a theoretical scenario, I'm afraid.

Thayenga
Vadim Kadyrov
Marcus König
 

Baran Keki  Identity Verified
Turkey
Local time: 08:39
Member
English to Turkish
+ ...
TOPIC STARTER
It's not about accepting or rejecting them Jan 13

Tomasz Sienicki wrote:

If the agency suddenly stops paying, you lose 60 or 90 days worth of work for them. In some cases it can be a lot of money and time – and it's not just a theoretical scenario, I'm afraid.


The agencies I'm talking about are big translation agencies with highly sophisticated accounting systems that always pay on time (after waiting months on end of course).
I tend to avoid agencies with 60 day payment term like the next man. It's just that a regular client of mine extended their payment term by 15 days at the beginning of this year. Anyways, my question is like this:
If you owe somebody, say, 50 EUR and you're intent on making this payment (in other words, you're not looking to rip them off by not paying them at all) and if you have funds available to you in 30 days' time, why would you ask for another 15 or 30 days and hang on to the cash which you will eventually lose (once the payment has been made)? Does this make sense?


Armine Abelyan
 

Thayenga  Identity Verified
Germany
Local time: 06:39
Member (2009)
English to German
+ ...
New T&C's Jan 13

Baran Keki wrote:

Tomasz Sienicki wrote:

If the agency suddenly stops paying, you lose 60 or 90 days worth of work for them. In some cases it can be a lot of money and time – and it's not just a theoretical scenario, I'm afraid.


If you owe somebody, say, 50 EUR and you're intent on making this payment (in other words, you're not looking to rip them off by not paying them at all) and if you have funds available to you in 30 days' time, why would you ask for another 15 or 30 days and hang on to the cash which you will eventually lose (once the payment has been made)? Does this make sense?


Well, it doesn't make much sense, unless their clients are slow payers... which is not your problem. Now, if you want to keep this client and can afford longer payment terms, then go stay with them. Just be prepared that they might add a few more days next year or the one after next. Then the question would be, how long are you will (or able) to wait for your money? And is it fair that they want the product (translation) within a few days or sooner, but expect you to wait for months to get paid for something you have done months ago? I'm just trying to find the equal partnership here somewhere. They are a business, you are a business. So unilaterally imposing new terms doesn't really sound like a true business partnership.


 

John Fossey  Identity Verified
Canada
Local time: 00:39
Member (2008)
French to English
+ ...
Lack of working capital Jan 13

Extended payment terms generally indicate a lack of working capital. The company needs to have enough capital to cover the time between when its vendors bills are due and the time when its clients pay their bills.

Unfortunately, one of the most common forms of mismanagement is being in business with inadequate capital. So when a company extends its payment terms it is a warning signal of mismanagement.


Jan Truper
Desiree Davidse
 

Heinrich Pesch  Identity Verified
Finland
Local time: 07:39
Member (2003)
Finnish to German
+ ...
Charge them more Jan 14

I know it is hard to make them accept interest surcharge on our invoice, but why don't we adjust our rates according to the paying practice of each customer? I must say almost all my customers pay within a month, even sooner, but I don't have any customers from "west of the Rhine".

 

DZiW
Ukraine
English to Russian
+ ...
John is talking: drop-shipping Jan 14

While some owners state in certain countries and situations a sizable financial cushion (reserve funds) may require a different financial statement and status, I consider such push-pull tricks as a manipulation to keep 'independent freelancers' in play check--more agreeably easygoing and flexibly obliging.

It's a kind of an invoked/private
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While some owners state in certain countries and situations a sizable financial cushion (reserve funds) may require a different financial statement and status, I consider such push-pull tricks as a manipulation to keep 'independent freelancers' in play check--more agreeably easygoing and flexibly obliging.

It's a kind of an invoked/private dumping via pitting free* lancers against each other locally and globally, lowering their common sense and requirements. How come many middlemen are aware and willing to accept higher risks, but they allegedly have no idea about escrow, let alone proper liability insurance?

On the other hand, if there're a lot of eager 'entrepreneurs' in a can who agree to $0.01/word ($0.05+/w minus "discounts") after 90+ days, then why not? Hopefully, soon it becomes a tradition and 360+ days term would seem fine too--on and on.
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Baran Keki  Identity Verified
Turkey
Local time: 08:39
Member
English to Turkish
+ ...
TOPIC STARTER
A clarification Jan 14

Heinrich Pesch wrote:

but I don't have any customers from "west of the Rhine".


The agencies I'm referring to are big companies operating out of luxurious office buildings in Berlin, Paris, London, Copenhagen etc. and listing major car manufacturers, energy companies as their direct clients (that is, of course, according to their websites, but I feel I'm capable of distinguishing fake Shutterstock images from real ones). In other words, they are not the so called 'best rate' agencies from Calcutta or Shanghai. Such companies have stellar BB records here with loads of positive feedback from translators located in Europe and North America.


 

Wout Van den Broeck
Belgium
Local time: 06:39
Member (2019)
English to Dutch
Reasons for improving cash flow Jan 14

Baran Keki wrote:

Heinrich Pesch wrote:

but I don't have any customers from "west of the Rhine".


The agencies I'm referring to are big companies operating out of luxurious office buildings in Berlin, Paris, London, Copenhagen etc. and listing major car manufacturers, energy companies as their direct clients (that is, of course, according to their websites, but I feel I'm capable of distinguishing fake Shutterstock images from real ones). In other words, they are not the so called 'best rate' agencies from Calcutta or Shanghai. Such companies have stellar BB records here with loads of positive feedback from translators located in Europe and North America.


When companies need to improve cash flow, one of the obvious measures is to delay/reduce payment of suppliers. In a freelance industry, this is easily done. The reasons are not necessarily bad (from the company's point of view). For instance, they might need more investible cash for new investments, or they might need to "fluff" their balance sheet to keep investors happy.


John Fossey
Dan Lucas
 

Armine Abelyan
Armenia
Local time: 09:39
Member (2017)
English to Armenian
+ ...
Extended payment : not fair Jan 15

Totally agree that the payments should be done at the end of the month, just for the same reason that the translators are as well people:) and they need to eat..to buy.. to dress... and to live finally. I am working in Armenian market and I am really surprised of that politics to pay, worst case after two months (60 days). Our Agency never do such payments..we pay at the end of the month for the jobs done in a current month..that is all..as usually..for any profession.

[Edited at 2020-0
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Totally agree that the payments should be done at the end of the month, just for the same reason that the translators are as well people:) and they need to eat..to buy.. to dress... and to live finally. I am working in Armenian market and I am really surprised of that politics to pay, worst case after two months (60 days). Our Agency never do such payments..we pay at the end of the month for the jobs done in a current month..that is all..as usually..for any profession.

[Edited at 2020-01-15 06:05 GMT]
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Logic behind long payment terms

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