Q: I realize that almost all airline tickets and other travel bookings are paid for by credit or debit card these days, and even the federal government pays by credit card. However, I have a prospective corporate client who needs to pay by check on a weekly basis. I understand the client's reasons, but I want to be sure that we actually get paid, since I must pay ARC weekly regardless of whether the client pays me. What protections can I put into the client contract to help ensure that we do get paid?
A: There are several provisions that you can put into such a contract. Although none of them will absolutely guarantee that you will be paid, they will definitely help.
First, set a clear payment deadline, such as the close of business every Wednesday for the tickets issued during the previous week. Since you must pay ARC by the Friday after the week that you issue tickets, this will help ensure that the money is on deposit before ARC draws it.
Second, require payment by wire transfer or automated clearinghouse, or ACH. This ensures that the client cannot lie to you that "the check is in the mail," and you won't need to wait for the check to clear after you deposit it.
If the client requires an invoice before it will authorize payment, be sure to email the invoice promptly each Monday. Get proof that the invoice was received by asking for a return email or using email software that will certify that the message was delivered.
Third, retain the right to cease issuing tickets if the client does not pay by the deadline, then enforce the contract accordingly. Once the client realizes that you are serious, you are more likely to get paid on time.
Fourth, since there is a gap of three business days between the end of the previous week and the payment deadline on the following Wednesday, you need to retain the right to refund or void any unpaid tickets starting on Thursday. Doing so will obviously inconvenience or even anger the client, but it will minimize your risk of nonpayment.
These protections provide you with leverage to get the client to pay on time. However, if the client does not do so, there are still more protections available:
Fifth, since travelers may have already traveled by the time the payment deadline passes, you should require a security deposit equal to at least one week's anticipated ticket volume. Then you will have the right to apply the deposit toward an unpaid bill, and the client will have to replenish the deposit within a day or two.
Sixth, you should provide for a penalty and interest on late payments, like your landlord probably does. A 5% penalty for any late payment plus 1% interest compounded monthly seems reasonable, if it is consistent with your state's usury laws.
Finally, consider charging transaction fees that will be high enough to compensate you for the extra work involved in enforcing these clauses.