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 Hi everyone, this is a tad off-topic, however I can't think of a better area to get an answer to my question...

 

BLUF: Do labour-based contracts in the US normally require 100% payment up front?  Is this common practice?

 

Detail:  I'm in Australia, and we are working with a US-based cloud company for some work.  We have a change request (small amount) which requires one of their people to do some work.  The company has issued an invoice, and will not start work until the invoice is paid.  Our accounts payable people are refusing to pay the invoice until goods or services are received - which is a pretty common practice in Australia (at least for small/short pieces of work).  

So my question - is the US-based company being unreasonable not starting work until the invoice is paid?  Or is this common in the US?  I just want to see if we have a cultural clash, or if its a separate issue worth pursuing.

 

Thanks for any guidance!

timrutter's picture

 Bartman,

Short answer, it's unusual in my experience.

Long answer is that I work for an American company in Australia and this is definitely not our standard terms or practice

mike_bruns_99's picture

Bartman, While not common, I see it from time to time.  I'm in the US.

It's based on the lawyer model where a "retainer fee" is required prior to starting a case. Many IT companies and/or freelancers use the same model to ensure they are paid for their work.

BartMasters's picture

 Thanks for the feedback gents - its good to make sure we are speaking the same language.

scm2423's picture

I am assuming there is a purchase order or some contract governing this work.   What does it say about payment?  I say this once where the vendor wanted payment before they would issues software keys to us.  Like you our A/P would not release the funds until we received the product.  In the end we showed the vendor our purchase orders that they agreed to that said payment would occur after the goods or services were delivered.  Since they agreed to that in the PO they had to issue the keys without payment.

 

S

Marvin's picture

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Marvin's picture

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JustHere's picture

Ive seen this before.  Negotiate a 50% payment, or even better: stagger it at different milestones of the project, complete step A get 25% of payment, complete step B get the next 25%, and so on. 

mike_bruns_99's picture

That's what we do.  Our standard terms for larger projects are:

  • 25% at time of order  
  • 25% at design approval
  • 50% at project completion
BartMasters's picture

 Sorry SCM, forgot to check this and get back to you.

 

To answer your question - there is no PO - rather its covered by the overall PO/contract for the whole piece of work - which has detail about the core work, and details how to invoice and track payments for the main piece of work, but it says nothing for any agreed variations beyond that they will need to be additional to the main fixed price job.  Thus our frustration with each other.

And Mike/Nevermind - we have thought about doing a staged payment, which is what we would normally do.  Its such a small amount ($20K) - that I'm loath to do that level of paperwork.  It just comes down to working out how much we want to dig our heels in...

Thanks for the advice folks - it gives me food for thought.