| Pages in topic: < [1 2] | Bad payment policies Thread poster: Djana Surkovic
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| I understand your point, but... | Jun 24, 2013 |
jyuan_us wrote:
The issue is, don't you have savings in your bank account to support your monthly expenses? If so, what will be the difference between paying you 1 month or 2 months after the job is done?
When I started to work with my best agency a year ago, they set a payment term of 60 days. I didn't feel that happy at first but I eventually agreed.
If I refused to accept their payment term, my income in the past 12 months would have been about 20 thousand less.
Now I'm so busy with them that I don't even have the time to prepare invoices for jobs I did for them 3 months ago.
I'm glad I didn't care that much about their payment term in the beginning.
How much is each of us is spending to finance that agency's operating capital?
From the table to which I provided the link on my previous post:
Monthly interest in the USA: 0.25%
Monthly interest in Brazil: 8.00%
Monthly interest in Serbia: 11.00%
Let's overdo it, and say that a client is to pay each of us $1,000 after 6 months. Let's assume all three of us are completely broke, so we cannot finance that agency with our own funds, but we'll have to get a loan to do it, for the purpose of calculating how much it will cost. Furthermore, let's assume that interest is linear, i.e. it does not accrue on itself.
To you, Jyuan, in the USA, it will cost 6 mos. @ 0.25% x $1,000 = $15
To me, in Brazil, it will cost 6 mos. @ 8.00% x $1,000 = $480
To Djana, in Serbia, it will cost 6 mos. @ 11.00% x $1,000 = $660
Of course, I've used farfetched figures to make it blatantly obvious.
Using realistic figures, yes, I do give discounts for earlier payment. A client paying COD will get an 8% lower rate from me than another paying in 30 days. So, if they borrow those $1,000 from a bank in the USA at 0.25%/mo. to pay me forthwith, when they settle that loan one month later, they'll have had a $77.50 financial profit... at the expense of the greedy Brazilian banking system, which would otherwise have lent those $1,000 to me.
Is the picture clear now?
My tenet is that a translator is not - or should not be - expected to provide agencies with operating capital, especially if the former lives in a country where interest rates are way higher than the latter.
| | | | | That's a bit like free samples | Jun 25, 2013 |
jyuan_us wrote:
The issue is, don't you have savings in your bank account to support your monthly expenses? If so, what will be the difference between paying you 1 month or 2 months after the job is done?
When I started to work with my best agency a year ago, they set a payment term of 60 days. I didn't feel that happy at first but I eventually agreed.
If I refused to accept their payment term, my income in the past 12 months would have been about 20 thousand less.
Now I'm so busy with them that I don't even have the time to prepare invoices for jobs I did for them 3 months ago.
I'm glad I didn't care that much about their payment term in the beginning.
That's a bit like free samples, and a bit like some other terms or conditions that make potentially a lot of people unhappy. IMHO the key here is to keep level-headed and realistic and know an isolated issue for what it is. We aren't robots, but sometimes we need a bit of a colder approach to trade-offs.
| | | | | The risk is clear and present | Jun 25, 2013 |
jyuan_us wrote:
The issue is, don't you have savings in your bank account to support your monthly expenses?
jyuan, as others have pointed out, this is actually not the issue. And as the OP pointed out, it is certainly none of the client's business whether she has savings or not, i.e. it is not an aspect to be considered as part of a business transaction. The only party here that should (in some cases, by law) be able to prove "savings in the bank" is the agency.
If so, what will be the difference between paying you 1 month or 2 months after the job is done?
Indeed, if the agency is solvent - i.e. has the "savings" (= capital) in the bank to pay its suppliers (= translators), then what is the difference between paying in 1 month or 2? Based on the policy change, however, there must be a difference to the agency - and that is what presents a real risk for the supplier.
It indicates that the agency likely does not have the capital to pay upon delivery of the service it contracted for. And that implies in turn that it is overly dependent on immediate cash flow from its own clients.
So what happens if there is a dispute with a client about a big project? Will the agency pay its suppliers? This kind of thing happens all the time in the translation "industry", and the outcome is not usually positive for the suppliers (= translators and interpreters).
When I started to work with my best agency a year ago, they set a payment term of 60 days. I didn't feel that happy at first but I eventually agreed.
If I refused to accept their payment term, my income in the past 12 months would have been about 20 thousand less.
You made a calculated - but personal - business decision. This has worked out well for you, so far, but things could have gone much differently. Things still may change for the worse (I certainly hope not for your sake).
By making this decision, you accepted a rather large risk - the risk being the agency's implied lack of capital. Accepting this kind of risk is simply not for everyone, and I dare say, it is not a decision that most translators would typically make (provided they are not extremely dependent themselves on the client in question, and that is an altogether different kind of risk).
| | | | Djana Surkovic
Bosnia and Herzegovina
Local time: 11:57
Member
French to Bosnian
+ ...
