Business Question - How many of you are "cash and carry"??

[crypticglobe]

Ok... a little venting... and then the question.

So...I have had a semi-full time gig for a some time as consultant to a company that does computers for various music applications. I have had my own company as a side thing for a while, and recently went completely full-time self employeed. It's been mostly a GREAT experience, but I recently decided to cut a "small" client loose. As most creative people do... I am constantly 2nd guessing myself, and especially here.. because they seem pretty pissed.

Here is why:

My terms are "cash and carry". When I do a session for you, or build a computer for you, or do tech support or consulting it's either pre-paid or payment on the spot. I have a quite a few long time clients that have excellent payment histories that I give terms to, but for the rest I don't. ESPECIALLY in the Christian Music Industry (which some of my work goes to), I find it almost impossible to get paid other wise. (I know that's sad... and it's a whole other rant... don't get me started on that). With Major Labels, in my experience it takes forever to get paid... but they tell you that up front, and the check DOES come... usually right around 10 days later than they told you. I can deal with that cuz I know what to expect. No problem. With everyone else on "terms"... it's like the check will just NEVER come unless you beat them up about 10 times (this is at least a month after payment is due). If you don't... they just never pay! I don't have a staff, and I am working during the hours you would normally make "collections" calls... so when I take people on terms and they don't pay on time (which is generally synonomous with "terms" in my experience) I end up working twice as hard for the same "hour" of work making collections reminders, etc.. So... I have enough clients that are willing to pay on my "cash and carry" terms that I have pretty much decided not do any business on "terms" with any new business, Major Labels being the only exception for the above stated reasons.

So... this particular client (one of the owners is a friend) has consisently taken advantage of my good will. Ya know... stuff like...ignoring my e-mails/phone calls asking for payment (well after the due date on a bill). Saying... oh yeah, come by at lunch time tomorrow and I will have a check, and finding no one there, and certainly no check, etc.. So I decided simply to sever the business relationship. I guess I made the mistake of explaining why (I tried to do this in a nice, professional way, but I guess I just suck at that). So... they are pretty pissed. A heated e-mail explains to me that I have no "real business experience" and this policy will never work for me.

So....what do you guys think?

For reference... my business if multi-faceted.

I am producer/enginieer (mostly indy and label develoment stuff) and I work out of studio I basically have a "co-op" with. Some of my gear is there and they cut me a great rate on time.

I am a consultant. I do tech support and consulting mostly to music industry customers, but some straight up network and computer tech support to other types of businesses.

I am a sessions guitarist.

I build custom high end DAW computers, mostly for Nuendo and Cubase users.

So what do you guys do? What do you think??? Should I just chill out and learn to live with some clients that will only pay after about 4 to 6 months and many reminders... or should I stick to my guns and do "cash and carry" with non-major secular labels and long time "good status" clients??

Thanks in advance!

[thethrillfactor]

Originally Posted by crypticglobe

... or should I stick to my guns and do "cash and carry" with non-major secular labels and long time "good status" clients??

Thanks in advance!

thumbsup

[lefthando]

Sounds to me like you've got plenty of "real business experience" and you've got policies that reflect that experience.

Also, I notice 'moneylending' was absent from the list of services you provide.

[chrispick]

I think you made the wise decision and should continue to stick by your guns. These kinds of business choices are tough, but essential. It's very difficult to grow a business without established operating procedures in place, including billing practices.

You work to get paid, right?

I've had to turn away business because it didn't abide to my operations. At first, you wonder if you're shorting yourself. But then the next client comes around who's happy to see you're a professional who demands professional interaction (because they do too). And you realize the minor sacrifice was worth it.

That's not to say you should forgo favors in the future. They can be cheaper, more effective marketing than, say, media advertising. But it's best to perform them on your terms.

Hang in there, man.

[artbeat77]

Stick to your guns, Steve. You don't need that headache.

Tony

[ripper]

I feel your pain, brother.

I'm in my 21st year of doing engineering, producing, session playing and studio owning.

You are exhibiting excellent business acumen.

The #1 reason small businesses fail is not because of long-term viability, it is because of cash flow problems. Cash and carry addresses this because you MUST have the same terms with your cash in as your cash out, ie with your clients as with your utlities,, rent, insurance, repair people and your stomach.

If the latter are due and the former are not forthcoming, you better have some backup funds!

Recently I've been tempted to tell clients:

"Think of me as your mechanic. Not because I'll fix your career but because you ain't getting your ride til you pay your bill!"

or

"Sure, your face looks honest but I can't fit it into my cash register!"

I've told several employees:

"Here's the single most important part of your job engineering here: GET THE MONEY!"

Am I saying that money is my sole or even my main motivation for doing this throughout the years? NO! It is not. I would've continued my education through law school if money was such a motivated.

