Writing supply conditions that define customer's deadline

Question

I'm a freelance since 10 years and I develop hardware and software. Usually the pattern of a job is the following:

1. A customer contacts me asking for something
2. I submit him a quote with the proposal of my supply conditions
3. If he accepts and signs the quote I do my job
4. He helps me to validate the project
5. Billing and payment

Some words on point 4: in most cases I cannot fully test the board or the software without some support provided by the customer. I.e. if the board has to be connected to an industrial machine I need to go there with his technicians, and so on.

One of the worst problems I often face is when the customer receives the stuff (pcb or software) but doesn't actually test it - even for 9+ months. And he doesn't pay me because "he hasn't tested it yet".

One day he wakes up and requests me to be immediately available because "my project doesn't work".

Well, sometimes this is known and expected because as said I actually need to complete the development on field, others he changed his mind in these months and he wants something different.

My supply conditions look like these:

• the delivery date is guaranteed if I receive all information and support as described in the quote

• after 30 days from delivery the project is assumed to be completed and fully working if no feedback is provided back. Billing will follow.

• any change to the specifications of the project should be discussed and might lead to extra costs

(They are actually written in Italian - I apologize for any grammar error).

When I point out these conditions in such a situation, these are the most common answers:

• I don't care/read them

• The project doesn't work as I expect, hence it's your fault

• Because I wasn't able to use your project for N months (well because you didn't use it!) you will be paid after other N months

• These conditions are not acceptable to me (so why did you sign them?)

What do you suggest to prevent these uncomfortable scenarios?

Of course losing a customer is a valid option, but too many of them show this behavior. Perhaps there is something wrong in my pattern?

Answer 1

What do you suggest to prevent these uncomfortable scenarios?

First, your process makes absolute sense from an engineering point of view. But as a freelancer in your field, you have two jobs: engineer and manager.

Interestingly, clients (or generally humans) tend to act on other priorities, even if those do not lead to what they say they want, at the time they want it, at the cost they want it.

Now, let you as the manager have an eye on that process and design it so that his needs are taken care of as well: compensation and closure.

Of course losing a customer is a valid option, but too many of them have this behavior.

In a business environment where conditions are not much valued, re-design the pattern to get money as early as possible in the process.

• take a deposit of x% of the total on signature, before you start working.

• take the rest on delivery of the product, ideally deliver after or at the same time as having been paid the full amount.

• include an after-sales voucher for adapting the product to the customer's special conditions within X weeks after completion, worth a maximum of X working hours, plus a 10% discount on your hourly rate for working hours exceeding this limit.

Now, I can almost hear the engineer crying out loud that you would not get clients with such a re-designed business-process.

But are you sure?

Go to an Italian coffee bar, an ice-cream shop, whatever. Before they serve you, they send you to the cash register to pay first, get the ticket, and exchange the ticket for the coffee or the ice-cream.

This is the same pattern, it is already familiar to your Italian clients, they act like this probably several times every single day.

Now to your scenarios:

Of course, discussing conditions with the cash already in your pocket is way easier and more fun.

Client: "I didn't read your conditions on the voucher, it says it is valid only till last month!"

Mark: "Oh, don't worry. I'll make an exception for a good client like you!"

Now, you can be generous if you choose to, and win long term clients without ruining your business.

Client: "The project doesn't work as I expect, hence it's your fault."

Mark: "I don't really get your logic, but hey, let's focus on the solution rather than the problem and get your project up and running. Of course, any liabilities of my work will be covered to the extent agreed on signing, don't worry. And I'll offer you a fair discount on any changes after that as a good customer. What do you think?"

Twisted logic, but hey, why not playing the blame game, if it saves you money?

Client: "Because I wasn't able to use your project for N months (well because you didn't use it!) you will be paid after other N months"

you won't get this with the money in the pocket

Nevertheless, nice logic this one, isn't it. Try buying a Ferrari like this: "Oh, I didn't drive it for 12 months, that's why I haven't paid for it for 12 months and I won't pay for it for another 12 months!" Or at a restaurant: "Oh, I didn't eat those spaghetti you served me 2 days ago, so I'll eat them now, leave the restaurant, be back in 2 days and pay you!"

A deposit will filter out clients who are still "ambivalent" on whether they are going to pay you or not. From a managerial perspective, these are the clients you want to filter out.

Client: "These conditions are not acceptable to me (...)"
(this time - with your new conditions in place - before signing)

Mark: "Ok, what condition exactly? Let me know so I can see if I can make it easier for you to agree."

or...

Mark: "What a pity, I'd love doing business with you, but I really can't change these conditions. But hey, what's bugging you, maybe we can talk this over, and I'll promise you, I won't abuse these conditions, as I value fairness."

Of course, you might want to task a lawyer to shape and word your redesigned process to Italian/EU law.

Let me know what you think.

