Monday, May 17, 2010

Be prepared to wait 3 months for payments.

Apart from the all-too-frequent "We take 90 days to process", bear in mind that large corporations have very strange structures.

One of my clients is based in New Jersey. I chat by email and phone for a month or so, we write down the goal, objectives, I do specifications and issue a proposal for a fixed-price. My contact in the corporation agrees to the proposal, and understands that a 50% deposit is required for me to start work.

So far so good.

Now comes the dance:

To receive payment I must

(1) Issue an invoice (for the full amount) by email (minutes)

(2) Wait for the accounting department to issue me with a Purchase Order number (a week)

(3) Transfer the P.O. number to my invoice (minutes)

(4) Re-issue the invoice in signed hard-copy form by postal mail (this takes a week to skip across the border)

(5) The accounting department in New Jersey checks the invoice, and then mails it (hard copy) to an office in Texas.

(6) The office in Texas does something with it, and then mails it (hard copy) to India.

(7) After that, from somewhere in the labyrinth, a real cheque gets issued and is popped in the mail (this takes a week to skip across borders)

(8) If I'm on the ball, or at least, desperate, I deposit the cheque the same day in my bank account.

(9) The banks can transfer money electronically in seconds, but insist on five weeks to clear a U.S. cheque, no matter that I receive several cheques a year from this company, drawn on the same branch, etc.

Now add up those standard delays, toss in the random glitches (my ISP is down, it's a public holiday in NJ, TX or India, Marlene is "off sick" for two days and so on), and you have an extra-long wait before you can pay your rent.

Factor these figures into the cash-flow portion of your business plan.

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