I was thrilled to be instructed by a large multi-national recently. However, on reading through the terms they were proposing, my heart sank and it struck me how bullying does not just happen in the playground. Small companies are subject to it too via unduly harsh terms imposed on them in the legal contract. It is vital therefore to scrutinise them carefully!
Some of the most important clauses to check when presented with a contract engaging your services are:
- the AMOUNT you will be paid; and
- WHEN you will be paid
This may seem obvious, but people often gloss over the detail in the heat of excitement at landing a job. e.g. they may agree a daily rate, but not actually state how many hours a “day” consists of and whether a break for lunch is included. When I put in this detail, the multi-national then announced that they would not pay for overtime. Agreeing to this would mean that I could potentially end up doing 12 hour days for no extra pay!! And this was on top of aleady offering them a very discounted rate.
To add insult to injury, they then informed me that payment terms were 45 days from receipt of invoice. Given that invoices had to be submitted monthly in arrears, this amounted to having to wait almost 11 weeks before being paid! This seemed particularly absurd as we were only talking about a three month contract anyway. So it is vital to literally get out a calendar and check the practical implications of the terms offered. If you are subcontracting the work, you need to make sure that you have mirrored the terms with your subcontractors. Otherwise you could end up having to pay them, before you yourself have received the money and end up with all sorts of cash flow problems.
Another trick is for companies to say that payment terms start from the date of the “receipt of invoice”. Again this adds another couple of days’ credit in their favour which may not be obvious to you. It enables them to argue that it took days for the invoice even to arrive or reach the right department… The better option from a supplier point of view is to state that the payment term starts from the “date of the invoice”.
I believe that if all of us small business owners object to such lengthy payment terms, large corporates will think twice about seeking to impose them on us and improve the small business economy tremendously. As a leading entrepreneur once advised me: “Take the brave pill!”