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Ask HN: How do your enterprise customers pay you?

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Re: Ask HN: How do your enterprise customers pay you?

#71

Post by eitally »

cpncrunch wrote: post #31
patio11 wrote: post #12

Overwhelmingly: Send a quote for the upcoming year, get a PO number corresponding to the quote, send an invoice referencing the PO number, wait an interminable amount of time, a check magically appears in the mail. The last one was 9 months late in paying. Enterprise life, yay. Salient point to keep in mind: the people responsible for everything that happened in that workflow after my customer passed the quote to her…

They can speed things up if they want to. I hope you're not providing your service for free for 9 months. At some point you need to give them a deadline. It's easy with SaaS, as you can just flick off the switch if they don't pay. Obviously with a large, important customer you don't want to immediately deactivate their account if they are overdue by a day, but you have to have a limit!

Can confirm! My company's typical turnaround time when requesting a PO for non-critical stuff is probably 10-14 days (and trust me, it irritates EVERYONE!), but if someone absolutely has to be paid or something absolutely much be obtained ASAP, we break all our internal rules and can get same day POs. This is obviously not something to be abused, but I wanted to emphasize that you're right.

I encourage everyone to write into their terms what will happen if payments are late. It would be insane not to.

Also, it is a jerkwad thing to do (for some definitions of the term) to right in a destroy clause into your terms (e.g. "When you stop paying maintenance on this software, you must stop using it.") but it really does lock in large enterprises who frequently don't even remember the name of the guy who set the thing up in the first place, and can't imagine committing current resources to figure out how to stop using it.

I feel like I sound either really bitter about my job or that I'm a really awesome enterprise IT manager. :D I'm not sure which is closer to the truth.

Re: Ask HN: How do your enterprise customers pay you?

#72

Post by eitally »

kephra wrote: post #3

Let define "enterprise customer" first. This is someone for whom the terms, conditions and prices of your website do not apply. Enterprise customer = Ask for quotes. So you might delay the question of how they pay you, once you have an enterprise customer ready to sign. An other distinction is, that you might charge accounts of normal customers, but you always just send an invoice to an enterprise customer, and they…

The other common game is the "our fiscal quarter/year is about to end and if you sign by X date we'll be able to give you Y discount." Since most of the time enterprises don't accelerate for anyone, especially a small contract, this bluff is pointless and if your sales guy gets called out for bluffing, they'll be disinclined to do business with you in the future. But, on the other hand, it can sometimes work, and work VERY well. One of our suppliers negotiated with us to sign a 3yr, $5m+ deal rather than a 1yr, $1.8m deal simply by telling us we could lock in pricing if we committed to the longer term. Since it's a SAAS service, they'll getting a ton more money up front, at no extra cost to them. ... Or are they... this is the customer I mentioned in a different comment, where we negotiated quarterly instead of annual payments. It's a great example of a BATNA: we got favorable terms that impact our cash flow much less, plus guaranteed pricing for 3 years on a large opex budget item, and they locked us in for 3 more years with guaranteed on schedule quarterly payments. Everyone loves smooth (as opposed to peaky) sales forecasts.

Re: Ask HN: How do your enterprise customers pay you?

#73

Post by eitally »

smackfu wrote: post #44
sologoub wrote: post #10

My experience is that this largely depends on the procurement practices of the company and whether or not your price range is low enough to be below discretionary expense limits. The greatest feature of SaaS has been the ability to take a 50k software package and make it a 500/month subscription that people who actually need it did not have to go through the official procurement process and could simply expense it. F…

Software procurement also tends to get hung up on EULAs because someone decided they want a fancy indemnification section that that lawyers at EnterpriseCorp don't want to agree to.

