8 ms·
Ask HN: How do your enterprise customers pay you?
If you are a SaaS company, how do your customers pay you? Credit, ACH, etc, monthly vs. annual contract. Any good resources on the subject?
- lanstein 12y agoAs always, I'm happy to meet for coffee in SF with any founders who want to talk about SaaS sales in detail. I was the first sales hire at PagerDuty. Email in profile. To start to answer, do annual deals whenever possible. Large companies want to pay once a year via ACH/check/wire rather than dealing with credit card payments and expensing, etc. Often times credit card payments are prohibited (though that rule is often ignored). Money up front is key for the business.
- hunvreus 12y agoI'm most likely gonna take you up on that offer.
- kephra 12y agoLet define "enterprise customer" first. This is someone for whom the terms, conditions and prices of your website do not apply. Enterprise customer = Ask for quotes. So you might delay the question of how they pay you, once you have an enterprise customer ready to sign. An other distinction is, that you might charge accounts of normal customers, but you always just send an invoice to an enterprise customer, and they send you the money. German customers could use the old BLZ routing, European the IBAN routing, and US will use ACH. But I don't care, as long as I get my money on my account. Big companies are slow payers. My trick of getting the money fast is to offer 2% discount, if they pay within 7 days.
- gk1 12y ago> My trick of getting the money fast is to offer 2% discount, if they pay within 7 days. Great tactic. The reason this works, in some cases, is NOT because the company cares about a measly 2% of whatever they're paying, but because they may have a policy that says they _must_ accept discounts if available.
- petercooper 12y agoYou know you're dealing with a very enterprise customer when they automatically give a discount of this nature to themselves when you bill them using their own billing system (I seem to recall MS's vendor system does this).
- RyJones 12y agoit did (or does). Sun did the same thing - nice discount for sun if they pay within 7 days, so everyone raised rates by that much. It was nice getting paid so quickly
- tomjen3 12y agoThen 1% for 4 days should work equally well, right?
- sologoub 12y agoMarking invoices with 2%/7 NET 30 or any variation thereof is definitely a great practice. The shorthand means X% discount if paid in Y days, with full amount due in 30.
- eitally 12y agoThe other common game is the "our fiscal quarter/year is about to end and if you sign by X date we'll be able to give you Y discount." Since most of the time enterprises don't accelerate for anyone, especially a small contract, this bluff is pointless and if your sales guy gets called out for bluffing, they'll be disinclined to do business with you in the future. But, on the other hand, it can sometimes work, and work VERY well. One of our suppliers negotiated with us to sign a 3yr, $5m+ deal rather than a 1yr, $1.8m deal simply by telling us we could lock in pricing if we committed to the longer term. Since it's a SAAS service, they'll getting a ton more money up front, at no extra cost to them. ... Or are they... this is the customer I mentioned in a different comment, where we negotiated quarterly instead of annual payments. It's a great example of a BATNA: we got favorable terms that impact our cash flow much less, plus guaranteed pricing for 3 years on a large opex budget item, and they locked us in for 3 more years with guaranteed on schedule quarterly payments. Everyone loves smooth (as opposed to peaky) sales forecasts.
- koddi 12y agoThis will vary by contract size and type, but for us, it's a split down the middle of monthly check or wire on annual contracts. In our experience there is a line somewhere around $1000/month where credit cards aren't commonly used.
- mpr3 12y ago>$1k/month is by wire/cheque. Below that is credit card.
- GolfyMcG 12y agoWe sell to large healthcare companies for anywhere from $1,000's to $100,000's and it's almost exclusively checks in the mail.
- BjoernKW 12y agoI'd say it very much depends on the country and the price range. In Germany for example by the far the most common method for business payments is invoice / bank transfer. Up to a certain amount (about €500) credit card payments are accepted, too though (because that's what middle managers in larger companies commonly are allowed to spend on their own account without asking for permission). In the US paying with credit card is much more common even for business. Then again, enterprise pricing can easily exceed the usual credit card limits. Larger companies like to pay annually, smaller ones especially startups are more likely to pay monthly for obvious reasons.