Answer 2

I know it feels like you have the wrong documents and process. But the actual problem is different: you have the wrong clients. Some people are just not good customers.

What can you do about it? Well, focus your attention on your good customers. Reward them for following your processes with simple things like saying thankyou. Ask them to refer you work from people they know. Emphasize whatever work-getting technique you use that got you that customer. Work with them and enjoy working with them: they read the requirements and pay attention, they test promptly, they pay promptly. If you are up against a wall and have to choose whose work will get done on time and whose will slip a few days, choose the good customer.

When you take on a new customer, make sure you tell them what you expect from a customer. Not with a 27-page lawyer-approved ironclad contract that forces them to do this, but with your mouth. Most will be happy to work this way. Some won't.

When someone isn't testing, bill them some fraction of the price, say 90%. Tell them there's a 10% holdback and you will bill that when the testing is complete. Tell them you look forward to hearing how the testing went. Then just put it all on the side of your desk, enjoy the 90% of the money, and stop thinking about them. Go get some more good customers. Don't try to "push a rope" with the bad ones. You got mostly paid. Perhaps they'll come back and ask for changes later. OK, you can do those changes if and when they are asked for. Perhaps they'll ask for a change that contradicts the written requirements they couldn't be bothered to read. Cool, that means you can negotiate a price and timeline to make that change. It's all pretty relaxing really. It's stressful when you're taking the whole thing super seriously and want everything taken care of on schedule and they are all "Whatever, I might look at that next month."

You might improve a client by showing them they are contradicting a written requirement, and teach them to read before agreeing next time. But it's more likely you might not. You might get a client to test by demanding they pay you, but chances are they'll just pay you and still not test. So learn how to roll with that. Leave them a little holdback (so they don't feel robbed) that can wait until the testing is done. Then relax and move on to your next job. You can't manage everyone.

And keep focusing on the customers who work the way you like without the lawyer document. Who respect your time and effort. Who see you as a valued partner, pay you quickly (and well), and keep using you whenever they have that need. Those are the ones you want more of. Eventually you won't have any more poor customers, and you won't have a 27 page contract either.

Answer 3

There are enormous volumes written on project management, but the basic principles could be employed here.

The phase you appear to be stuck in is 'user acceptance testing' (UAT). You think they are past this phase and so you (rightly) expect payment, but they think they are still in this stage because they haven't bothered to test it.

Do you give them the finished, working product to test? Could you give them a beta version to test with a dummy database instead? That way they cannot 'use' the product under the guise of 'testing' it.

UAT always ends with the end-users 'signing off' the project and then the final product is delivered.

• You need to make them aware from the start that this phase exists, that it has a marked beginning and a marked end. They do not receive the final product until they sign it off.

• You need to make them aware when they enter user acceptance testing.

• You need to give them a deadline.

• Once signed off, it is up to you if you want to insist on payment on delivery, or 30 days later. But it they say they haven't tested it, you can show them the UAT they signed off.

Presumably you offer some kind of after-sales support, so you can reassure them that once paid you will support the working product.

Answer 4

@michi has excellent points. Those are techniques I apply in my business. I'm not in this field but I experience similar clients on occasion.

A deposit is sound advice. Clients will be monetarily invested in the completion of the project. You could consider it a consultation fee. It takes time to draw up a contract/proposal and your time is valuable especially if you could have other devoted clients.

You clearly care about making your clients happy. However, I always assume there's going to be "that" client who makes life difficult. If clients sign without reading, it's up to you to stand behind the contract terms even if it means they're a bit grumpy about it. Wording is important when you're trying to professionally state that due to their own oversight, they're now disrupting your schedule to complete other projects.

"I would be happy to look at the work. Since it's __ days past the testing period outlined in the contract, I have other project deadlines coming up but I'll draw up a new proposal by __ and discuss the new deadline."

If for some reason it's an emergency and you're willing, a fee could be applied to fast track it ahead of other deadlines.

That said, it's tedious but consider reminding them when you hand over the product that they have 30 days as per contract and/or following up before the 30 days as a way to offset any future similar situations.

"I'm emailing to remind you that the testing period ends on __. As per contract, if I haven't heard back by __ any nonfunctional products could be subject to extra fees/delays".

In addition, when our clients propose a change, we quote for the additional work or material and they either accept or keep the original design. We'll absorb the cost if there's error on our end but in general, the majority of our clients are understanding of delays.

Answer 5

This is not really an interpersonal question. But if I answer in a comment it will be deleted.

IANAL (I Am Not A Lawyer)

project is assumed completed and fully working

Is not the language to use. You cannot make that assumption. Something like:

Payment is due in full 30 days after deliver. During that period we will fix any defects identified in writing and add any missed features compare to the specification (dated xx/yy).

When you deliver perform a walk through demo.
Remind them of the commercial terms (in a nice way).