Business Risk, Reallocated

A dear colleague just shared this gem of a business risk story with us. The following is an excerpt of an e-mail that our colleague received from an agency (which shall remain anonymous):


As I'm sure you are aware, the global economic situation is still very problematic and we have experienced the following effect:

- The majority of our clients have extended their payment terms from 30-45 days to 60-90 days. 
- Clients have been requesting big discounts in rates.

All language service providers are experiencing similar difficulties.

Due to all this, we have been forced to take some measures to remain competitive in this market, but do not believe that reducing vendor rates is an appropriate action to take. So, we have decided to adjust our providers' payment terms to more closely match our clients' payment terms. 

Effective immediately, our vendor payment term is changed from 30 days to 60 days. 

This is a measure we very much regret to take, but we hope that you can understand our situation and why we have taken this decision. 
What's wrong with this picture? It's simple: the language service provider (or agency) has a payment obligation to the contractor. That payment obligation is independent of the agency's contractual payment agreement with the end client. Language service providers need to have funds available to pay contractors what they are owed on the day of the agreed-upon payment. It's possible that the language service provider's situation might have changed between the time when the project was delivered and when payment is due (usually 30 days), but the payment obligation remains.  Running a business comes with some risks. Passing that business risk on to the weakest link -- in this case, the freelance linguist -- is unacceptable. 

If a freelance linguist enters into a contractual agreement to provide a translation of a contract with XYZ agency and the linguist delivers in accordance with the terms, she is legally entitled to payment. XYZ agency can't come back and say "Sorry, the dog ate our client," "The client went out of business," "We are so poor, we are barely covering our costs and the client hasn't paid" or similar non-sense lines. Even if these lines are true, the payment obligation doesn't magically disappear.

We do not work with agencies, but our response to this would be the same as our colleague's: request to be removed from that particular agency's database. We'd love to hear your thoughts. While these are certainly tough economic times, language service providers need to find ways to prosper without alienating their most important asset: their people. 


11 comments:

Ray Collins on November 11, 2010 at 5:47 PM said...

After having been known as a "fast pay" company for many years, McElroy Translation adopted this policy after the management change in October 2009. Unlike the anonymous company in your blog, they had already asked contractors to take a pay cut.

Michael Schubert on November 11, 2010 at 6:00 PM said...

Yes, you summed up the issues quite nicely - bravissima! I've had this line fed to me as well on several occasions, even once after submitting an invoice for which payment terms were of course already agreed. My response is invariably some variation on "I can neither control nor verify the terms you negotiate with your end clients, nor are they of any relevance to our transaction, so I would ask you to make no further reference to them."

María Eugenia on November 11, 2010 at 8:17 PM said...

Hi!

I received that email. I must be in their database, although I never worked with them. And after that email I decided I won't ever work for them, exactly for the reasons you stated. Whenever I share a job with a colleague I take the risks of not getting paid by the client but I pay the other colleague according to the terms we established before starting working together, no matter what.

I like your posts very much, they are always interesting. :)

Best
Eugenia

Judy Jenner and Dagmar Jenner on November 11, 2010 at 9:05 PM said...

@Ray: Oh wow, McElroy wins the prize for both pay cuts and changes in payment terms. Nice. Sorry this company had to remain anonymous per our colleague's request. And it doesn't really matter who it is -- it's the content of the request that needs to be spread and the response to the unreasonable request.

@Michael: Thanks for the nice comment; happy you like the post. Truly intredible to change the payment terms after the fact -- that would never hold up in court. :) We LOVE your line that you have shared here -- "I can neither control nor verify the terms you negotiate with your end clients, nor are they of any relevance to our transaction, so I would ask you to make no further reference to them." -- absolutely brilliant wording.

@María Eugenia: Thanks for commenting and reading and we are glad you enjoy reading our blog! We enjoy writing it, too. :)And we agree with you 100% -- whenever we outsource (rarely, to colleagues we know very well), we always pay before we even receive payment from the end client. It's the right thing to do.
Oh, and we have a solution to the unwanted e-mails you are getting from these folks: block sender and you will never see another e-mail from them in your inbox!

barbara on November 12, 2010 at 4:18 AM said...

Thanks so much for the tips and tricks. Some I am already doing and others I will dbe doing shortly. You are a wealth of knowledge!!!

business from home

Sara on November 12, 2010 at 5:06 AM said...