- sologoub 12y agoMy experience is that this largely depends on the procurement practices of the company and whether or not your price range is low enough to be below discretionary expense limits. The greatest feature of SaaS has been the ability to take a 50k software package and make it a 500/month subscription that people who actually need it did not have to go through the official procurement process and could simply expense it. From the orgs where I worked, $500 to $1000 per month seemed to be the usual limit for expense items, depending by company size and the position of the person expensing it. CTOs typically can get away with a lot more...
- smackfu 12y agoSoftware procurement also tends to get hung up on EULAs because someone decided they want a fancy indemnification section that that lawyers at EnterpriseCorp don't want to agree to.
- sologoub 12y agoThat, a long with many many other things that become a matter of getting a rubber-stamp from some stakeholder that is protecting a fiefdom, but doesn't really have anything to do with why that software is being bought. Although, legal review is always a good idea to make sure you understand what you are agreeing to.
- eitally 12y agoJust to use an example fresh in my mind... we're a Google Apps customer and bought a bunch of Lucidchart licenses to help wean people off Visio. One of the things Lucidchart does that, if we had known about it beforehand, we'd have written into our terms, is that they refuse to delete accounts even after a person's Google account is deleted, so we end up paying for licenses for terminated employees unless we physically add Lucidchart as a checklist item in our termination process, and then pay a guy to go do the needful and de-allocate it. Lucidchart is cheap by comparison to lots of things, but managing licenses is a pita (and they are by no means the only offender).
- 12y ago
- BorisMelnik 12y agocheck, sometimes wire. some of the ones under $5k/monthly will do credit card or do net 30/60
- petercooper 12y agoThey cut a check every month? Or do you group it up into invoicing every 3/6/12 months?
- patio11 12y agoOverwhelmingly: Send a quote for the upcoming year, get a PO number corresponding to the quote, send an invoice referencing the PO number, wait an interminable amount of time, a check magically appears in the mail. The last one was 9 months late in paying. Enterprise life, yay. Salient point to keep in mind: the people responsible for everything that happened in that workflow after my customer passed the quote to her purchasing department are a) not my customer, b) not even on the same campus as my customer, and c) just. don't. care. A six figure check is just another piece of paper to them, which they'll see several hundred of this week.
- ibejoeb 12y agoI typically bill a 3-year license on an order form in advance, which basically follows this procedure. It gets settled several months after invoice. For services, I provide a statement of work and an invoice. Perhaps unexpectedly, I did 2% 10 Net 30 for gov't, and I was almost always paid on time.
- linuxfault 12y agoNET 30 baby
- ceejayoz 12y agoGiven that @patio11 can have "late" checks, I presume there's already such a thing in place. The problem is what you do when they let 30 days fly by. Many of the recourses available to you aren't worth the risk of losing the client by being a hard-ass.
- patio11 12y agoThe customer believes that it paid NET 30 ("You received the check within 30 days of us deciding to send you a check. NET 30!") and that I can speak to Legal if I want to press the issue, which (naturally) I don't. As near as I can tell, this is just priced into everyone's expectations.
- linuxfault 12y ago
- bvanslyke 12y agoBitcoin, overwhelmingly.
- blumkvist 12y agoEnterprise customers? Please wake up from your wet dream.
- deleted 12y ago[deleted]
- shillster 12y agoMicrosoft's data centers have been used for mining for over a year and its been used by internal teams to compensate people outside the company (working with open source vendors) and its a very convenient way to bypass the age old fight for money in the budget.
- normloman 12y agoTwist: OP is a drug dealer.
- BallinBige 12y agoHigh ticket ACH is the way to go. (5k or above) Fee's to the merchant will be less < 1%.... The key is finding a processor who will take on that risk
- vivekpreddy 12y agoIf you're a startup selling to the enterprise, I would highly encourage billing upfront. Collecting cash upfront has huge ramifications for cash flow and how fast you can grow the business. In terms of payment, it really depends on the company and size of deal. For some companies you can send an invoice and they'll send you a check back quickly, but the larger enterprises usually will need you to fill out a PO, you'll certainly go through procurement, and then you'll be able to invoice. I've typically seen Net 30 days for payment due date, but some companies may push back to Net60. Credit Card usually only works for smaller transactions (<$10k) or monthly recurring charges.