TOPIC STARTER
José Henrique Lamensdorf wrote: Djana, I just checked this table, and discovered that you are in one of the few countries in the world that manage to have higher interest rates than where I am, Brazil. So my recipe might work for you. I explain these long-payment-term clients that I have made a non-compete agreement with my bank here: As long as they don't offer translation services (and they don't, banking is much more profitable!), I won't lend money at interest rates lower that 2x theirs. These clients must understand that those large, powerful commercial banks compete against each other on which one offers loans at the lowest interest rates. While I've been a professional translator for several decades, I'd still be a complete amateur in providing financial services. Therefore my interest rates should be about 20% per month. Yours in Serbia may be even higher. So they want to pay 60 days after I deliver? Fine! In that case my rates will be 44% higher than what they are on account of the interest accrued. And then there is the priority issue. I used to adopt rush surcharges. When one client decided to overbid another one's rush surcharges, I considered that it would be dishonest to waitlist a client who was already paying a rush bonus, just because another one would pay more. So I gave up completely on rush surcharges, as they caused havoc to my schedule anyway, and began serving my clients with shorter payment terms first. Those clients demanding absolute priority should prepay the job upon ordering. There is no way any other might overturn them, because they can't go further back into the past, to pay me before the current #1 already did. Most clients get speedy service with COD. Those who are not in a rush may pay in 1-2 weeks. Those intending to pay in 30 days are not likely to get service from me in the foreseeable future. A client willing to pay 60 days after delivery will probably have to wait forever to get any service from me; I guess I'll be long gone when their turn comes. I began doing this last January. It is working so well, that I wonder why I didn't think of it before.
I must say to everyone that I am not from Serbia, I am from Bosnia and Herzegovina.
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| A very important point | Jun 25, 2013 |
Janet Rubin wrote:
Indeed, if the agency is solvent - i.e. has the "savings" (= capital) in the bank to pay its suppliers (= translators), then what is the difference between paying in 1 month or 2? Based on the policy change, however, there must be a difference to the agency - and that is what presents a real risk for the supplier.
It indicates that the agency likely does not have the capital to pay upon delivery of the service it contracted for. And that implies in turn that it is overly dependent on immediate cash flow from its own clients.
So what happens if there is a dispute with a client about a big project? Will the agency pay its suppliers? This kind of thing happens all the time in the translation "industry", and the outcome is not usually positive for the suppliers (= translators and interpreters).
Janet, you raised a most important aspect in our profession.
I haven't researched on that lately, however there was a time when I did, and I noticed that there were several self-asserted one-person translation agencies everywhere with some peculiar features:
- The owner/operator often knew very little - if anything - about translation;
- They never had a physical address/phone number; only e-mail, at times MSN too;
- They made it clear to prospects that all orders must be prepaid for work to begin;
- They never paid translators before the end of the second month after the invoice had been submitted.
My take on their m.o. is that they had found a clever way to stay afloat financially: they'd live merely on the cash flow generated by receiving early from clients and having to pay translators much later, with the prepayment from the next job.
If demand declined - or worse, halted - there would be no more prepayments, and these agencies would default on all translators. Most likely, those all-1 WWA agencies on the Blue Board here are outfits like this, usually kitchen table operations displaying clip art photos of fancy commercial buildings on their web site.
That led me to work only for translation agencies located on the sunny side of the street, and I don't regret it.
| | | | Sheila Wilson 
Spain
Local time: 10:57
Member (2007)
English
+ ...
| @ jyuan_us - I'm crossing my fingers for you | Jun 25, 2013 |
jyuan_us wrote:
When I started to work with my best agency a year ago, they set a payment term of 60 days. I didn't feel that happy at first but I eventually agreed.
If I refused to accept their payment term, my income in the past 12 months would have been about 20 thousand less.
Oh dear! I hope you understand what a terribly dangerous path you're following, jyuan_us. This agency is clearly providing a large part of your revenue, probably one of your top three clients (I hope fervently that you have at least three clients). They are paying you regularly, so you are no longer seeing the problem that they are paying long after you do the work - I understand that, and I know it's easy to be lulled into that false sense of security.
However, at any one point in time they must be owing you at least 60 days' worth of work. But is it limited to 60 days' worth? Are you invoicing them separately for each small piece of work, so that the 60 days is about 62 days from starting the work? Or are some of those jobs large, meaning that the work is paid 60 days + 3-4 weeks after starting the job (I'm assuming that you don't invoice before delivery)? Or are they sending you so many jobs that you've agreed to invoice monthly, meaning that all of your work is being paid at between 60 and 90 days?
And then you say
Now I'm so busy with them that I don't even have the time to prepare invoices for jobs I did for them 3 months ago.
In that case, assuming fairly regular workflow (and allowing for my limited grasp of maths), the sum owing becomes astronomical, doesn't it?
- invoiced and not yet paid (60 days' work - the absolute minimum) = 3,333 (presumably USD)
- jobs not even invoiced (90 days' work) = 5,000
Bearing in mind that those last 5,000 dollars won't even be due for payment for two months if you invoice today, you are risking an awful lot of money on the health of that one company. If they file for bankruptcy today, it looks like you'll stand to lose 8,000 USD AT LEAST. With translation agency bankruptcies all too common at the moment, I really wouldn't like to be in your shoes. What seems to be a great "gravy train" today could mean big problems for you, and any family members who depend on you, tomorrow. I hope not, but you really are risking a lot with this business practice.
| | | | | Closer to the situation in Brazil | Jun 25, 2013 |
Djana Surkovic wrote:
I must say to everyone that I am not from Serbia, I am from Bosnia and Herzegovina.
Djana,
I apologize for that. I only looked at the map on your profile, failed to read the text.
Anyway, considering that table, interest rates in Bosnia and Herzegovina are 7.00%/mo.
So your situation is closer to mine:
To you, Jyuan, in the USA, it will cost 6 mos. @ 0.25% x $1,000 = $15
To me, in Brazil, it will cost 6 mos. @ 8.00% x $1,000 = $480
To Djana, in Bosnia and Herzegovina, it will cost 6 mos. @ 7.00% x $1,000 = $420
... still almost 30x what it would cost a translator in the USA to offer a 6-mo. payment term, if s/he volunteered to provide for free their clients' operating capital.
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