Payment terms......sheesh!

I have been dealing with quite a bit of issues lately with payment terms.  This is something that I find kind of funny.  It appears that the only dates that are truly flexible is when one company owes another company money.  It is even something that you are really not supposed to discuss.  Many companies have payment terms on their invoices.  Usually it is a net 30 days or net 45 days and almost always there is a penalty clause.  However, the clauses are almost impossible to enforce.

This is not the same for the consumer credit world.  If you are one second late paying a credit card or a bill, there are late fees, percentage increases, etc.  There is no grace period for an overdrawn bank account.  The consumer has no choice but to pay.  If they do not pay, then there are collection agencies and other means to recover their money.  I once received a notice in the mail that I owed $0.04 to a company.  It took them $1.35 in supplies and fees to send me the notice!  When I disregarded the notice, they threatened to send me to collections.  I stopped it there, but I did kind of want to see if someone would actually call me for it.  But then again, I knew that there would be $100.00 worth of fees put on top of the collection activity, so I just taped 4 pennies to an index card and mailed it in.

However, businesses are not the same.  I just watched a thriving business go bankrupt because their primary customer withheld payment for no apparent reason to the point that the company missed a payroll.  If you try to enforce penalties, then many companies refuse to pay it.  Also, collections seems to cost more than the recovery of the money.  It is just weird.

It is interesting to watch a business fight for longer payment terms while never honoring the original terms.  They will ask for a change from Net 30 to Net 45 and have payment averages of Net 70.  As a small business, I often have to make phone calls or inquire about payment.  I normally get a very polite response, but it is also very nonchalant.  I will call and say something like, "I am inquiring about invoice X that is 15 days past due.  Can you let me know when this will be paid?"  The answer is, "Oh yes sir, we are cutting a check a week from Friday and will put that in the mail."  You are so happy it is going to be paid that you generally accept the terms.

I know as consumers, we can act the same way, but there is also consequences that come as matter of fact as the behavior.  If businesses try to enforce it in the same terms, it strains the relationship or ends it.  For many companies, late payments are an honest mistake or are late by a few days due to process.  There are other organizations that pay late as a strategy.  I have personally seen a memo of one organization that outlines how to string their vendors along maximizing the "use" of their funds.

I also worked for a company that incented us on making sure that we ran a 45 day services to cash metric.  This meant we had 45 days from the day that we performed the service to collect payment.  We were incented on invoice on a monthly basis on good faith.  If we had an invoice go over 45 days services to cash, the company would pull back the incentive amount on your next check.  If you collected the money after the 45 days, then the company would give 50% of your incentive back.  There were many times that I was on my client's site at 44 days begging for a check with a FedEx envelope in my hand!

As a project manager, we are to ensure that contracts that we oversee and manage are compliant to the terms.  For most, this means to ensure the deliverables are complete to the specifications provided.  It usually ends there.  As responsible project managers, we should make sure that all terms are being adhered to.  As PMI states, the project manager is responsible for the relationship with the vendors and that both parties are treated fairly.  This should include payment terms as well.  What are your experiences?

Rick

My Blog is one of the Top 50!

I received this note today:

"I’m just writing this to let you know about a new featured post we just made over here at Mr. Manager entitled, “Top 50 Project Management Blogs.” I thought that both you and your readers at Project Management That Works! might find it to be an interesting article. Please do let me know if you have any feedback -- http://mastersinprojectmanagement.org/top-50-project-management-blogs.html'

I am very honored!!!  Thanks!!!!

Rick

It is all in how you take it......

One of the most overlooked options for most of us is the option to choose. In every situation and interaction, knowingly or unknowingly, we choose to feel how we feel. This is a very powerful concept once you understand how to harness the power. Let's look at some examples:


Someone just yelled to you, "Hey...idiot!" We turn around to see who shouted at us....and then we choose how we will react. If it is a long lost friend, the insult may have been a joke or term of endearment. We just laugh and shout back, "Who you calling idiot?" It is all a big laugh. What if when you turned around, you didn't know the person. This is where the choosing comes in. We may react by shouting the same thing that we did at our friend, "Who you calling idiot?" This time, it is not a big laugh but an escalating confrontation. The point is that we affix connotation to almost every situation in life. Many times, we unknowingly choose a negative connotation. Why is that?

