Negotiating on Agency Payment Terms

[Willy Win]

I am in the process of negotiating contract terms an deliverables with an agency for a short term an outside IR35 contract. Their monthly payment cycle is going to be a problem for cashflow so on stating that and that the business needs weekly payments their response is they have "managed" to get approval for weekly payments for the first 4 weeks then monthly after due to internal workloads. Any advice on a counter negotiation?

[WTFH]

What are you wanting to counter with?
If your cashflow is so tight that after 1 month of weekly payments you can't save, it's maybe better to get something with regular income.

[malvolio]

A couple of thoughts:

Please don't make the stake of thinking you are in a B2B relationship with the agency. You are a commodity as far as they are concerned, not a supplier.

Their business model is built around minimising risks and costs. Their internal payment cycle is part of that, they aren't going to change it just to suit you, without a very good reason.

My last three "outside IR35 short term contracts" were based on payment on delivery which is a good outside pointer. Payment for time spent isn't.

And while I agree with WTFH to some extent, in this market you may not have the ability to build a war chest. But don't lose the chance to earn income for the sake of some short term financial pain.

[Protagoras]

I suppose that monthly payment could be a cashflow concern for a contact that incurs significant costs, such as travel and hotels where extended payment terms / risk of non-payment becomes a problem.

Ultimately, business risk needs to be managed and if you can't get terms that make an engagement work - or insure the risk - then maybe some contracts need to be declined.

That said, in the market as currently reported few would decline a short-term outside IR35 'gig'. It's said that some people even agree contracts with tax indemnity clauses!

[eek]

I suppose that monthly payment could be a cashflow concern for a contact that incurs significant costs, such as travel and hotels where extended payment terms / risk of non-payment becomes a problem.

Ultimately, business risk needs to be managed and if you can't get terms that make an engagement work - or insure the risk - then maybe some contracts need to be declined.

That said, in the market as currently reported few would decline a short-term outside IR35 'gig'. It's said that some people even agree contracts with tax indemnity clauses!

Love to know where you can insure the risk of an agency going belly up, factoring companies don't work like that.

But equally I don't particularly want a small agency potentially owing me 2 months money (monthly billing on 30 day terms).

[Protagoras]

Love to know where you can insure the risk of an agency going belly up, factoring companies don't work like that.

But equally I don't particularly want a small agency potentially owing me 2 months money (monthly billing on 30 day terms).

Waiting to the end of the month to be paid is fair enough, but I think payment should then be in under a week. No way should it be necessary to extend such supply chain credit.

When I was a member, I recall IPSE membership came with agency failure cover.
Their website says "End client or agency failure cover up to £10k for loss of earnings". https://www.ipse.co.uk/membership/pricing

One problem with this is that it's only £10k - and I've not read the T&Cs to appreciate what 'earnings' means.

[courtg9000]

Love to know where you can insure the risk of an agency going belly up, factoring companies don't work like that.

But equally I don't particularly want a small agency potentially owing me 2 months money (monthly billing on 30 day terms).

Remember also that the recruitment and "consultancy" sectors traditionally have carried the largest fees in terms of factoring! There is a reason for this. Its very hard for the factor to get the invoices paid from these peoples clients!

[malvolio]

Waiting to the end of the month to be paid is fair enough, but I think payment should then be in under a week. No way should it be necessary to extend such supply chain credit.

When I was a member, I recall IPSE membership came with agency failure cover.
Their website says "End client or agency failure cover up to £10k for loss of earnings". https://www.ipse.co.uk/membership/pricing

One problem with this is that it's only £10k - and I've not read the T&Cs to appreciate what 'earnings' means.

No idea about the modern IPse, but originally it was pretty unconditional, actually. You had to have contractual proof of the potential loss of YourCo revenue, which isn't all that hard and quite understandable. But it was £10k, both because IPSe wasn't a bank with infinite funds and partly because the whole ethos is that you are supposed to minimise your risks.

Like all IPSe products, it was a safety belt, not a safety blanket.

[ladymuck]

Smaller agencies can be more amenable to flexible payment terms. Larger ones tend to have fixed processes that they're unwilling to flex.

I think you've done well to get what you have and I'm inclined to agree with the comments above.

Are you willing to turn down work because the payment terms are sub optimal? If you push too much, that is the risk you face.

[ladymuck]

No idea about the modern IPse, but originally it was pretty unconditional, actually. You had to have contractual proof of the potential loss of YourCo revenue, which isn't all that hard and quite understandable. But it was £10k, both because IPSe wasn't a bank with infinite funds and partly because the whole ethos is that you are supposed to minimise your risks.

Like all IPSe products, it was a safety belt, not a safety blanket.

The 10k still exists. It's only available with the Director level membership, which is over £300 a year in fees.