Archive | June, 2013

Translator credit for agencies/intermediaries

9 Jun

IMG_3358 best cropped to 320 x 200 shortWhen it comes to translators complaining about LSPs/agencies and other intermediaries, their ‘payment practices’ are right up there with the pressure on ‘rates’ (if you are a professional translator, please charge a fee for the project, instead of agreeing to ‘rates’).

I recently terminated a successful, long-time working relationship with a colleague, who has operated a one-man, well-established translation services practice for more than 30 years.  He sent me a lot of Dutch/Flemish>English translation work for almost a decade.  He liked the quick turnarounds, my knowledge, expertise and experience in the technical/commercial/legal field, all of which allowed him to build a reputation for being able to provide high-quality technical/commercial/legal Dutch>English translations.

His payment practices were somewhat erratic, averaging 60 days from date of invoice/completion of project (some one-man operations are a bit like that), but I weighed this against the regular volume, the close and collegial collaboration, and his willingness to pay my very reasonable fees.  I also knew what he charged the client, so a solid professional relationship worth looking after.

However, when the financial tsunami hit Europe, (once again) caused by the Wall Street Casino, things went pear-shaped and he admitted that things were getting difficult, so I agreed to be flexible and to help in any way I could.
However, when I started noticing that work dried up once accounts became seriously overdue, the warning lights started blinking.  This behaviour is fairly typical of such circumstances; use someone else until you can pay, and then switch back and let the other guy carry the can for a while (I have owned a collection agency in the distant past, so I have seen it all before).

When things went from bad to worse early this year, he told me that he was setting up additional (small) and unrelated businesses to diversify his income stream and that he ‘hoped to be able to pay me soon’.

When I pointed out that he was using my money to set up other businesses, the response became a little terse, focusing on his ‘loyalty to me’ over the years and how “he had advanced payment to me and his other translators over the years before he got paid himself”.  This argument has been used by other intermediaries, and the sheer chutzpah needed to use it, is breathtaking.  I made an attempt at pointing out that he was not an agent acting on my behalf and in my interest, and that my contract was with him only, not his client….. It was a waste of time, and I was accused of refusing to see his point of view.  Also not uncommon in these situations.

I am sure you understand that my willingness to be flexible, evaporated at this point, so I examined the realities, separate from our personal and business relationship, and here they are:

The commercial realities are relatively simple: the capital that a business enterprise requires, is usually made up of 3 main components:

(1) the capital (often in the form of a loan) that the owner puts into the business and on which he must earn a return to cover inflation, opportunity cost and risk (I would think at least 15% in the current settings for this type of ‘enterprise’).  In small businesses, this loan is often extracted again as soon as cash-flow becomes available, rendering the financial foundation of such small privately-owned businesses rather weak, to say the least;

(2) borrowings like overdrafts, secured loans, etc., on which the business has to pay the bank interest (say around 12 – 15% when including fees and penalties)

(3) working capital made up of the positive difference between assets and liabilities.  In this type of business, this is primarily the difference between the money that the business is owed by clients, and the money it owes the translators (debtors and creditors respectively).

The latter, (3), is essentially free money, of course. The sooner you can get your clients to pay, and the longer you delay payment of your translators, the more working capital you have, and the less you need of the two former modes of (costly) financing.

Unfortunately, the reverse is also true, and this poses a considerable risk for the translators working for such agencies. Many fly-by-night, and even well-established agencies, with little or no capital or borrowings of their own, will try to make ends meet by carefully managing (manipulating) this equation. However, they fall over rather rapidly when things get tough and their own clients delay payment.  When this happens, it is the unfortunate translator who foots the bill.

If my observations are anything to go by in this business of rapid global interchange of services and payments, the translators generally know little or nothing about the agency or its owner(s) that would either warn them about the risks of extending credit to them, or to help them collect their money when the proverbial hits the fan.

It seems that in this respect too, the freelance translator is the proverbial ‘hindmost’ in this predominantly Anglo-American model of a largely free-for-all, market-driven economy where it is ‘every man for himself and the devil take the hindmost’.
There is a need for freelance translators to first request some basic information do some ‘due diligence’ before agreeing to extend credit to an agency, e.g. owner(‘s) name and private address, business registration, years in business, etc.

Oops, I just got interrupted by a pig flying past my window 🙂

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