> Here repping enterprises, can confirm this is how things work. But we don't pay late out of malice. Often incompetence and apathy, sure, but we don't actively set out to cheat you guys.

Yep. Also, small companies dealing with MegaCorps - please, just accept our terms & conditions. Raise the price by 20% if you have to compensate for whatever rights you feel our standard T&C doesn't give you, I don't really care. But if you want your own terms, then your lawyers need to talk to our lawyers and there is a 50% chance that your PO will arrive after man lands on Mars.

Helpfully, if you have raised the prices by even as little as 20%, you can easily use that extra margin to pay for an invoice factoring company who will pay you the invoice upfront - for a fee, but a fee that's usually much less than 20%.

Examples in the UK: https://marketinvoice.com/ http://www.platformblack.com/ or even http://granttree.co.uk itself (though we don't advertise this at the moment - our power-up fund does extend to invoice factoring for startups with no trading history).

Nice I didn't even know such a thing existed...now off to find and try something that seems acceptable.

More like raise the price by 200%. The number of overzealous indemnification clauses and other nonsense makes dealing with enterprise customers worth at least that much.

Interesting point re: T&Cs because I often find that the PAPERWORK is the worst part of enterprise deals - not the time to get paid.

It's shocking how many big companies will send me book-length MSAs, T&Cs, etc and expect me to just sign it. A lot of them have some scary-sounding clauses in them.

It seems especially weird for a buyer of a SaaS product to have their own T&Cs.

Recently I was asked to sign a 30 page T&C doc from a potential customer - and I just said no. To my surprise, they said "ok no problem, we'll just use yours".

I tried this again with 2 other customers, and so far it's worked 2 out of 3 times. On the one that didn't, I'm still kind of in limbo - waiting for a PO nearly a month later... Based on your comment, it sounds like I'll be waiting a while :\

In the EU there is the better payments directive to handle exactly this problem; big companies dragging their feet with smaller suppliers. The law requires NET-30 unless otherwise specified and anything above NET-60 in a contract is normally considered unconscionable. Of course the big companies can fudge that by complaining about issues with supply or by querying amounts, not enough description of supplied services, SLAs etc and delay it that way; but the big companies do run the risk of the regulators coming down on them.

So how does it work in reality? Do big companies violate these directives? Do the regulators fine them?

The key phrase in his statement is "unless otherwise specified". Whenever an enterprise is dealing with a supplier -- and it doesn't matter whether it's software, electronic componentry, services, or anything else -- there is no such thing as an acceptable boilerplate contract or TOS... that is, unless the supplier is bigger than you and refuses to negotiate. Apple is notorious for bullying their suppliers for example, and Foxconn has gone so far as to purchase their own iron mine in order to control as much of their supply chain as possible. It typically takes 4-6 different groups (I feel like all this should be, and probably is documented somewhere... like every company's sales manual. You end up talking with the manager whose group requires the service/product, someone above or parallel to them as a sanity check, someone in the company's supplier management team, someone in the accounts payable org (to get your banking & credit details), someone in Legal to review contracts, a stamp of approval from one or multiple execs, and then finally whomever has to input the purchase request.) within an enterprise looking at it to get an approvable contract, and then another week or two to figure out whose signature it needs to have.

As long as money is flowing and there is no obvious abuse, no one really complains an regulators don't get involved. The wheels of commerce and all that.

Perhaps more apropos is the answer to a different version of your question, regarding a different EU directive: EU 95/46/ec (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:...). This directive covers data protection and proscribes quite a few things that make licensing or operating SAAS services challenging in the EU. Some enterprises take the tack that "well, Safe Harbor covers us." and do whatever they want. Others are ultra-conservative and refuse to use SAAS services that aren't explicitly compliant with 95/46/EC. And, since it's a directive and not actually a law in any country (except perhaps maybe slightly Sweden... which is also quite a bizarre situation, having a FB data center there and all), it's clear as mud how it would actually be enforced, or what enforcement would look like.

To close, I will tell you that The Street looks very closely at the payables/receivables numbers & ratio, just like they care about inventory turns and other supply chain metrics. It's a big, and bad, deal when a large enterprise doesn't pay more slowly than they receive payment (in aggregate).

I could tell a lot of stories but that would be ... career limiting.