But cash flow is the river from which all things in any small business drink. Won't be much art happening when the electricity is shut off!

This brings up a problematic logistic:

When you give a client a 16 bit ref and withhold the 24 bit files or 1/2 inch tape until full payment, you expose yourself to the risk of them mastering off the 16 bit files (which I dither w/ UV22 which doesn't sound half bad) and not paying you.

Recently I was owed about 10K on a project that was nearing conclusion when the band started nonchalantly talking about how they were going to shop it and how they KNEW they'd immediately get some big advance to pay the balance, fly here and there, buy gear, etc.

I thought: "Uh oh! Actually their songs ain't that great and I can't seem them getting ANYTHING but dissapointed and when that happens and they don't realize their past dreams (these guys were older musicians who had had success in the 80's... but no way now! my wife heard it and called it Viagra Rock!), who do you think they will blame? and who do you think they'd use that to justify not paying?

Yeah, that's right, lil ol me!

Problem was, they wanted 16 bit refs immediately and said that they HAD to have them to sign off on the mixes. But I KNEW they would usethe refs to shop thereby negating their motivation for paying me the balance.

So I was sitting at my mac, scratching my head, thinking: "Damned if I do, damned if I don't!"

And then there it was: right in front of me! The perfect solution! I-TUNES!!!!!!!

When you want to see if you like an album on I-Tunes, you hear 10 or 15 seconds as a sample. Hey, the right 10 or 15 seconds of a mix tells you a lot about drum sounds, vocal levels, etc.

So I did up refs of 15 secs of each track and gave them to the clients.

BOY WERE THEY PISSED!!!!!

I got threatening and abusive e-mails, was accused of more treachery then Saddam Hussein and Donald Rumsfield combined, etc. I stuck to my guns and kept saying:
The simple solution is to pay your bill, which is due. If you'd like me to sign something that says if there are any TECHNICAL defects in the mixes I will fix them for free, I'll do so.

This went on for weeks so I added the pressure of taking them to court on a certain date if they didn't pay. I had early e-mails in which they had promised payment on a certain date.

Finally they paid in full.

A double win for me: I'm paid and they are no longer my clients!
THEY HAD NO INTENTIONN OF PAYING THIS BALANCE!!!!!

Try to keep return clients. But the ones you "lose" over payment are NOT ones you want to keep!!!

Also, I STRONGLY suggest you do P.O.'s for each clients that stated rates and terms of payment and delivery. Short of this, have them reply and confirm their acceptance to an email of yours that states these things.

I have never NOT been paid by a major label but there have been many times with major labels that the A&R said, "No we discussed this and it was..."
At which point I just forward them the emails from prvius weeks that in fact shows that NO, IT WAS THIS...."

sorts it every time!

MORAL: GET IT IN CASH FROM BANDS OR SMALL BUSINESS, GET IT IN WRITING FROM MAJOR LABELS

[Led]

Stick to your terms, it's your business, you make the rules. You mentioned you sort of co-op with the studio you work out of. I did this for a fair few years with a bigger studio I worked out of. They acted as a sort of billing agent, and did the invoicing for bigger jobs, for which they got a small percentage. It wasn't hard for them as they had the systems in place to do it, and it was good for me because I never had anyone welch on a payment. Mind you with anyone other than idividuals or small independents, the payment usually came in around the thirty day mark. We tried offering a discount for immediate payment, but none of the bigger clients took the option because their companies paid everything on at least 30 days and it suited them better to just pay all their bills on the same terms.
Maybe for any bigger clients you should have a credit application that states how many days you are to be paid on? It's a lot easier to say just don't work for those who don't pay immediately, but as you know labels, ad agencies and most of the bigger clients won't pay on those terms, no matter what. I reckon on the bigger stuff I'm always about 45 days behind.
Good luck,

Led

[squeegybug]

I recently had a referral through someone I trust, so I talked to the client and started the background work to get an estimate. Called and gave him a quote, he said go ahead. So I did, and got it almost finished in a couple of days.

Then he called and said he changed his mind and did not want to pursue the project after all, that he would pay me for whatever portion I had completed. Well, it was almost done, so I told him the price (about 75% of the original quote). He had a fit. Could not imagine how I had got so far so fast. Essentially calling me a liar. He said, send the invoice and what I had complete to that point. I did, and that's the last I've heard of him.

Lesson -- give out the quote, then get a contract with a deposit before starting the work.

As for slow pays -- 18% interest on past-30. On the original contract of course.

Can you allow them to make payments? Maybe a way to at least get the money eventually, with interest.

In this particular case for me, I'll take the lesson and spread the word. The guy who referred him is well connected, and I expect this "client" will hurt more in the long run than I will.

