How to deal with customers who drag their feet when it’s time to pay up.
Loving the work is not enough. At the end of the day, you need to get paid. But what if your customers don’t cooperate?
It’s a common problem that’s only getting worse, according to research from the Kauffman Foundation. In a survey released in May, Kauffman found that more than 14% of entrepreneurs had trouble getting paid in 2010, compared to 13% in 2009 and just 2% in 2008. Large companies, which are sitting on unprecedented hoards of cash, are taking longer to cut checks, often revising purchase orders from net 30 to net 60 or longer. In July, US President Barack Obama signed an executive order requiring prime contractors to pay subcontractors in net 30, which are the same terms that prime contractors get.
In addition to lengthening payment cycles, big companies are often offering their smaller suppliers an ultimatum of accepting payment in either net 60 or net 10 for a discount of between one and four percent on the total amount due, says Jeffrey Leonard, chief executive of the Global Environment Fund, an investment firm.
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