Today's job/business posting led me to write this article.
I have listened to several litanies of complaints from BPO firms about clients who refused or simply stopped paying the outsourcing company. Lawsuits may always be resorted to but with both clients and vendors being located in different countries, the complication brought about by legal jurisdiction will always exist. In addition, legal action takes time and before its conclusion, the BPO firm may have already folded.
Here are some practical lessons that I have learned in order to avoid getting into this situation.
1. WRITE A TIGHT CONTRACT: Hire a lawyer from the client's country that will write a tight contract. To save on legal fees, the lawyer may be hired only during the negotiation phase. It is also imperative that a lawyer from the BPO firm's country is also hired to serve as a local adviser. That way, the outsourcing company is able to make informed decisions. Not to worry, the process is only tedious during the first contract. Beyond that, the BPO firm should have refined and mastered this process.
2. REQUIRE A DOWN PAYMENT: Starting a contract means committing company resources into an endeavor. It is but wise to be able to get hold of some of the client's money that wil also commit them to seriously do business with you. If not, a bank escrow or Letter of Credit (L/C) will be good. Again, double check the terms of the escrow or L/C agreement.
3. PROGRESS BILLING: This system simply means that the provider gets paid for every percentage of the job completed. A contract may specify a 20% downpayment making the service provider eligible for additional payment once his progress exceeds 20% of the project.
Here is an example of a progress billing.
There are many variations of this system. Please contact me should you need help.
4. HAVE A GOOD LAWYER PRESENT IN THE CLIENT'S COUNTRY: In the event of disputes, it always good to have a lawyer that will send collection notices on your behalf. Identify the law office prior to doing business with the offshore client. Have the lawyer agree to represent you should you need him. That way, you will not be scrambling for legal representation when the problem has already started to bother you.