Default risk, late payment and bounced cheques

Default risk means literally the failure to pay what is due. Musicians may get a bounced cheque, late payment, or even nonpayment especially during the recession.

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What is worse than not getting paid on time?

To get paid late.

What is worse than being paid late?

Not to get paid at all.

What is worse than not getting paid in full?

To be paid a partial sum of what was due.

What is worse than getting paid a partial sum of what’s due?

Not to get paid at all.

What is worse than all of the above, i.e. not get paid at all?

To spend time and resources chasing and negotiating with someone who owes you money and having to justify yourself when all was agreed upfront.

The good news is — there is plenty to write about.

The banks have already cleared the path by charging fees for bounced cheques, interest on overdrafts, and, in the worse case, closure of your bank account.

Individuals who run credit card debt or fail to pay their rent on time are at risk of downgrades in their credit scores.

Companies who continually default on their payments run risk of a bad reputation and lower credit ratings.

I got charged $5 for a $20 cheque that bounced. I stuck a 44 cent stamp on a letter to the cheque owner requesting a payment for the CD she bought several weeks ago at a house concert. I am sure it was not intentional. She got to enjoy the CD for several weeks without any money leaving her bank account.

The same is true of concert producers who pay their artists late, not at all, or not the full sum. They and their audiences get to enjoy the music without the payment due.

It’s a pain to have to chase after payment. Think of the lost productivity and lost trust, not to mention the lost income.

The reason default risk is low in an industry such as the performing arts is that a nonpayment or late payment invites doubt and confusion, which in turn disrupts the trust that’s so integral to the profession. We musicians would agree to give concerts on a handshake because we know what is at stake.

If a musician does not show up for a concert that’s been booked for him/her, it is unlikely he/she will be booked again.

If a music presenter, concert producer, concert management agency, or agent does not pay, the word soon gets around. There is no opportunity cost incurred in the sale of a CD that’s not been paid. But you could have been doing something else that would have drawn you an income for that concert or month’s work that you performed without getting the pay you deserved.

Unfortunately, as my lawyer friends have witnessed, default risk is rampant during the recession.

All of the above reasons are what prompted me to invoice in advance for a future concert not yet performed.

Author: BLOGmaiden

As one of the earliest bloggers (since 1999), I enjoy meeting people who embrace "out-of-the-box" thinking and fear not the unknown. I believe in collaboration for sustainability because it increases stakeholder value.

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