Small Business Contracts and Getting Paid on Time – Small Business Show 140

The Small business show episode 140 for Wednesday, October 11, 2017. Greetings, folks, and welcome to the Small Business Show. The show by, for and about small business owners here in Durham, New Hampshire. Dave Hamilton is me and in Lafayette.

California, I'm Shannon Jean. And unfortunately, we're getting a little smoked out here, Dave. We're about 40 miles from all these Napa, Santa Rosa fires and it's just been. Been really rough down here.

That's, that's, that's too close for comfort, man. Yeah. You guys doing okay so far?

Yeah, yeah, we're fine. We're actually reaching out, trying to help as many folks as we can and getting them whatever they need and.

Yep.

Helping fam. We have some family up there, one of which lost their house and now we're. My wife's making Costco runs, picking up supplies and trying to just, you know, help any way you can. You can't. It's kind of early. It's like you can't go up there. You'd be in the way.

Right, right.

We're just, you know, but, you know, things go on, business moves on.

Of course it does.

That's why we're here today.

That's why we're here. Yeah.

Yeah.

A couple of fun things to talk about. You want to start with a follow up from last week's show?

I do, yeah. So last week we talked about phone systems and mobile voiceover IP and that kind of stuff. And we had a comment that I thought was worth mentioning from Rick Stewart from Listo. He was a guest on our show last year, I believe, and he mentioned in the support group that one of the things you want to be sure when using a voice over IP phone system for your business that you have enough bandwidth that if you're pushing lots of data that your call quality doesn't take a hit when, when that happens. And he, he's experienced where he didn't feel the, the quality was very. Was professional and it kind of sounded a little sketchy when, when talking to their customers. So they had to, you know, increase their bandwidth enough to counter, you know, whatever they were pushing data. I don't know if they had a server on site or anything like that, but something to think about, you know, if you go back and listen to that show or is make sure you get enough bandwidth, talk to your provider, let them know what you're going to be doing.

Yeah, that's interesting. Yeah, that's right. Because there's a whole other level of service that you need for voip and it may not be just bandwidth because voice uses relatively speaking, like, relative to, say, Netflix, voice uses very little bandwidth, but it uses some, and you certainly need enough for it. But what you also need is to have very low latency between your office and the provider of your VoIP service. Right. And by latency, I mean, you know, you want, when you send a packet out, you want it to get to them very, very quickly. Even if it's a small amount of data, it has to get to them very quickly. And the reverse is true. You want their data to get to you. And depending on how you have your network set up, it's possible that even though your voice service doesn't need a lot of data, if, say, you're doing things like online backups or, you know, things that are just going to barf as much data up the pipe as they. And you're sharing that pipe. Of course, now with your VoIP service, those backups can cause your outbound or potentially inbound data to slow down, and then you get really weird problems. I mean, we have that occasionally, thankfully, not too often between you and me, but on Skype, right. I mean, it's the same thing. If one of us has an upload going, it can impact that. Now, you can get the right kind of router and the right kind of network setup to mitigate that sort of buffer, bloat and those sorts of things. But. Yeah, that's right. It's interesting. Yeah. I didn't even think about it when we were talking about it, but that's a good point.

If you want to learn more about this, you should jump over to Dave's other podcast, the Mac Geek Gab, where they talk a lot about networking and mesh networks and latency and that kind of stuff. But it's something to be aware of when you're looking at. If your Internet connection isn't that great, then your call quality may not be that great either.

Yeah, yeah, good point, man.

That's cool.

Good point.

Yeah. And so onto today's topic. We talk about cashier a lot. We did a show a few weeks ago ago about, you know, financial statements, P and L and that kind of stuff, and always focusing on. On cash, cash flow. And so today I thought we would talk about a couple things. Follow up with your credit card merchant processing debacle that you've been working on in trying to switch providers, and then just talk about getting paid and, and what to do if you're, if you're not getting paid and, you know, get. We just kind of have a discussion about that.

Yeah.

So let's drop into your situation about Dave with your credit card stuff.

Yeah. So a couple shows ago, we talked about how we were moving away from sort of the older, more traditional credit card processing. We were using Authorized Net and a company called North American Bank Card as our merchant provider and payment processor. And we moved to a new one called Stripe which does it all in one. And the fees are way less for most types of transactions. Right. Certainly for what we're doing, it's a no brainer. So we made that leap. We decided not to import our customers from Authorized Net. And for the most part that actually has been going okay, our customers.