Absolutely agree with Michael's great response. Translators should realize that these middlemen will try to increase their margins any way they can. It is up to the translator to say no (or to find better clients...they ARE out there!). I also think it is just plain bad form to send out a mass email "announcing" these kinds of cuts. In the real business world, this kind of thing is discussed in person, or at least over the phone (it's called negotiating, and it takes two parties do do it). Still haven't found any instances of this kind of unilateral proclamation by middlemen in other industries...
If agencies don't know how to do their job properly (essentially selling translation services and negotiating with end customers and vendors) why should freelancers have to pay the price of their incompetence? Learn to sell and negotiate on your own behalf and bypass the middlemen completely. You'd be amazed how much more money you can make, not to mention job satisfaction.

Nelida on November 12, 2010 at 2:54 PM said...

I received the mail too. I am obviously in their database, but they never so much as contacted me once. And they better keep it that way, it's for sure that I will never accept working for people who apparently think we are dumbwitted...

Rachel McRoberts on November 12, 2010 at 5:24 PM said...

Emails like this really make me wonder: Do these agencies forget that freelancers are not the same as employees? They are not in a position to dictate terms of payment to independent contractors. Request? Yes. Negotiate? Of course. But the moment an agency starts trying to dictate these things to me, I worry that they have forgotten what our business relationship is founded on. (Namely, my freedom to go find other clients! Not to mention binding contractual agreements that may have already been made.)

Judy Jenner and Dagmar Jenner on November 13, 2010 at 8:22 AM said...

@Sara: well said! We completely agree that bypassing the middlemen/women :) results in much higher pay and job satisfaction. Whenever we report on something agency-related, it's not from our own experience, as we work exclusively with direct clients. And yes, it is such bad form to send out a mass e-mail, and it clearly shows the lack of respect towards freelancers that seems to be prevalent. In addition, you are right on with your comment: great-paying customers are out there, and as an industry, we are all responsible for accepting the bad terms -- no one is pointing a gun to anyone's head, but we do fully understand freelancers who, for one reason or another, feel like they don't have a choice but to go along. However, if more people say no to unreasonable demands, we bet they'd disappear?

@Rachel: thanks for your thoughtful comment; good point. That's precisely what is always so astonishing to us when we hear that LSPs want freelancers to use a specific translation environment tool. They might have to check their definitions of "employee" and "contractor." What's next; dictating what brand of computer freelancers must use? ;)

Madalena said...

I also received this email. I have worked as a freelancer in the past for this company (well, I'm in their database, but I've never been able to accept work because of them either wanting the work back in an unreasonable amount of time or they want certain programs to be used that I don't currently own). I was appalled to see this message as well, especially because I recently took the leap from freelancer to LSP owner. I found it curious that this company thinks an email would be sufficient to change an agreement that would have been signed by both parties. Is this legal? I certainly don't have any desire to take work from a company like this in the future and can see that as a newbie LSP owner, this could turn off many contractors. Shame on them!

Álvaro Degives-Más on November 22, 2010 at 2:34 PM said...

Stretching out payment terms to subcontractors is but one way to depress COGS and so leverage EBITDA. Another, more straightforward method is simply to pay less. Notorious recent case in point: Didiergate. A more coolly critical take on that issue is here, from Miguel Llorens. Yet for the sake of thorough debate, fortunately I'd say, not everybody engages the topic with indiscriminate fear and loathing.

It boils down to the same approach: it's squeezing time and you depend on us, so pucker up and bless your still existing job. Yet here I am, contending that price is the poor man's weapon in the never ending battle for a market niche. Minding my old Ps, there's also place (the cloud as a workplace is a very relevant factor here), promotion (what do you do to market yourself as a language pro?), and lo and behold: the product itself (so what's your QA strategy, really?) That is why I avoid most agencies who, in their never ending chase circling the drain, resort to the most myopic of fixes: price.

So, turning once more to Miguel Llorens, that's why I look at his suggestions with greater sympathy than some in the handwringing OMGWTFBBQ crowd who vow to never ever across my heart to work for that bad, bad, bad agency ever again and then, of course, at the next drop of a deadline job (and the next rent due date) rush to take it up for pennies on the dollar.

The bottom line question still is: if we don't value our profession and our own added value, why would a wholesale agent do that for us?

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