How do we make sure our client in India pays their last invoice?

May 27, 2009 10:35 AM

Our consulting company is doing business in India and we need a way to make sure that our client will not skip out on the last payment in our contract.

I don't mean to single any country out, but we have a new project in Mumbai and we got burned several times recently by other clients in India.

We have been told it is common practice not to pay the last invoice for a project. Our submission to the client is a digital / hard copy report. Typically we send our report and request our final payment, but we have no real leverage to make sure they pay we just cross our fingers.

Is there any other strategy we could be considering - is there anything like "escrow" which we could use to make sure the transaction happens smoothly?

posted by davidfitzy7 to work & money (12 comments total)

How about asking for a post-dated cheque beforehand?
posted by Gyan at 10:50 AM on May 27

What we do when we're concerned about being paid is to charge a retainer, say 20% or 50%, at the the beginning of the project.

Let's say the overall cost is estimated to be $100. We bill the client $20 up front. The first month's bill is $25. They pay that. Then the second month is another $25. Let's say the third month is $30. They pay that. Then the last month, which is $20, is simply taken from the original retainer.

This way you stay "one ahead" on payments, and at any time if they don't pay a bill, there is still work outstanding that you haven't done yet. There is no point at which you have done everything and they owe you money.

If your project has already started, this won't work. If your submission is a report, maybe you could deliver a non-savable, non-printable, non cut-and-pastable .pdf file to show you have completed the work. When you receive the last payment, you can send them a normal .pdf or the Word document, or whatever kind of document it is.

Regards
posted by lockedroomguy at 10:51 AM on May 27

Also the .pdf could be set to expire at a certain date.
posted by lockedroomguy at 10:52 AM on May 27

I think your payment schedule suggestion is right on lockedroomguy but I doubt that DRM restrictions on the final product would be a significant impediment to theft if the customer wants to steal. In your example it would just take a few taps of the Print Screen button and a paste job.
posted by Chrishartley at 11:21 AM on May 27

Your right lockedroomguy - this is the best strategy if possible which is why we have negotiated a hefty 40% retainer up front. Problem is for us the client won't agree to this relationship as from their perspective we could just bail on the project without delivering our submission. Of course we wouldn't ever do that to a client - we value our reputation and always hope to do future work.

Post-dated cheque... I wonder if banks can produce post dated certified cheques?
posted by davidfitzy7 at 12:14 PM on May 27

--I hear certified cheques can actually be canceled. so much for my brilliant idea
posted by davidfitzy7 at 12:19 PM on May 27

Can you watermark the report and send them the final version upon receipt of the money?
posted by bottlebrushtree at 12:34 PM on May 27

You give them a black and white hard copy of the report until they pay their last invoice. This shows that the work has been completed, but it can't really be distirbuted. Also, watermark a DRAFT over all the pages.
posted by unexpected at 12:58 PM on May 27

Instead of generalizing, how about doing some credit checking on your specific client company? If they pay other vendors in full and on time they probably will you too.

And if their payment/credit history is rocky, you can tell them that and negotiate some arrangement.

But it kinda depends on the amounts involved.
posted by Xhris at 3:21 PM on May 27

You could try a letter of credit. Basically your customer's local Indian Bank agrees to pay your US bank on the submission of documents proving you complied with your responsibilities. The local Indian bank takes on the collection risk from their customer and your bank maintains credit lines with foreign banks for this very reason. This is how exporters of goods protect themselves. Conceptually no reason you couldn't use an LC with a digital/hard copy report, although I've never seen it personally. Your bank would be able to tell you more if it's feasible or not.
posted by limagringo at 3:47 PM on May 27

Chrishartley, you can also disable printscreen and other screen capture techniques for pdfs. Here is one solution:

http://www.copysafe.net/copysafe_pdf.asp

There are other options for delivering a doc safely which generally include shipping the doc encapsulated in a piece of software which severely restricts what you can do with it.

But the best bet is still the retainer. And if they have already nixed that by accusing you of being the kind of company that might steal it, then you're free to bring up the possibility of them not paying, and ask them for a suggested compromise solution they'd be happy with.

Regards
posted by lockedroomguy at 4:09 PM on May 27

thanks for the suggestions everyone - very helpful stuff!
posted by davidfitzy7 at 10:39 AM on May 28