And just I'll interrupt you, you didn't do that because they wouldn't provide it to you without a hefty fee.

Hefty, that's right. Yeah. And it was like, man, okay, fine, this is why we're walking away from.

You people, which is just a bear, a barrier to try to keep you as a customer totally versus offering you great service. So you want to stay in the first place.

And I asked the Stripe people about this. I said, okay, now I'm going, I'm going to get into a scenario where all of you, you have all of my customer data. What happens if say in like three or four years I want to move to something else? And they said, we're glad you asked. Here's our knowledge base article on that. And I went. And sure enough, the article says if at any point you want your customer data, let us know. Give us a PGP key so we can encrypt it and we will send it to you for free.

Yeah, that's awesome.

Yeah, that's how it should be. That's customer service.

That's how it should be.

So that was fine. So we ended the relationship. Relationship with Authorized Net, no problem. But we still have this processor called North American Bank Card. And I'm happy to say their name because I'm going to tell you not to work with them or be very careful. But really there's sort of a meta issue or a meta lesson here and that's pay really close attention to agreements that you sign. Ah, yes, okay. Because sometimes you can be surprised. So we went to, we, we, we called them up and we said we're going to cancel. And they said, oh, we'd like to keep you. And we said, yeah, but you're effectively charging us 16%. We're not going to stay like we're out. Goodbye. Yeah. And they said, okay, that's fine. We'll process your, your, your, you know, your cancellation or whatever. We'll send you a letter that, that you'll just sign and then that'll end our relationship. Great.

Yes.

So one Sunday morning a couple weeks ago, we get the letters via email, of course, and it says, just sign here, you know, send this back, fax it back to us. And you know, you're agreeing because you're terminating your relationship early. You're agreeing to pay this, you know, $600 early termination fee.

And I'm like, how long have you been using them?

Yeah, so we signed up with them in March of 2016.

Ah, okay, gotcha.

And so I'm like, oh, okay. You know, and they're like, in the letter, alluded to this. In the letter was, you know, you agree to the term early termination fee. And then because it's obvious that everyone that gets one of these letters says, I didn't agree to a contract or anything like that, they list the section in the contract right there in the letter as. Because they know, yes, this, you're gonna say, I didn't agree to this. And so I went back and looked and we don't have that agreement right now. I looked at the paperwork that we signed and the paperwork that we signed says you got all this paperwork from us and you're agreeing to everything included in this. So I'm like, okay. And that gets nebulous, right? But on the contract that we signed, which was like a three page thing with a lot of details, there was nothing about a 36 month term. So I'm like, okay, I feel pretty good about this. If I had to sit in front of a judge, I feel pretty good.

That here's the paper I signed.

Here's the paper I signed. If they're trying to include something else, that, that's shady. But I figured, let me look and let me find this. And I looked and I looked and nothing. Okay. And I signed this paper on March 22 and I'm of 2016. So 3, 22, 16. I'm really obsessive when I'm about to sign a contract. I read the whole thing and I have a pretty good memory. I'm not perfect, but I have a pretty good memory. And like, this is the first time I've ever heard of there being a lock on this, you know? Right. And so I looked through all the stuff, like even the emails that we got from them, and one of them did say our rates are guaranteed for 36 months. So like, here's the Rate that you'll pay for Amex. Here's the rate you'll pay for this. And I'm like, okay, well, that's fine, but there's nothing about. And to get this, you then agree, Right? There was no mention of it. I see. But I thought, well, here's the problem. This company has the ability to deduct things from my bank account.

Oh, yeah.

And I would much rather be in a battle where they're saying I owe them 600 bucks and they have to collect from me than the other way around of me being in a battle where they've already taken the money and I'm trying to get it back.

Oh, yeah, you'll never get it back.

Correct.

No way.

So, you know, without. So first, I'm like, I'm going to call these people and tell them, you know, they can take a hike. Like, wait a minute. How do I end this relationship? So I. I took a moment and I did some research on this, and I. I found that there is a phrase that is very well respected in the banking industry, and it is called revoke authorization. Perfect. Okay.

Okay.

