Congratulations! You landed that big corporate customer that you always wanted. Then they request your signature on the payment terms. 60 days? 60 days EOM (End Of Month)? Even longer?
You already know that cash is king and for large corporations this is no different. Actually they often rely on being able to demand their own complex and extensive credit terms for the privilege of working for them. The longer they can drag this out, the smoother their own cash flow.
The first 6-12 months of dealing with this can be tough or just downright scary. So let’s take a breath and figure it out. The money is good, the kudos is amazing, all we need to do is sort out the process which will sort out the cash flow.
For the avoidance of any doubt, when you’re agreeing to terms which include the letters EOM, you’re effectively agreeing to invoice just once per calendar month. So if you agree to supply or work for your customer on 60 days EOM, you then fulfil work and/or supply on the 1st January, you won’t get paid until around 1st April. (January EOM = 31st January + 60 days = 1st April). And then only if you get their process right.
That’s the first thing you need to establish; what exactly is their process.
Start with the invoice itself:
- Is it just the order number you need to show on the invoice or other information too, such as your supplier code, project number etc?
- Do you need a signed completion statement or delivery note included with the invoice?
- Can you invoice in parts as the work progresses, or does it have to be in one lump sum at the end?
- Where and how does the invoice need to be sent?
- What date does the invoice need to be received by to be included on their next payment run? (I once had a client who was on 60 days EOM. If we sent their invoice for January’s work, for example, on 1st February, they treated it as a February invoice!).
- Send the invoice to them on the day the work is completed. Any delays at your end of this process will only make it that much harder to get paid on time.
Next, chase it all the way through their system. Large corporations will have a series of steps that must be completed by a set date before each payment run.
Once you have the information below make sure you set a reminder for each date and for each invoice.
- Establish right at the start who your point of contact is for payments.
- A few days after you’ve sent your invoice in, call to make sure it’s been received and put on to their system.
- What’s the next step in their in system? Management approval for example? When does this need to be completed by? Call again a week or so before the deadline for this and make sure it’s been signed off. If not, call the manager or contact who raised your order number. Don’t just leave it to their accounts department. You will likely need to chase this up a number of times.
- When is the cut off for their payment run? Often this will be a week or more before the payment date. So guess what? You’ll need to call again and make sure that everything has been done and that they have it on their list of payments.
- Don’t be shy! Call as many times as you need to for every phase. Presume, because it’s true, that this only matters to you.
Miss just one step and you could be waiting yet another month for your money. In our next article we’ll take a look at managing your own payment system and what else you can do to ease cash flow in the meantime.