Customer negotiating invoice payment

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Topic Author
Greentree
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Joined: Sun Jul 28, 2013 9:34 am

Customer negotiating invoice payment

Post by Greentree »

My work is independent contract hourly service work and have been in business for 5+ years.

I did a small project for someone who used to be the president at my former employer, let's call him Joe. We outlined our terms when the project started in an email: we are time and materials and we bill at the end of the month for actual hours billed. After some negotiation on deliverables, the project was quoted at 48 hours.

Once we got into the work, we asked for 10 more hours because of the increased complexity of the direction chosen. Joe ok'd that time. When Joe came for a project review before the end of the project, he asked for additional work and I told him that might take a full day and that we were already at 70 hours. He said absolutely no problem, please proceed. In the end, we billed 75 hours.

The total for the phase with materials is $12k. Joe came back and said he didn't realize we were time and materials and that he didn't know we were at 70 hours. Both of these I can't dispute because I outlined the time and materials in an email (not a contract) and the 70 hours was discussed and not documented. He said that he is willing to meet us in the middle and pay $10k.

I made a few mistakes. The first is that I didn't use a contract. I will be using a contract for all work going forward as I knew this would bite me sometime. The second is that in between the 58 hours and the 70 hours, I was caught up in trying to solve a difficult issue and didn't keep Joe updated. His next update was at 70 hours. However, before the work was finalized he fully understood what the total could be before we spent another day on the project, and had no reservations. He and his client are happy with the work.

Would you agree to being paid $10k and move on with some new lessons, or hold out for the $12k?
Last edited by Greentree on Mon Jul 08, 2019 9:09 pm, edited 2 times in total.
cadreamer2015
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Re: Customer negotiating invoice payment

Post by cadreamer2015 »

I am an independent contractor as well. If it were me I’d accept the $10,000 and chalk it up to a lesson learned: get a signed contract and clear agreement in writing for anything beyond the scope of the original contract.
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8foot7
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Re: Customer negotiating invoice payment

Post by 8foot7 »

Joe verbally agreed to more than 75 hours and now clams he didn’t? I don’t play that game. Full payment or the collections and attorney sequence begins. There is no negotiation; that’s done up front.

If you have your time and materials basis memorialied in an email to which this guy has responded then that is nearly as good as a contract and perfectly fine for these purposes.

If he is having money problems then you can work out a payment schedule but always hold back full delivery until payments are made. “I’ll accept 10k now and the final 2k split evenly over 90 days at which point I’ll deliver all materials”

I wouldn’t put too much stock into a contract either — for folks like Joe they are barely worth the paper they’re printed on and only useful to enforce in a legal setting.
Last edited by 8foot7 on Sat Jul 06, 2019 3:04 pm, edited 1 time in total.
Thesaints
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Re: Customer negotiating invoice payment

Post by Thesaints »

Signed contract wins in court. Perhaps even against third party witnesses.
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TomatoTomahto
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Re: Customer negotiating invoice payment

Post by TomatoTomahto »

Tuition for something you already knew (have a contract) came in cheap at $2k. Live and learn. If you deal with Joe again, overbid by $2k.
I get the FI part but not the RE part of FIRE.
Jack FFR1846
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Re: Customer negotiating invoice payment

Post by Jack FFR1846 »

Accept the $10k this time.

If Joe comes back for another job, negotiate the hours. Up your hourly rate by 20% up front. Don't start the job before getting a retainer from which you will work from until a certain point, at which point an additional retainer will be provided.

Having retained lawyers, this is how they've all worked. Should I fire them at any point, I don't owe them a dime. They refund what has not been used from the retainer.

If Joe doesn't want to accept these new terms, move on to someone who isn't so difficult and dishonest to work for.
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blackholescion
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Re: Customer negotiating invoice payment

Post by blackholescion »

cadreamer2015 wrote: Sat Jul 06, 2019 2:47 pm I am an independent contractor as well. If it were me I’d accept the $10,000 and chalk it up to a lesson learned: get a signed contract and clear agreement in writing for anything beyond the scope of the original contract.
This. Build or find a change management process including documentation. Use this documentation whenever you ask for additional hours. You could amend the contract as an alternative but the change management allows you add more detail in a supplemental document just in case there are questions. For example you can explicitly call out the additional tasks you are using the additional hours for and specify different ones in the case of additional scope.

It will take you 15 extra minutes of wasted time but will be worth it in the case of any dispute. I’m sorry you had to deal with a dishonest person but it’s a good cheap lesson learned for the future. Take the 10k this time. Depending on your state, email may be good enough for litigation. However, since you don’t have the additional hours over 58 in email, you don’t have much course. You could threaten but at 2k it’s probably not worth burning bridges over possible future work. Definitely also agree with other posters about retainers, changing the hourly fee, etc.
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8foot7
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Re: Customer negotiating invoice payment

Post by 8foot7 »

Well, I guess this thread resonates in harmony with the "do we negotiate a large hospital bill" thread in demonstrating that if you press for a discount, it seems like the majority of folks are inclined to give one.
adamthesmythe
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Re: Customer negotiating invoice payment

Post by adamthesmythe »

Verbal agreement to extend the billed hours is a real problem. These days there is no excuse for at least documenting things with an email.