Yep. So the first thing I did, but I had to wait till Monday morning, I called my bank and I issued a revoke authorization on the phone with my bank for this particular company.

And they went. And then block them from accessing your account.

That's right. They said, okay, they can deposit money to you as much as they want, but they cannot withdraw from you. And then my bank said, and which. Which I already knew because I did some research on the Internet. They said, you need to send them a letter telling them that you've done this. And I said, no, okay, no problem. I just wanted to issue it with my bank before I sent them a letter.

Yeah, sure.

Yes. And so I did. So I sent them a letter. And it. And the letter was, was I faxed it to him and I emailed it to him. And I'll explain how I emailed it. So I faxed it first. And the letter was very bare bones. It was on company letterhead. It was for both companies because we actually have two accounts with them that they're trying to get us to collect on.

Okay.

But it was very bare bones. It wasn't, we want to cancel our account. There was no editorializing, no opinions. It was with this letter, we issue a revoke authorization. You are no longer permitted to do this, you know, to take money out of our account. And it was crystal clear. And like two sentences. That's okay. Yep. Just so that there Was no, like we didn't understand why you sent this to us. Sure. Yeah. And then I queued up an email explained with these two letters as PDFs. And then some, some, you know, editorialization in the, in the beginning of the email, explaining exactly what we would and wouldn't do, and also explaining that I know we have one month worth of fees left to pay these people that they would normally have auto deducted, that they no longer can, that they'll need.

To bill you for.

And I, and I made it clear if just send me an invoice, we'll pay it right away. You know, we're not trying to get out of that. Yeah. And, and I. So I had that email sitting on my desktop and I called the guy who's hard to get on the phone, and I took a few different calls, I think actually 5. Finally got him on the phone. As soon as he answered, I hit send and I said, hey, I like it. Right? Hey, I just want to. If you would please check your email.

And this is your rep with the company.

Yes, my rep, that's right. And he says, okay. And it took a minute for the email to come in, so I had to vamp a little bit on the phone. But I'm obviously comfortable just talking and talking as I'm doing here. And sure enough, he got the email and, you know, things that the tone of the call changed as he read the email. And he said, okay, I understand. And that's what I wanted, is I wanted to hear his verbal commitment. And I said to him, would you please reply to the email and confirm receipt? Which he never did, by the way. Yeah. And then we had a frank conversation. And he said, okay, look, I'm going to lobby for you. And I told him, I said, we never got any of this paperwork that this note says we got.

Yes.

And he's like, well, it's standard, part of the contract. I'm like, well, oh, standard, yeah, whatever. Like, that's fine.

I almost broke our no cussing rule right there. I just want to let you know, I almost. It was right to my tongue. I said, oh, wait, I'm on the air.

Oh, yeah, you can't say that. That's right. So it took a few days, right. And he said he would, you know, get back to me. And so today he gets back to me. He called me earlier today and he says, and it's interesting, actually, I get two phone calls from him. You folks will appreciate this. The first one I answered, and I can hear him talking to someone else. In the background, where he's like, no, no, they issued a revoke authorization. And then it hung up, right? So it was obvious, like, he was talking with perhaps a superior or another colleague or something about. And they're saying, well, screw him. Just bill him. And she's like, of course you were right, you know, and it was like he didn't know the call had gone through, and he just hung it up, you know, as he was finishing this other conversation. Then he called me right back, and. And we had a very frank conversation. He's like, look, I. You know, I want. I want to make sure, you know, we're doing. Trying to do the right thing for you. And he was very friendly. And he said, I. I was able to negotiate it down. Instead of it being 600 bucks, it's now, you know, half that, 295 per company. And I said to him, I said, well, you know, that's great. I appreciate that. I'm not going to pay that. I said, that's right. You know, I'm starting this process at $0, because that's what my expectation was, and that's what my expectation still is, having gone back and read everything again. And he said, well, on March 30th of 2016, we sent you that form. And I said, what email address did you send it to? And he told me, my Dave at Backpack Media address. And I said, that's great. Let me look and let me see if I got it. And so I look and I don't have it, and I save everything. And I tell them, that's right. Me too. Yeah, dude, I save everything. I said, look, people tell me in a parallel life I should be an attorney. I said, I don't know if I'm supposed to take that positively or negatively, but it is what it is. I said, it's possible this got deleted. I'm not gonna say it was never sent, but I don't have it. And he says, well, I have a copy of it here. I was cc'd on it, and I have it. And I said, that's fine. I. I said, here's the thing. You're saying that was sent on March 30, right? He said, yeah. I said, I signed the contract on March 22.

