In the language industry, it is not unusual for a translation agency to pay its providers before getting paid by the customer.
Especially with smaller agencies, providers are not willing to wait for months for their remuneration. Larger agencies can delay payment by offering their providers regular assignments and larger volumes, therefore translators accept that they might have to wait for payment – even if it is 45-60 days.
It can take much longer for the customer to pay the agency. Agreements signed by both parties usually define that payments will be made 60 to 90 days after delivery. Quite often even this is not observed. An extra 30 days of delay means that the payment arrives at the agency 4 months after the translation was completed.
For this reason, thorough analysis of the cash flow is extremely important for a translation agency. Delayed payments can also occur when an agency does not:
- issue the invoice exactly when agreed with the customer (e.g. immediately after delivery, or at the end of each month for regular clients)
- remind the customer immediately after the payment due date
The prompt issue of invoices might be problematic for many smaller agencies. Very often, different payment terms are agreed with different customers and the bookkeeper can forget to issue the invoice in time.
Also, the regular identification of all incoming payments might be problematic, so overdue payment reminders of are not sent immediately to the customer.
The best solution for improving cashflow is the automation of invoicing processes, including: invoice generation and delivery; monitoring of payments and their identification; generation of reminders; etc.
As a rule, a Translation Management System has an invoicing module. The TMS not only issues the invoices in time according to the individually agreed payment conditions, but it can also generate reminders for all overdue payments without any human assistance.
For this feature to work properly, it is crucial that the TMS database is updated regularly. The system will generate the reminder for each payment with the status “overdue”. Therefore, the TMS user should regularly match all received payments with the invoices still marked as “not paid”.
From my own perspective, the efficient implementation of payment monitoring significantly reduces our overdue payments. Using the regular updating of unpaid invoices for us, their total value was reduced by over 60%.
Jurek Nedoma is also co-founder of the professional TMS software development firm XTRF Management System.