- deleted 12y ago[deleted]
- damoncali 12y agoWhatever the contract says. But if you have a long term deal, I would recommend quarterly, or preferably annual billing. Dealing with checks is a pain. In my experience, big co's are no more or less likely to pay on time than anyone else. But they don't tend to pay early. If it's small recurring billing, just have them use a credit card. Even then, annual billing is preferred - it cuts down on the requests for invoices from their accounting departments in addition to the obvious cash flow advantages of collecting a year up front.
- raverbashing 12y agoFunny how in the US paying with cheques is still a thing Cheques are practically non-existent in Europe. SEPA all the way.
- mixmastamyk 12y agoI liked the system in New Zealand, in the US it's still the 1970's for payments.
- yitchelle 12y agoCan you elaborate the New Zealand's system?
- mixmastamyk 12y agoEveryone has a bank account number for deposit that can be public, just like a telephone number. To send money, you log in, paste the number and amount, and hit the send button. If both parties use the same bank, the transfer is immediate, otherwise, it happens at 10pm that night. There are no "~$25 Wire fees" or delays or other nonsense, which makes tiny bank transactions possible, like here's $1.25 for a cookie, as well as paying rent a breeze. Just like it should be. When I came back to the US and had to write a paper check again (that wouldn't clear for a week) I was quite disgusted.
- mrgriscom 12y agoSeriously, it's fucking embarrassing. To send me money, someone writes numbers on a piece of paper. That piece of paper is physically transported hundreds/thousands of miles to me. Then I have to write on the piece of paper. Then I take a picture of the piece of paper and upload it, where someone reads the numbers written on the piece of paper, and actually transfers the money. Is this really how the world works in 2015???
- mcherm 12y agoWell, if I'm sending out payments then that's several days of "float" where I'm still earning interest on the money because all those physical pieces of paper are still in transit. So given the choice, why wouldn't I go with the less efficient process? (That's a rhetorical question - but feel free to answer it if you feel so inclined.)
- Flemlord 12y agoSeller of financial services software for large wealth managers here. Checks or wires, annually or quarterly in advance. 3 year contracts with a minimum of $10k in annual revenue.
- smacktoward 12y agoSlowly.
- BRValentine 12y agoWe try to get as much as possible up front, with a minimum of half of the first year up front. After that it's monthly or quarterly payments, depending on what we negotiate. So far all payments have been by check. For context, we're early stage with a handful of initial customers, mostly small companies. Deal sizes in the five figures per year.
- GordonS 12y agoLate. That's how :/ Invariably we have to spend a lot of time sending emails chasing late payments, and sometimes making phone calls. They always eventually pay, but it always takes a ridiculous amount of energy to get to that point. Oh, and US customers (we are based in the UK) most often still pay by cheque (or 'check', if you are American :), which take weeks to clear and usually involve high processing fees. On the occasions where US customers pay by bank/wire transfer, they sometimes do so while specifying that we also pay their side of the transaction fees. Bad practice, and very irritating :/
- codecondo 12y ago:/
- jeremyw 12y agoThere is justified pessimism here about getting enterprise checks paid on time. An early colleague taught me to make relationships inside the accounting department, address invoices and questions to one or two people specifically and personally thank them for their time. For that small effort (15 minutes per month), I get direct reminders about deadlines and payout boundaries, and consistently good paper turnaround. Doesn't work universally, but holy cow when it does.
- hackerboos 12y agoBACS transfer in the UK.
- superflit 12y agoI will say something that is very unusual but I hope other fellow HNers do the same... They pay me in CASH inside a cool envelope. And it feels great seeing real cash, the volume and smell.