Absolutely.

He said, that's right. And I said, he didn't have the.

Documents when you signed it.

That's what I'm saying. He said, well, but you signed that you had these documents. I'm like, well, how could I sign that? I have something that I don't have. I said, I signed that. I basically that I had everything you sent me. How do I know what you're going to call this stuff and weasel in on me like, dude, this isn't the right way to do business and you know it. And I said, this is going to be great. If you want to, you know, you can't bill me or you can't auto deduct me. You can bill me for anything you want. And I said, if you want, let's go to court, sue me. I said, I won't even need a lawyer for this one. I'll just show up and represent myself. I said, this is easy, really easy.

And the thing is it's such a common thing for these large companies, I would imagine, especially in the banking or merchant kind of things or whatever, phone companies, Internet providers, just to come up with these arbitrary fees and bill you for them. Because most people don't fight it, right? And the cost to fight it is often more expensive than what they're asking for.

That's it. And that's why I wanted to put, make sure they couldn't deduct money from me anymore. As soon as they do that, I'm never getting it back. I mean, it's just over and I'm not going to spend a lot. I told him, I said, look, you know, in the interest of just settling this and walking away, I'll give you 100 bucks total. I know that's not what I owe you, but it's, you know, to make the headache go away. That's fine. I said 50 bucks a company and we're done. But other than that, I said sue me, it's fine, no problem. I'm not worried about it, you know. Yeah.

Did they settle for the hundred?

No. Well, he couldn't, you know, of course it's the one legged presentation. I'm not, he's not able to commit to anything.

Somebody else is the decision maker there some committee. Well, you'll have to let us know how that goes. But I think that the, the key phrase is revoke authorization.

Yeah.

Is awesome. And that, that's, I did not know that. And so I've learned that today and that that's, I think that's powerful for many, many different things. That, because you know, you often have to give access to your bank, you know, for debit, you know, all that kind of stuff. So I think that's great.

Yeah, that's awesome. Yeah, it's just great. And it's, you know, like I said, the other lesson is just read contracts and save stuff because, and you know, just pay attention to the details. Because if I hadn't pointed out that eight day Delta, he certainly wouldn't have. Yeah, you know.

Yeah, that's right.

Not that it seemed to matter to him.

No, because they're not, they're just, oh, well, we're just this big company and we, we don't do anything wrong and we send out these arbitrary bills and invoices and people pay them, you know, and, and oftentimes, you know, we, we've talked about it before. There's a separation between the person who is like signing the agreements and contracts versus who pays the bill, you know, your accounting department or bookkeeper. And often, you know, you may not even be looking at those things. So it's really important and you have to let us know how it goes.

Yeah, I love it.

You know, and bills and invoices and things, you know, critically important. We probably won't have enough time today to go over this in the depth that I would like to, but I would like to start talking about making, you know, things you can do to make sure you get paid. And I think, you know, it's critically important because, I mean, I think we've all been there where you've maybe done some business with, with a company and often a small business or maybe a contractor and maybe they don't even bill you, you know, you never, you don't get an invoice or you get an invoice. Months later, I think we had. Man, her name is escaping me in a moment. But with Handler interview a few months, part of her problem was that she didn't bill people for almost a year or six months. And it was the impetus to start Handler to come up with a better software solution that would allow quick billing and that kind of stuff. And I think that to avoid bad debts and. Yeah, it was Brit.

Alvarude.

Yeah, that's right. From Handler. And I think the, the way to start this conversation is, you know, one of the best ways to avoid not getting paid is to ensure that you have a really good policy up front to avoid the bad debt in the first place. You know, what is your payment policy and how do you convey that to your customers?

Yeah, make a very clear payment policy.

Very clear up front. And especially, I think, you know, one of the problems we always had in the. And you may be able to attest to this as in the tech business, you know, you go and you show up and maybe if you're doing stuff on site at A business or a home. And, you know, when you're done with the work, sometimes that, okay, now you need to write me a check or give me your credit card. And I think it's much easier now to accept payments.

