Quick reminder on vendor relations

I consult to many types of professionals. Some are better than others when it comes to paying bills on time. Attorneys tend to be the worst, for whatever reason. (Perhaps they focus too much on legal compliance, instead of on building human relationships).

If you have a vendor/contractor who does great service for you, pay them the day they send the invoice, if not earlier. Most sole proprietors or owners of small firms live invoice to invoice, and appreciate clients who pay on time. It is a business practice that goes against the grain of how large corporations work (net 30 or worse), but in the world of small business, makes lots of sense.

To give an example from outside IT, I know a mortgage broker who pays his best appraiser when he gives an order, not when the property appraisal is delivered. As a result, this appraiser bends over backwards for him and works hard to stretch for the best possible appraised value of the property.

In contrast, I worked with a business colleague who paid professionals only when he was 100% sure he got what he wanted from them. He withheld payment, sometimes for months, until he was 100% satisfied. To him — and his point is valid if misplaced — this strategy kept his leverage over vendors. But what really happened is his vendors resented him, and stopped working for him until they got more upfront payment. They also lost trust.

So pay people the way you would like to be paid. In a world where small businesses can have trouble competing, this kind of strategy can help you get an edge in attracting top, motivated talent.

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  • http://www.practicalapplications.net bwarrene

    How true this is. Well said reminder. I have found that in every single case where have taken the time to develop a relationship with a vendor and not simply expedite a commerce transaction – the payments in both directions go smoother and issues get resolved more quickly.

  • http://www.goldrule.net starrsoft

    Your post only applies to vendors you know and trust. An example: When we built our house we, of a necessity, used an electrician that we didn’t know. We were planning to finish paying him only after the work was finished. He begged and snivelled and griped and groaned and we finally gave in and paid in full. That was five years ago and there is still unfinished electrical work in our house.

  • http://norbert.mocsnik.hu/ norbert_m

    I think the best way to avoid these kind of situations is to agree on milestones, then finish and pay them seperately.