Invoicing and Payments

[malvolio]

Agency I'm with does bulk deals as the single agency on the PSL for the client. 4% fixed margin*, I'm on weekly billing with 7 day terms and I know they're on monthly billing with 45 day terms with the client. I'm not sure how they survive on that it. I suspect that they save some cashflow with the more naive contractors on monthly+45, that's what they initially tried to palm off on me before I insisted on weekly+7.

For me, an agency on that low a margin is just a disaster waiting to happen and I want them having as little of my money as possible when** they do go bang.

* I know because I negotiated the rate with the end client and I own the budget for my own contract!
** not if

There are successful agencies working very low margins with the big corporates - SQ with BP for example - but you can be very certain that their payment terms with the client are bombproof so removing the factoring costs from the margin.

No non-PSL agency can work at much under 10%, that's when you need to start worrying.

[craig1]

I broadly agree with that, the problem is that the contracted maximum is 85 working days. Multiply your day rate by 85 and ask your self if your business is willing to extend that much credit (even if it's only a worst case scenario) to another business. Mine isn't. Agencies make a good margin, that should pay for the factoring of the invoices if they don't have a reasonable cashflow.

Agency I'm with does bulk deals as the single agency on the PSL for the client. 4% fixed margin*, I'm on weekly billing with 7 day terms and I know they're on monthly billing with 45 day terms with the client. I'm not sure how they survive on that it. I suspect that they save some cashflow with the more naive contractors on monthly+45, that's what they initially tried to palm off on me before I insisted on weekly+7.

For me, an agency on that low a margin is just a disaster waiting to happen and I want them having as little of my money as possible when** they do go bang.

* I know because I negotiated the rate with the end client and I own the budget for my own contract!
** not if

[JoJoGabor]

On a related note - do people ever credit check their agency? I am about to for a new contract as I have never heard of them.

In fact looking into this a bit more, my new contract states an address that doesnt match up with the company registered address, and doesnt have the company registration stated. Should these be added to the contract?

[Wanderer]

It is a contracted maximum. If they want to better it when it is in your interest I see no problems with the practice being different.

I broadly agree with that, the problem is that the contracted maximum is 85 working days. Multiply your day rate by 85 and ask your self if your business is willing to extend that much credit (even if it's only a worst case scenario) to another business. Mine isn't. Agencies make a good margin, that should pay for the factoring of the invoices if they don't have a reasonable cashflow.

[nomadd]

Have a contract which mentions that invoices must be raised only after 2 months from the end of the month and payments will be made within 30 days which means for the month of January, invoicing on 1st April will pay me by 30th April for January! However, the agent says you are free to invoice as soon as the month ends and payments will be made usually within 20-25 days and the contract clauses are not strictly followed in principle. With my current contract, I am paid within 10 days even when its stated 30.

What to make of this? Clearly, something should not be mentioned in the contract when it won't be followed in practice. What should be done in such circumstances? Refuse the terms or accept and assume things will be fine?

With the world economy the way it currently is, I'd say you are insane to sign up for any such payment terms. You only have to read a few of the recent posts on this very forum to see how many contractors have had their fingers burned by agents who've gone bust.

I normally insist - in writing - that weekly or bi-weekly payments are made. At the moment I'm on monthly, but only because it's a big agency I've worked with for many years and I know they are good for the payment (they can't screw around as they are on-site here with the contractors.)

[northernladuk]

What to make of this? Clearly, something should not be mentioned in the contract when it won't be followed in practice.

Not true. It is a contracted maximum. If they want to better it when it is in your interest I see no problems with the practice being different.

[Wanderer]

Have a contract which mentions that invoices must be raised only after 2 months from the end of the month and payments will be made within 30 days which means for the month of January, invoicing on 1st April will pay me by 30th April for January! However, the agent says you are free to invoice as soon as the month ends and payments will be made usually within 20-25 days and the contract clauses are not strictly followed in principle.

Multiply your day rate (inc VAT) by 85 and that's how much credit your company would be extending to their agency. That's just not going to happen, don't stand for nonsense like that. If it comes to the crunch then you don't have a leg to stand on under law.

Tell them your company policy is to invoice weekly, your payment terms are 7 days and that gets written into the contract, you're not signing up for some nonsense payment terms and a gentleman's agreement that you will be paid quicker - you just can't do business that way or you will end up bankrupted.

Who is the agency?

[JoJoGabor]

Its up to you. Suitable options are:

1. Insist on shorter payment terms. Refuse the contract if they dont agree
2. Ask for a higher rate to cover the risk of the agency going bust, and to cover your financial inconvenience.
3. Get PCG Plus insurance which covers agency bankruptcy

Personally, I would go for option 1. Its quite unreasonable. Many clients pay on a weekly basis, on 7 day terms

[skipjack]

Have a contract which mentions that invoices must be raised only after 2 months from the end of the month and payments will be made within 30 days which means for the month of January, invoicing on 1st April will pay me by 30th April for January! However, the agent says you are free to invoice as soon as the month ends and payments will be made usually within 20-25 days and the contract clauses are not strictly followed in principle. With my current contract, I am paid within 10 days even when its stated 30.

What to make of this? Clearly, something should not be mentioned in the contract when it won't be followed in practice. What should be done in such circumstances? Refuse the terms or accept and assume things will be fine?