Payment Terms Part 2

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13 hours 9 minutes
Video Transcription
Hello and welcome to another penetration. Testing execution Standard discussion. Today we're on part two of payment terms, picking up where we left off. Our objectives are going to be to discuss half upfront payment type as well as to discuss re occurring payment methodology. So with that, let's go ahead and jump right in
half. Up front. I tend to be a fan of half up front on Lee because it's it's pretty simple.
Half of the farms are due up front
half of the total cost of service, or the estimate is do prior to the start date of the testing service
Tester service. And so
what you do in this case is
you could do it is a percentage of the total estimate or half,
it should be clearly defined like any other payment as faras in the payment terms.
But in this case,
you don't start working until half of that is paid up front, and you know this can be expenses and tester payment that can be made up front, and clients known for difficult payment history must provide funds prior to doing the work.
And so you're saying to yourself, Well, you mean if I've worked with a customer or client before, that didn't pay me until 60 days after the Net 30 that I should do business with them again.
That's up to you.
But if you've ever had ah, difficulty and receiving payment, regardless of whether the client was a good client bad client, whatever the case may be,
you know that it's hard t o pay your bank notes when you don't have anything coming in. And so if you've got a difficult payment history, that half up front can be kind of that safety net to help you take care of expenses and everything else while you work out the rest of payment after the service is completed. Now,
if the project experiences scope, creep, the expenses, maybe an excess of the monies given up front. However,
if you're estimating accordingly
and you know you're not letting scope creep come into that, then it shouldn't be a cz much of a problem. But I have to say this is probably swaying towards this particular methodology that this is a lot better than having no funds and having excess expenses and so
way that in whatever manner you feel is best when selecting, and then the last method I
and a partial fan of is, well, um so re occurring payment is essentially as it sounds. It's well, it's an agreed upon payment term where the client provides a monthly amount in exchange for service term lynx are negotiated by the Kleiner service provider. And so, if you are, um,
tryingto work with smaller businesses where it may be beneficial for them to have a smaller amount that they pay over a period
versus um,
paying all of those monies up front
that can be beneficial to them. For you, it establishes some monthly revenue. It's an easier payment for the client. And for businesses like small businesses, large businesses, whatever it could be seen as an operating expense versus capital expense, where
it's built into the budget. It's something that they know they have to pay for month over month. It's a part of
whatever it's a part of their standard service agreement, and so
that could be beneficial. Now, on your end is the business owner is the one doing the testing.
It can take a longer time to recoup expenses, and so let's say that you do testing annually or just wants, and you know that it's going to be 80 hours that you're going to put into this.
But there's a 12 month term on payment.
So if you do this work
up front at the beginning of those payment terms at the beginning of that scope,
then it's going to take you
12 months plus or minus to recruit the expenses. So you have to take that in consideration. Now.
If you were to break this into a two year engagement,
okay, and you were to do this at the end of each calendar year or maybe in the middle, then that gives you a longer period of time over that that 24 month cycle to recoup that payment. But again, that is why you discussed with the client when testing will occur.
You plan maybe to do this a month after the engagement so that the initial payment is made and some reliability on the client side is established as far as getting that.
But you have to consider
that if the client Mrs payment it can take longer,
businesses go out of business. So if something happens there and they go into a state of at least in the US based organizations that go into bankruptcy.
And then you have to negotiate settlement. Whatever the case may be, you've done the work
so again re occurring. Payment can be great from kind of forecasting revenue standpoint, things of that nature. But it comes with its own pitfalls as well.
So let's jump into a quick check on learning. So which payment method requires that money be put down
prior to starting the work?
So take a moment to look over the responses.
All right, so if you need more time, please pause the video. So starting from the bottom zero *** is not a term that we used here. Recurring is monthly payments. Net 30 is all of it is due within that period 30 days after the work. Up to
half up front is the correct answer. So that is the payment term in which the client must put money down prior to starting the work.
All right, everybody. So in summary, we discussed half upfront payment types as well as re occurring. And with that in mind, I want to thank you for your time today, and I look forward to seeing you again soon.
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