Just to use an example fresh in my mind... we're a Google Apps customer and bought a bunch of Lucidchart licenses to help wean people off Visio. One of the things Lucidchart does that, if we had known about it beforehand, we'd have written into our terms, is that they refuse to delete accounts even after a person's Google account is deleted, so we end up paying for licenses for terminated employees unless we physically add Lucidchart as a checklist item in our termination process, and then pay a guy to go do the needful and de-allocate it. Lucidchart is cheap by comparison to lots of things, but managing licenses is a pita (and they are by no means the only offender).

Re: Ask HN: How do your enterprise customers pay you?

#75

Post by ci5er »

In the US: Up-front, monthly or annually (for a discount), ACH. On one of my current projects, we gave a MAJOR discount to our first two customers for 3-year contracts paid up front. The projects were large enough that this almost (for certain definitions of 'almost') funded the product/service development.

If the customer wants different terms, we stick GE-Capital between us to deal with the impedance-mismatch.

Outside the US, similar structure (not ACH, of course), and usually with either DB or HSBC there to work out any mutual trade-finance/payment-timing issues standing between us.

Sticking a bank in-between works well on a number of fronts, and one is that the client doesn't owe you -- they owe the bank. It's not free, but saves a lot of hassle for international deals. Even domestic.

Re: Ask HN: How do your enterprise customers pay you?

#76

Post by flomo »

fludlight wrote: post #58
nulltype wrote: post #46

Earlier quoted context omitted.

How does this trick save you money? I'm not really clear on the details of enterprise payments.

It's an interest free loan from their suppliers. They also give interest free loans to their customers, so it's a two way street. Ultimately, they want to get more free loans from their suppliers than they give to their customers

Just to reinforce this, I worked with a F50 which offered vendors standardized tiers of quicker payments, in return for discounts which were (much) more than whatever their expected interest income would be. The terms weren't negotiated, they were just spit out of spreadsheet based on the interest rate.

I understand the importance of "cash flow", but the real goal seemed to be shaving every nickel to maximize profitability on the deal.

Re: Ask HN: How do your enterprise customers pay you?

#77

Post by hayksaakian »

BHSPitMonkey wrote: post #51
refurb wrote: post #33

Earlier quoted context omitted.

I was wondering about this! Has anyone tried it? I know in my industry (pharma) we offer "prompt pay" discounts to our customers. 2% 30 net 60 for example (payment due in 60 days, get 2% off is paid in 30). Of course a huge corporate has a lot more leverage with regards to terms than a small contractor.

How does that work? Do you send out the first invoice at 98% cost, wait 30 days, and send a second 2% invoice if the payment still isn't there?

an easy way to do it is to apply the credit to your next bill

if you offer a 2% discount on a 500$ service for paying in < 30 days, then you could give 10$ credit on the next bill

Re: Ask HN: How do your enterprise customers pay you?

#79

Post by kvanderd »

fwiw -

Worked at a startup that served only fortune 1000 companies. Always late, late, late, late.....

Good side: Repeat customers. Getting in the door is hard but once you're in it is easy to stay in if you're doing a decent job.

Bad side: After 6 months of doing business with them you would finally get your first check. For a startup even with millions of dollars in the bank this sets your burn rate on FIRE.

Re: Ask HN: How do your enterprise customers pay you?

#80

Post by fludlight »

flomo wrote: post #76
fludlight wrote: post #58

Earlier quoted context omitted.

It's an interest free loan from their suppliers. They also give interest free loans to their customers, so it's a two way street. Ultimately, they want to get more free loans from their suppliers than they give to their customers

Just to reinforce this, I worked with a F50 which offered vendors standardized tiers of quicker payments, in return for discounts which were (much) more than whatever their expected interest income would be. The terms weren't negotiated, they were just spit out of spreadsheet based on the interest rate. I understand the importance of "cash flow", but the real goal seemed to be shaving every nickel to maximize profita…

The relative importance of cash flow vs. income is dependent on the availability of capital. A business might take that 2% discount IBM offers to pay now vs. in a month if they are out of working capital and worried about making payroll.
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