> since it's a directive and not actually a law in any country

What? EU Directives are requirements on member states to bring in laws. That data protection directive has been implemented into national law in every EU member state…

> (except perhaps maybe slightly Sweden... which is also quite a bizarre situation, having a FB data center there and all)

Pretty sure Facebook is (legally) based on Ireland, and under Irish Data Procection law (which is the implementation of the EU DPD in Ireland).

> Here repping enterprises, can confirm this is how things work. But we don't pay late out of malice. Often incompetence and apathy, sure, but we don't actively set out to cheat you guys.

This one really makes me laugh. Can I use the same excuse when I am late in delivering your order?

Yes, you can but they're still the big fish and we are the small one. Chances are you'll get hurt and they won't. Pick your battles wisely.

Really? And here I always thought enterprises pay at the last minute (or late) in order benefit from inflation. If you have lots of money, then even benefiting from a 0.0001% inflation is worth it.

It's a combo of all those things: inflation, improving the cash flow cycle, and even internal rate of return (i.e. for those 60 days the money is hopefully being used in a capital efficient manner).

I'd say it's mostly because "that's how it's always been", and because they can.

That's how it's always been, because before computers, it typically took 7-10 days to process through company procedures and banks.

And the cash flow cycle / rate of return is laughable in today's ZIRP environment. Especially if you are bigcorp, you can pay at Net+0 and take a loan at ~0% (+/- 0.1%) yearly, which translates to ~0.02% over 2 months, if you so wanted -- and no one would notice.

When I did contracting, I would happily give a 5% discount to get Net+0 -- in fact, a couple of times I raised my rate 10% a-priori and offered a 10% discount if they paid Net+0 instead of Net+30 (the latest I was willing to accept). None eventually accepted; One tried to get it through their bean counters and couldn't - the Net+X for X>30 is so deeply ingrained into most accounting departments that it can be considered an axiom, regardless of how little financial sense it might make in a given case.

swombat is right, and to add one small bit: when we pay late, it is nearly always due to an unforeseen lapse or issue with payment, and that's it. To give you an idea, we have over 8,000 suppliers, where our spend ranges from <$100/yr to $>1,000,000,000/yr. That's a lot of terms and payments to keep track of, and things occasionally break (on our end or the supplier's). For big customers with whom we use standard B2B EDI transactions, we have multiple internal instances of different B2B platforms and work heavily with those suppliers to test an ensure stability, and we coordinate with their engineering teams on upgrades, outages and configuration changes. Ditto that on the bank interfaces.

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

It's designed to help the enterprise customer not you; i.e. they aim to get paid for services or products that you provide that they resell (directly or indirectly) before they pay you.

Example; one day 1 you provide a service to enterprise customer (the clock starts ticking), on day 2 they resell that service (with added value etc). The enterprise customer's customers either pay upfront (B2C), day 5 through 9 for customers paying by credit card, bank transfer etc, or pay on day 32 (B2B). Then on day 60 they pay you. So in the case of B2C your enterprise customer has cash in the bank earning interest for between 51 to 60 days, and for B2B customers for 28 days. So they always have a positive bank balance (no need for a rolling line of credit and risks involved), and they earn some extra cash because of it.

EDIT: further technical info.

The technical accounting term for this is positive cash flow. The opposite (paying you providers before getting paid by your customers) is obviously negative cash flow (like a old fashioned mom and pop shop; they buy the stock before their customers pay for it. Please note that modern supermarkets work nothing like this).

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.

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.

Yeah, I've heard that Carrefour does it that way

I cannot bring myself to upvote this wonderfully informative post.

You don't have to upvote it, but if you ever want to chat about this kind of stuff, shoot me an email. I'm happy to answer questions and offer advice.

I find myself working for a startup enterprise consultancy as my first employer now that I've changed careers and entered software development. One of the primary factors in our success as a company is down to just getting paid, which is not usually an intractable problem, but it is a thing to reckon with. I don't handle that part of the business, but the realities of corporate AP/AR have come close to shutting us down as we endured some lean months there in the first year. Meanwhile, our corporate clients keep chugging along...

Interesting. Thanks for the insight in to your world :)

Happy to share. :)

I really hate it when Enterprise customers force us to compete unfaithfully with banks to finance them.