Everyone knows South Africans don't pay

[Neville Bailey]

I've posed the following question on another business forum, and received some interesting feedback, but I thought I would ask the members here for their input...

A large portion of my income is from Pastel consulting, for which I charge an hourly rate.

Even though my terms are clearly indicated on my invoice as "payment is due on presentation of invoice", the reality is anything but that, apart from a few star clients. In fact, in these tough times, even some of my better paying clients are stretching their payment terms further and further.

So I was wondering if there would be any merit in the idea of me offering my clients upfront hour bundles at a discounted rate, from which they can draw as soon as I provide them with my consulting services, with the proviso that they top up their hour bundle as soon as the existing bundle reaches a predetermined percentage (say 20%) of the original full amount

Perhaps I could even offer a sliding scale of discounts depending on the size of the bundle purchased?

What do you think of my thinking?

Is it an attractive enough incentive to my clients, whilst boosting my cash inflows, minimising potential bad debts, and without eroding my margins too much?

[desA]

Some software houses sell blocks of support hours - in advance. Perhaps in lumps of 8-10 hours.

In your business, this may just work out pretty well.

[AndyD]

Sounds good to me but I would increase you hourly rate buy 15% to cover your extra costs incurred by the epidemic of late payers and offer the old price for bundles paid for in advance. If they're good payers then you can always exempt them from the price increase but I would make them aware that they're getting preferential rates and why.

[Dave A]

So I was wondering if there would be any merit in the idea of me offering my clients upfront hour bundles at a discounted rate

Sounds good

One possible wrinkle is s100 (2) of the National Credit Act:

(2) A credit provider must not charge a consumer a higher price for any goods or services than the price charged by that credit provider for the same or substantially similar goods or services in the ordinary course of business on the basis of a cash transaction.

However cash discounts, advance payment discounts etc. are still happening without much fuss...