I have been doing a tremendous amount of public speaking lately and I see all kinds of things from the front of the room:

• A guy is nodding off
• Someone just left the room
• Two people are whispering

I could take this as:

• A guy is nodding off - "Man, I am boring him to death!!!"
• Someone just left the room - "I have offended her. She doesn't like me."
• Two people are whispering - "They have lost interest in my message."

Or, I could take each situation as:

• A guy is nodding off - "He had a really late night, but he is trying to make it through because he really wants to be here"
• Someone just left the room - "There is an emergency she needs to deal with."
• Two people are whispering - "They are sharing how they will use the concepts tomorrow."

The truth is that I really do not know any of the reasons for this behavior. However, I can choose what connotation I want to place on the event. Since ultimately we can choose to affix the connotation, then it doesn't have to be negative.

This is applicable to personal relationships as well. There are so many fights and disagreements because of how we chose to take something versus what the intent was. For instance, I have a person in my life that seems to always want to one-up the situation. They try to affect my spouse. If they can't get to her, then they try to get to me. If they can't get to me then they try to get to my family members and so on. It is almost an obsessive compulsive behavior. It is as if their joy in life is putting down me or my family. However, that is me choosing a negative connotation to the behavior. Who knows the reason for the behavior, I really don't. So why should I attach a negative feeling to it? The answer is that I won't! When I observe the behavior, I just shake my head and say, "That's odd," and move on.

In business, I found out that I was a fantastic motivator and project manager. I also found out that I was not good at being a HR manager. My entire career had been spent influencing people that did not report to me on an organization chart. When I did have people report to me, I was awful at some of the key skill sets. I had a person that worked for me that no matter what I did, in their mind I was out to get them. There was a negative connotation placed on every action that I performed. Some of it was warranted and some of it was just plain unfair. I tried everything to build a relationship, but just could not do it. That bothered me for a very long time until I chose the connotation that I would affix to the situation. I looked at my efforts to rebuild the relationship and then came to the realization that I had done enough. I could look at myself in the mirror and honestly state that I tried everything I could to make the relationship work. After that point, the negativity and hurt feelings I had simply melted away.

Choosing how you take something is a very powerful technique. People will see somebody really happy and state, "I wonder why they are so happy!" The answer is that they choose to be. Making the decision to find the good in situations can have a transforming effect. If you don't believe me, just try it! If you think I am crazy, I will just choose a positive way to feel about it! ;)

It is all in how you take it.......

Choose to have a great day,

Rick

Afraid of giving estimates

It is amazing how many project plans there are out there that have published dates and the project manager will tell you that the team will not give them estimates.  If there are no estimates, how do we have a date?

Here is a simple fix for when you feel people will not give you estimates.  Simply ask them why!  This  honest approach will catch some off guard, but it will open a dialogue that may break down some barriers.

In my seminars and work with clients, I will ask many team members why they will not give estimates.  Here are some common responses:

- "I am afraid I will be held to it."
- "I am not sure what I am estimating."
- "I don't know what else may be asked of me during the time that I am supposed to be doing this work."
- "I won't really know a real estimate until I get started."

Each of those responses can be worked through.  To really be great at project management, you must earn the trust of your team.  They must know that whatever information they give you is going to benefit them, not work against them.  There seems to be quite a bit of mistrust towards the project manager.  A honest conversation can remove many of these fears or doubts and at least getting you and your team on the right page.

If they are truly unsure, walk them through PERT (Best Case, Most Likely, and Worst Case) estimations.  Then apply formulas or select where you think it will end up.  This will give them an opportunity to present a range of estimates and will give you the opportunity to actually have an idea of a true estimate.  Honest conversations really work!

Be safe out there!

Rick