Sure.

But, you know, not too long ago, you know, you had to wait, they had to write a check or this kind of thing, and even maybe you had to invoice them. But, you know, I've always said to our technicians and people that we do business with, look, we're just like the plumber. If we show up and we fix your problem, we want to get paid right?

Then that's it.

It's very straightforward. But for some reason, in the tech industry here, I've always often encountered this, oh, well, you know, send me an invoice when you're done. And this kind of thing, it's like, no, no, you know, we get. We get paid right there. So you want to be sure your customers know, you know, what your expectation is before you do the service.

Right? Yes, yes.

Really important. Don't out. Don't solve the tech problem. Don't, you know, fix the computer, don't paint the whatever, don't do it until they've agreed, oh, here's the amount, here's the estimate, and here's the way we handle payment.

You know, my daughter is. Has done a lot of babysitting, actually, over the last several years. And I remember when she first started doing it, she said, oh, I'm going to babysit for, you know, so and so tonight or whatever. And I said, great, what are you being paid? She said, well, I haven't really talked to him about that yet. Ah. And like, okay, when are you going to talk with them about this? Well, you know, and it was really, the answer was, I'm not. I'm just going to wait till the end of the night and they'll pay me something. And I told her, she's like, well, you know, it's weird asking people for payment. And I'm like, right. And what I told her was, it's far more weird to you than it is to them because they know they're going to pay you. Like they're hiring you. They don't want it to be nebulous at the end of the night either. Right. It's way better for everybody if you have this conversation, like, hey, my rates, whatever, 10 bucks an hour, 12 bucks an hour, whatever it is, you know, 100 bucks an hour doesn't matter. Yes. You just need to make sure you just be clear about it. And again, if you take it, yes, it's awkward talking to someone and then saying, you have to pay me. Right. But. But if you take a step out of it and remove yourself from the equation, here's someone that wants something done and someone that's willing to do that work, and it's obvious that money will exchange hands.

That's right.

It's really not a big deal to say, okay, and here's the thing. I charge X per hour or X for the job, whatever it is, and I expect payment. And. Or you could even expect. Might feel aggressive or whatever. So you say, and I'd love to just make sure we settle up at the end of the night or at the end of the appointment or whatever that is.

Whatever it is.

Yeah, that's right. And as long as you can get comfortable with that, and you need to get comfortable with that, because otherwise you won't get paid. But once you're comfortable with it, everyone else will be comfortable with it too. It's just not a big deal.

That's right. And if as a service provider, whether it's babysitting or you're working on cars or. Or construction or whatever it is, tech stuff, if you don't manage that expectation upfront, someone is going to be disappointed.

Yes.

It's either you're going to be disappointed or your customer. And I would argue that both of those situations are bad.

Yeah, they're bad for both.

Yeah. And you may both be disappointed because, you know, it'll happen. Your customer's gonna, you know, can often think, wow, I didn't know it was going to be that much money, which is very common and which in turn, you're gonna say, wow, I could see, you know, you don't value my skill because the value of your skill drops precipitously as soon as you perform it.

Oh, that's a very good. Yeah, that's right. Yeah. You just mowed my lawn. I no longer need you, anyone to mow my lawn.

Well, and you know, I didn't come up with that. It's. It's based on what, one of the. What's the world's oldest profession.

Yes.

I mean, and so it's true. Once you fixed it. Oh, thank you so much. Here's $10. You know, like, wait, I charge, you know, one or whatever. So you need to be up front with, you know, what the bill is and this kind of thing. And, you know, we finally got to the point where we said, look, here's what we're going to do. For you in the case of our, you know, my, my tech business. And this is the price and before we do it, we need to get payment. We're going to authorize your credit card. So we know that you have the funds to pay for the service.

Yep.

