Thursday, May 18, 2006

When Clients Want Out

The idea for this post came from John Wagner. A few weeks ago, he was curious about other PR agencies' policies when "a client either wants out of a contract or doesn't want to pay for work that's been provided."

It boggles my mind when a client thinks they can disregard the contract. I don't understand how the question even comes up. I somehow doubt that our clients ever ask their lawyers if they "need to actually pay their legal bills?"

When a client doesn't pay their bill for 90 days, we stop work. To many folks, 90 days sounds like too long a time to wait, but, we work with a lot of start-ups, so it happens. We try to be flexible if there is a good faith effort to handle the A/P on the client's side.

On the rare occassion when a client simply refuses to pay, we send them to a collections agency, and usually to court. There's a clause in our contracts that provides a reasonable time period in which the client can dispute a bill for any reason, including (gasp!?) dissatisfaction. If they are not on record within that timeframe (which they signed off on originally, after all), we assume payment is forthcoming.

All of our contracts include a 60 day exit clause, so we assume that we are "always 60 days from being fired." Paranoia is bad for the soul, good for client retention.

In any case, a 60-day clause is seen by most clients as a reasonable compromise: "Let's wrap this up in 60 days." You need that time to tie up loose ends and transition things properly to a new firm or in-house contact.

Thankfully, our retention rate is upwards of 2 years (some clients have worked with us in some form or fashion for 8 years), so these issues come up fairly rarely.

3 Comments:

Blogger John Wagner said...

Todd ... I like your analogy about clients asking their lawyers if they have to pay.

My wife used to always tell me that my previous agency was the only business in the world that actually allowed people to negotiate their bills downward AFTER services were rendered. It's true ... we were often too scared to challenge some of the dead-beats out there who used us for free stuff and then walked.

I'm working with a design firm now that requires upfront payment before they even begin to work. That seems extreme to me but they've been burned in the past and it's the primary way they protect themselves.

May 18, 2006  
Blogger PR Minority said...

Upfront payment is a great idea. Since companies have certain target margins, aren't the employees the ones getting screwed come review time or when asking for a raise?

May 18, 2006  
Blogger PR-Guy said...

true 'nuff

May 18, 2006  

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