Q: One of my agency's largest and
oldest corporate accounts wants to convert from credit card payment
to direct billing. We would e-mail a weekly invoice, and they have
promised to pay us in seven days. When I asked the reason for the
change, I was told that there was "too much credit card abuse by
employees."
That
sounds fishy to me. Does this sound like the account is having
financial trouble? How could we protect ourselves under this
direct-billing arrangement?
A:
There is no rational basis for any corporate account to convert
from credit card to direct billing for airline tickets.
It is a step
backward, away from the accounting simplicity and control inherent
in credit card billing.
If employees abuse
the card, it is far smarter to tighten the company's travel policy
rules or use a ghost card or Universal Air Travel Plan card than to
stop using a credit card system altogether.
Therefore, you could
infer that the account is in financial trouble and has had or will
have its corporate credit card canceled.
If this happens, the
first issue you must face is whether the airlines will be sending
you debit memos for tickets charged before the card was canceled
but never paid for, if the company goes out of business or files
for bankruptcy. Unless you have a card imprint and signature for
each ticket, this could happen, even though you are
blameless.
Therefore, if your
client is teetering financially, it can, ironically, be less risky
to do direct billing than to continue to charge tickets to a card
that is going to be canceled soon. If you are still charging to a
card, try to get a card imprint and signature for each
ticket.
If you agree to go to
direct billing, get a written contract in place covering the
billing cycle and all the protections that you can think of. Here
are a few ideas:
" Spell out the billing and payment
cycle in as much detail as possible, so that the account cannot
possibly misunderstand how and when it is supposed to
pay.
Use the active voice
("Client will pay Agency within seven calendar days ...") instead
of the passive ("Agency will be paid within ...).
" Provide clear and scary
consequences for missing the payment deadline, such as ceasing to
issue tickets, canceling all pending reservations and voiding all
tickets that you can void. You can legally take these steps if the
account agrees to them in the contract.
" Provide for a security deposit
equal to a few weeks' estimated tickets and state that you can
apply the deposit (or any part of it) as soon as payment is three
days late.
" Require the account to replenish
the deposit within three days or you will likewise stop issuing
tickets, cancel all pending reservations and void all tickets that
you can void.
"
Consider limiting the amount of tickets that the account can
purchase during the billing cycle.
These steps will
minimize the possibility of losses as long as your accounting staff
makes sure that you get paid on time and takes the required action
if you don't.
If the account pays
on time, you will have better cash flow with weekly billing than
you would under any credit card payment system.
Mark
Pestronk is a Washington-based lawyer specializing in travel
law.