Or if you want to pay cash, you'll need to pay cash up front. Because too often then, you know, it became, we would perform a service and then the customer would kind of start arguing about maybe the fees or they wouldn't have it and so they couldn't come pick up the product. And you would wind up stacking up a bunch of, you know, repairs. And as a small business, you have to pay your technicians, you have to pay for all the, those parts that you've ordered to do those repairs. So we just felt that it was in everyone's best interest. We didn't charge the customer's card, we just authorized it. And we would often have to explain to them, oh no, we don't charge up front. We're authorizing the service is $300. We're going to do an authorization. And if for some reason we can't perform the service, but we're not going to convert that authorization to a charge, so you will not be charged anything at all. And so we would always tell them if somebody will call and say, well, I see you already charged me, you know, $300 or $500 sick. No, no, we, we've authorized it. Which if they use a debit card, you know, it does allocate those funds in their bank account, which can be sensitive to some folks. But again, you shouldn't be, they should not be contracting with you to do the service if they don't have the funds.

Yeah, yeah. When we would do. And, and this is, you know, before it was so easy to charge people people's credit card. But when we were doing on site support, we would, we got to the point where we had a contract that they would sign a pre, you know, a pre work contract. Like, look, I can't. And we'd always just blame the back office. Right. Of course.

It's great.

Yeah. And. Yeah, yeah, of course. And we'd always say, hey, look, you know, we can't start work until you sign this. And the, and the contract was very short. It was friendly. It was, we're sorry, you know, not we're sorry, but you know, just like very comparative conversational. Except it was very clear. And it was. You're agreeing that you have a backup of all your data. That's right. And if you don't discuss that with your technician, but we are, regardless, we are not responsible for your data. Number two was, here's our payment policy. We expect payment for the time the services are delivered and we charge for our time, not our solutions. Because we don't know if your problem can be solved until we dig in and we will share all that information with you. You know, and it was.

Yeah, and that's critical, especially if, you know, while you're there, you're having to research, you're having to do something. I mean, you need to, if you're billing for your time, you need to get billed for all that time. You can't. I mean, I constantly would go back and forth with technicians that would, you know, want to bill for two hours when they spent four hours. You know, it's like, well, I, I had to research, I had to do this, I had to call this. I did. Well, you know, that's. You're working on behalf of the customer.

Yep.

So you really need to bill for that.

So I would occasionally have it where somebody'd say, man, you know, you just spent four hours learning how to solve this problem, you know, and, and then solving. Sure. And, and they'd be like, but, you know, if I call you tomorrow with exactly the same problem, you can solve that in 30 minutes now. And I tell them, that's exactly right. And on this one, you happen to get that end of the short end of the stick, or the long end, as the case may be. I said, but here's the thing, you're going to be a customer for a while. You will win more than you lose on that.

Yeah, that's true.

You're paying me for my expertise. And part of that expertise is knowing how to find solutions. I don't know. And part of it is implementing solutions that I do. And I would tell them that's why I have a one hour minimum for my time. Because sometimes I have to drive to your house and do something that's going to take me 15 minutes and I still got to be paid to get here. And I'm like, yeah, okay, you're right.

And if they know that up front, it's a much different conversation. When you're on site for a couple of hours and you fix this thing and they say, well, gee, you really only worked on this for an hour. I talked to you for a half hour. It's like, well, yeah, but I bill for that time.

Oh yeah. I used to say I was especially back in the days of loading things from Floppy disks or whatever. Oh yeah. I used to say I was an underpaid therapist sitting there with some relative stranger, hearing them just ramble on about their problems, you know, while I was watching a progress bar creep across the screen.

That's right.

Yep, yep. That's great.

Yeah. So, so we're going to talk more about this. I want to delve into, you know, other ways to be sure you're going to get paid quickly. And then I also want to spend some time and get your feedback, Dave, as well on tips for collecting on a debt when a customer doesn't, doesn't get paid. But I don't want to take up too much of folks time today. The one thing I would like you guys to do is we have an interview next week with some fascinating guys that are running a small business based on the Turo platform. It's t u r o.com where you can. Basically it's a car sharing platform where you can rent just about any kind of car you could imagine and rent your own out as well. And these guys are running a business up there. I'd like you to take a look at the site so you can jump back and listen to our conversation next week.

Sounds like a plan, man.

It's going to be cool. I'm looking forward to talking with these guys.

Yeah. Yeah, it should be fun.

Yes.

Let's see. You can find us on the web at businessshow Co. You can find us on Facebook at businessshow co Facebook. Is there, is there anything else we'd like to say here? Shannon?

I think that's it. Just like you know your phrase, keep living that charmed life. Make sure you get paid for your, your skill before you do it.

See you next week.