Steve

[crypticglobe]

Thanks guys! I feel a lot better. I have been really lucky and had a lot of great clients who were happy to pay for my services up front in the last few years. Fortunatley this situation has been a rare one lately. I just hate having people pissed off at me... but I feel like I did the right thing. Thanks for all your input.

So let's take it a little further. You studio owners and engineer producers.... for non-label work... do you get payment at the end of each working day, or when the project is done?

[Nu Mixer]

It may be slightly uncomfortable demanding immediate payment in certain situations, BUT it is certainly much easier than having to chase down payment (and have to hear all the BS excuses). Things are the same here... majors get longer to pay (and pay my book rate) normal clients pay either before or immediately following a session, at my discretion.

[Acoustic Cloud]

Hey...oops, lemme go back and see your name...

Cryptic!!

Most of the guys I know around my digs, do hip hop-rap stuff in their studios.

A few have basic gear, and 2 have very nice serious professionally designed room collections.... both ends of the spectrum I suppose.

I only record solo artist, string(s), vox, etcc...

But all of them have told me that they do "NO TABS, CASH EACH TIME" Then they have the 50-hundies-one-hundies, etc etc, all in real time, nobody owed nuttin..

This is basically because their material is of absolutely NO collateral to you, if you float them for a few sessions...they could dissapear... and is then, the engineer going to claim "Snoop Doogie Howsers" material, and release it himself, for profit??


Nope

Money each time, or nuttin... its the only safe way

[HDGuru]

I totally agree with the cash and carry terms. Creditor is not one of the items on my menu of services either.

[nukmusic]

Always fellow your first mind. All businesses have these type of customers. And every once in a while one or two never pay. So do what you have been doing. You can't tell the bill collectors that you'll pay them when your clients pay you.

[gainreduction]

Slightly off topic but still related..

Anybody have any idea how to actually get the royalties you're entitled to ?

My experience is, the bigger the label, the harder it is. Sony beeing my worst experience. Still waiting after 3 years...

[Bob Olhsson]

For as long as I've been in it, the studio business has always been run "cash and carry" with a deposit unless you are talking about a purchase order from a major label and $150+/hr. rates. It's no different than settling in cash after a gig, SOP for everybody who is legit.

The first sign of trouble is any experienced client who questions a strict COD policy.

[Screws]

Originally Posted by Bob Olhsson

The first sign of trouble is any experienced client who questions a strict COD policy.

Amen to the voice of wisdom and experience.

My dad once said, the empty oil drum makes the loudest noise. Translated - those who complain about this policy are probably the most likely abusers.

[Jake]

Let me pile on to add my strong endorsement to your cash and carry terms.

I'm not a music professional, but I am a full time lawyer with lots of experience dealing with clients/customers. Believe me, if there's someone people hate paying fees to more than their lawyer I'd like to find out who it is!

Anyway, my clients are very similar to yours in that I do work for both large Fortune 500 companies which just like your Major Label clients offer reliable but slow pay, and many more smaller clients who you have to stay on top of for payment. Anyway, I've been doing this long enough to have a pretty good feel for what my market is, what my rates should be, and what are reasonable payment terms. I've learned the hard way that if someone can't agree to these terms, they're going to be nothing but trouble down the road, EVERY time!

To the degree possible, if you can get at least some of your payment in advance, it helps a lot. First, a client who doesn't balk at an initial retainer/deposit, is less likely to be a deadbeat down the road, and thus you'll naturally weed out some bad pays. Secondly, if they do stiff you down the road, you've at least got some partial payment. It's pretty common for lawyers to get paid an initial retainer, so this could be one area where it's easier for me to control client payments than a similarly situated music professional.

[GearHunter]

One of the things I decided never to have a problem with, and never hesitate to do, is talk money with my clients. They realize you charge for your services. They understand they are hiring you, a professional.

So, I just matter of factly state, "OK, to book the date, 50% up-front is required. Otherwise the date is not confirmed. The other 50% is due at the beginning of the the session after the first 50% is used up. For instance, if it's a two-day session, I need the first day now, and payment for the second day is due at the beginning of the second day. If it's only a one-day session, the terms are pre-payment in-full. "

Say it confidently and with a smile. If they really want you and value you, they will pay the money on your terms. If they can't, well, I guess they couldn't have afforded you anyway, right? They would have been more trouble than they're worth.

When I give my terms openly and unashamedly, the client almost always says, "Great. I can write you a check today."

[Knastratt]

What I've learned is that you DON'T need all the customers. SOME of them are just.....
....say CRAP!

They're gonna tell their friends you SUCK! And that's FINE. Because their friends SUCK too!

Choose your clients!

A "self cleaning cliente"l, that is! SELL the invoice to a collector!