At least with this customer I would bill maybe a bit higher or a bit more hours next time. AND have it in writing.

Sometimes it makes sense to fire a customer. I would consider this one to be on probation.
Mike Scott
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Re: Customer negotiating invoice payment

Post by Mike Scott »

Contract or not, I think my first response would be "we agreed on 12K, is there a problem with my work"?
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Kenkat
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Re: Customer negotiating invoice payment

Post by Kenkat »

Accept $10k. If you do any work for Joe in the future, over charge him and then negotiate a discount from there. That’s how the pros do it.
Topic Author
Greentree
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Re: Customer negotiating invoice payment

Post by Greentree »

Thanks for all of the replies, it is really helpful. While I was hoping everyone would say hold out for the full payment, it looks like most say take the $10k and make it up later, so that's the way I'll go. I will get a contract in place and get a system in place for anytime hours exceed the estimate.
k3vb0t
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Re: Customer negotiating invoice payment

Post by k3vb0t »

Mike Scott wrote: Sat Jul 06, 2019 4:15 pm Contract or not, I think my first response would be "we agreed on 12K, is there a problem with my work"?
Start simple. I’d go here. And I would document via email.
Daedalus214
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Re: Customer negotiating invoice payment

Post by Daedalus214 »

In the future, think about asking for progress payments in the contract. Also, ask to be paid for the work already done before performing additional work.
$2000 is cheap schooling to learn these lessons. We all learn these lessons in one form or another running our own businesses.

Sometimes a customer is more trouble than he or she is worth. Maybe "Joe" falls in that category?
tesuzuki2002
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Re: Customer negotiating invoice payment

Post by tesuzuki2002 »

TomatoTomahto wrote: Sat Jul 06, 2019 3:08 pm Tuition for something you already knew (have a contract) came in cheap at $2k. Live and learn. If you deal with Joe again, overbid by $2k.
I am along this line. Since you really don't need the money. Accept the $10K and if you chose to work with Joe in the future. Have a very clear contract and increase your rates by say 15% immediately. He can chose to go elsewhere or use your service if he likes the work you do.
Trader Joe
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Re: Customer negotiating invoice payment

Post by Trader Joe »

Greentree wrote: Sat Jul 06, 2019 2:35 pm My work is independent contract hourly service work and have been in business for 5+ years.

I did a small project for someone who used to be the president at my former employer, let's call him Joe. Joe likes to have people under his thumb. We outlined our terms when the project started in an email: we are time and materials and we bill at the end of the month for actual hours billed. After some negotiation on deliverables, the project was quoted at 48 hours.

Once we got into the work, we asked for 10 more hours because of the increased complexity of the direction chosen. Joe ok'd that time. When Joe came for a project review before the end of the project, he asked for additional work and I told him that might take a full day and that we were already at 70 hours. He said absolutely no problem, please proceed. In the end, we billed 75 hours.

The total for the phase with materials is $12k. Joe came back and said he didn't realize we were time and materials (which I know through a source that works with him is not true) and that he didn't know we were at 70 hours. Both of these I can't dispute because I outlined the time and materials in an email (not a contract) and the 70 hours was discussed and not documented. He said that he is willing to meet us in the middle and pay $10k.

I made a few mistakes. The first is that I didn't use a contract. I will be using a contract for all work going forward as I knew this would bite me sometime. The second is that in between the 58 hours and the 70 hours, I was caught up in trying to solve a difficult issue and didn't keep Joe updated. His next update was at 70 hours. However, before the work was finalized he fully understood what the total could be before we spent another day on the project, and had no reservations. He and his client are happy with the work.

I am in possession of the physical deliverables and while he could re-create them, it would take some work and he may risk some IP. Losing the money would not kill me but I'd rather have it of course, in other words, I don't need it to live. Would you agree to being paid $10k and move on with some new lessons, or hold out for the $12k, knowing that he wants the deliverables? How would you negotiate the $12k if so?
Yes, I would take the $10k (and the lesson learned) and move on. Best of luck.
Topic Author
Greentree
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Joined: Sun Jul 28, 2013 9:34 am

Re: Customer negotiating invoice payment

Post by Greentree »

k3vb0t wrote: Sat Jul 06, 2019 8:10 pm
Mike Scott wrote: Sat Jul 06, 2019 4:15 pm Contract or not, I think my first response would be "we agreed on 12K, is there a problem with my work"?
Start simple. I’d go here. And I would document via email.
It turns out that Joe really did not realize we were time and materials. Once he saw the first emails that laid out our terms, there was some back and forth, but he was very reasonable and agreed to pay the full amount. Still a few lessons learned and not an ideal situation but it was resolved peacefully and amicably. I sincerely appreciate the help here.
rantk81
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Re: Customer negotiating invoice payment

Post by rantk81 »

Glad it worked out!
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