- snowwrestler 12y agoI purchase services on behalf of a company; not a huge one but has some "enterprise-y" trappings. That said, make sure you're doing thinking and research about the companies you are targeting with your business. There's no one answer that covers all B2B transactions. For me, dollar amount matters. Is your service $100/month? It can go on a credit card and get expensed; Legal might take a quick look at your online standard terms and conditions and privacy policy (which must exist if you want to sell to enterprises) but not likely to argue anything. Is your service $5,000/month? Then I need a contract that is approved by the lawyers and signed and dated by human beings, and an invoice that Finance can validate against the contract for audit control, and then they will send you a check. Because all that is a pain in the butt, I prefer to do the whole thing only once per year on an annual renewal. Is your service $20,000/month? All the same legal stuff above, but now I might prefer monthly or quarterly invoices for cash flow reasons. But I'm guessing since you're asking here that your SaaS business is probably is not charging $20,000/month. :-)
- cperciva 12y agoSome of my largest customers pay me via Paypal. I've offered to take credit cards or ACH, but apparently they like Paypal. Mind you, my largest customers are paying a few thousand dollars a month, so I'm sure they're avoiding paperwork compared to the million-dollar-purchase-order payments.
- XERQ 12y agoNot quite a SaaS company, but I'll chime in anyway. For SSD Nodes we've done "trials" for enterprises with an explicit expiration date where the service gets disabled if we don't receive their payment. This tightens our AR and incentivizes them to push the payment through their channels faster. Sometimes a dev from a large company will test us on a smaller package with a company credit card and expand from there after we push them through the sales funnel. Most of our enterprise clients pay using either ACH or check, while the remaining typically use credit cards.
- whiskykilo 12y agoAlways wire payments. My consulting clients are mostly based in Europe for their HQ's, so they don't believe in checks. They also are very timely, within 5-7 days of a NET30. Like clockwork.
- curiously 12y agohere's a related question. what if you are a sole proprietor? do I start incorporating and setting up a business bank account now before they ask for the details?
- throwaway8490 12y agoIn the USA, banks will only accept one or two checks for deposit to your personal account if you're using a fictional company name before demanding you create a business account. You don't need to incorporate to create a business account, but you have to register your fictitious name locally. Costs about $40 at various places around town and they handle all the paperwork and announcement in a newspaper. For taxes, you just keep all receipts and file a Schedule C. When depreciating equipment, you need to know the day it was bought. Also, check if your city requires city taxes. Some do, some don't.
- ci5er 12y agoIn the US: Up-front, monthly or annually (for a discount), ACH. On one of my current projects, we gave a MAJOR discount to our first two customers for 3-year contracts paid up front. The projects were large enough that this almost (for certain definitions of 'almost') funded the product/service development. If the customer wants different terms, we stick GE-Capital between us to deal with the impedance-mismatch. Outside the US, similar structure (not ACH, of course), and usually with either DB or HSBC there to work out any mutual trade-finance/payment-timing issues standing between us. Sticking a bank in-between works well on a number of fronts, and one is that the client doesn't owe you -- they owe the bank. It's not free, but saves a lot of hassle for international deals. Even domestic.
- OceanPowers 12y agomonthly billing on the 1st, 30 day net.
- kvanderd 12y agofwiw - Worked at a startup that served only fortune 1000 companies. Always late, late, late, late..... Good side: Repeat customers. Getting in the door is hard but once you're in it is easy to stay in if you're doing a decent job. Bad side: After 6 months of doing business with them you would finally get your first check. For a startup even with millions of dollars in the bank this sets your burn rate on FIRE.
- dayolay 12y agoplease can you elaborate further
- mariogintili 12y agoAnnual contract here
- ryanelkins 12y agoEvery customer of mine pays through a bank transfer. Some pay monthly, some pay the full contract upfront. We offer a discount for those that pay upfront so it's the customer's choice. Most of our customers pay within 15-30 days. Our invoice says Net15 but some customers insist on different terms. It's just another negotiation point for us. Often the company policy is something like Net60 and the people we are talking to can't change that. Whatever the terms end up being, some customers are really good about sticking to them, and some aren't. Sometimes a customer doesn't pay for 2-3 months and then we get a deposit for all those payments lumped up at once. In almost all cases, the people making the payments have no relation to the people who bought your product. They most likely don't even know them or even work in the same state (or country). The bigger the company the more likely this is. Once you've worked with a particular customer for a while you at least have a good idea of how they pay.