One of my best customers has run into financial problems. This affects me because I contract for them on a routine schedule, and they missed the last payment by a week, with no solid ETA on when they can make it.
It’s an interesting question on how to handle this.
1. I could immediately suspend contracting services. This would insulate me from further potential loss, and I could use that time for other customers. But I’m a critical person they are counting on, and if I were to stop services they’d probably not be able to ship the game with multiplayer, or at least not on time.
2. I could give them a hard deadline to pay by. I’m exposed to further loss (over 25K in fees owed), but they might make the payment and I can continue contracting. They pay very well and I’d like to keep the contract if I can do so with reasonable assurance I’ll get paid.
3. I could give them a soft deadline to pay by. By this I mean being flexible and agreeable to whatever dates they offer as to when I will get paid. On the positive side, this maintains good relations, they’ll probably finish the game, and if they finish the game I’d probably be more likely to be paid than otherwise. On the negative side, if they DO go insolvent, as a contractor I’m an unsecured creditor behind the employees, and I could end up losing 50K in fees.
For option 2 or 3, suppose I set a deadline and they meet it. Should I continue on as if nothing happened? Or should I demand assurances for future payments, such as payment in advance, or requirement that the money be put in escrow? How about insisting on adding interest or late payment penalties to the contract? I’m critical enough I could probably get whatever I asked for, though they may not want me to contract after the game is done.
Suppose I set a deadline and they miss it narrowly. Should I bother coming back? And if I come back, should I demand assurances, as above? There are arguments both ways. Usually if a company is late on payments it’s because they are going to fall further and further late over time. Plus if they can’t meet a deadline to the point of losing key personnel, it doesn’t say much for their solvency. However, they did pay in the end and causing their game to likely fail regardless is kind of an asshole thing to do to a customer. Assuming of course they stay in business long enough to finish it.
In the last extreme, if I don’t get paid at all, yet the company stays in business should I file a lawsuit? That’ll definitely ruin relations and any chance of them recontracting in the future (assuming they did eventually pay, but much later).
As further background:
1. The company is very large – if they really wanted to I know they could make the payments, if nothing else by selling assets or reducing the salary of the CEO. But my payment has a lower priority than that of their employees and management (who did get paid on time, at least this last pay period)
2. I don’t think the finance officer’s handling of the situation is very respectful. Maybe it shouldn’t be a factor, but I feel like I’d be a lot more motivated to be flexible if I was told something like “Sorry, we’re having problems making payments. I was told we might have the money by Friday, and I hope you don’t mind waiting until then. I’ll try to see that this does not happen again.” vs. “I hope you’ll get paid next Friday” which is he actually said. It’s just words and doesn’t change the reality of the situation, but it does affect how cooperative I feel about the situation.
3. I’m not relying on the contract, it’s just one revenue stream among many.
4. The contract didn’t have provisions for late payments