Design payment terms

Hi Everyone,

I’m seeking some contract negotiation advice- any input is greatly appreciated!

I’m looking at a contract to do design consulting for a furniture manufacturer. Everything looks good, but the payment terms are as follows-

“All invoices will be paid within thirty (30) days. Any balance remaining unpaid after thirty (30) days will incur a late payment charge of one percent (1%) of the outstanding balance.”

Is that normal? I usually get paid much sooner than 30 days out, but I’ve been told this is ‘standard’…also doesn’t %1 late charge seem small?..I’m pretty sure there is a more standard late charge of %5 after 10 days late, %10 after 30 days late…

soapscum,

those terms don’t seem too onerous to me personally. we try to set our billing to a 15 day cycle, but not all clients will do that.

anything bigger than a 1% late fee, per month, is most likely going to be rejected as too high. especially for a more ‘known’ or trustworthy manufacturer.

what i’d probably counter with is a clause that says you’ll stop all work if an invoice is more than 30 days late, resuming work if all payments are caught up. where you don’t want to find yourself is doing a ton of work (and essentially finishing the assignment) with a ton of back payments owed. it’s a lot easier for them to try and ‘re-negotiate’ the terms after the work is in and so much money is still out…

Fair enough- thanks for the input Laru.

net thirty is reasonable. I usually have “invoices to be paid on presentation” on mine, but in reality I normally get paid in less than 30 days from invoice presentation. Depending on the client actual payment time can vary- sometimes big companies surprisingly take longer, for example, as payments have to go through several levels of approval, accounting writing a cheque, etc. and as well some companies don’t pay out until the end of the month so it may depend when you invoice is in.

1% late fees also i think is reasonable. It’s more a warning than anything else and in real life, you will likely never charge late fees anyhow (charging late fees is more likely to net you a pissed off client and no return business). IF they are delinquent and wont pay the principal amount at all, it’s highly unlikely that they’ll pay even 1% more.

working stopping is normal of course if you don’t get paid. also somewhat common (i’ve heard, but dont use it myself is a clause that final CAD geometry/goods will not be delivered until final payment is made.

R

You might find this of interest:

http://www.coroflot.com/creativeseeds/2008/09/playing_it_safe_contract_basic.asp