A remarkable number of Reseller Hosting outfits have what seem to me to be rather counter productive policies biased strongly against long term contracts with established businesses seeking reseller hosting for in-house use:

1) Many hosting suppliers will not accept annual prepayments for service. It's as though they have no confidence that they'll be there tomorrow and figure it's easier to go hand to mouth with monthly payments. If our accounting department is any example, they don't care for regular disbursements of small amounts because of the transaction costs. I was surprised that the hosting suppliers didn't welcome the certainty that they'll get paid, the lower transaction costs and the use of the money during the year.

2) Of those hosting suppliers who do accept payment for a year's hosting in advance, a remarkable number won't take a corporate disbursment drawn in funds local to the hosting company by a bank in the same nation (for example, US dollars from a US bank for a US hosting concern). Perhaps the problem is the hassle of waiting for the check to clear. However, the accounting departments of most firms of any substance prefer to pay with a check and maintain a solid audit trail.

3) If the hosting supplier does take annual payments and will accept a check, the next hurdle is draconian terms of service (TOS). I was amazed how many openly advertise that they will not make a prorated refund of the unused balance. Most seemed to feel that after the first 30 or 90 days they had earned the entire year's payment and were under no obligation what-so-ever to deliver any services. [One outfit, not listed below, even went so far as to bury in the fine print a demand that the customer agree to pay them $200 every time the customer contested a credit card charge -- I can't imagine that outfit will survive very long.]

In just one day, for example, I found four such Reseller Hosts:

PremiumReseller -- no checks
Eleven2 -- no refunds
TurboHost -- no anything
DowntownHost -- no checks

It seems odd to me and makes me think I must be miscommunicating with the prospective hosting vendors. Can any of the more experienced hands at purchasing Reselle Hosting shed any light on why so many outfits shun long term business relationships with larger firms plagued with accounting departments and auditors?

Regards,

Aza

It's as though they have no confidence that they'll be there tomorrow and figure it's easier to go hand to mouth with monthly payments.Then again, if they would doubt being here tomorrow, they could take all yearly payments they could as fast as they could, and, if it would really come down to it, be gone with the cash. :)

You bet they could skip with the money. Or their enterprise could fail with no money for refunds even if they wanted to.

There's risk on both sides, but don't you think most hosting providers work awfully hard to build their business in a very competitive market?

Given a choice it's hard for me to imagine any one of them would be willing waste all that effort by skipping.

But I fear I'm a bit naive about how the hosting business works.

Aza

I was amazed how many openly advertise that they will not make a prorated refund of the unused balance.One could see that as the cost of getting the discount that comes with yearly payments. That being said, I admit that I like it when a host gives a prorated refund though (some do so even though the TOS specifies otherwise).

Given a choice it's hard for me to imagine any one of them would be willing waste all that effort by skipping.I don't know about that. A scenario: due to very low pricing, markup is 5% or less. Growth is explosive due to the same reason. At any point in time, the host has 1 year+ worth of profits on hand. Incentive enough for a disappearing act? Maybe. :)

Plenty of web hosts won't accept check payments and the reason is fairly simple. If 99% of your customers wish to make payment via credit card or PayPal, the added expense of accepting check payments is greater than the the potential revenue from the remaining 1% of your customers.

At any point in time, the host has 1 year+ worth of profits on hand. Incentive enough for a disappearing act? Maybe. :)

Good point. Not only do they have one year of net profits on hand, they have up to a year of the gross before expenses.

Clearly, the more premium priced services stand a better chance of surviving with those thin margins; but I'm sure it doesn't follow that more premium priced outfits are more stable.

It's a lot easier to check a host's up time than how sound a business footing they have.

I confess I'm used to purchasing engineering services and manufacturing sub-assemblies where both the purchaser and supplier each have a vested long term interest in the other's survival. It doesn't sound like the hosting industry works that way. That's why I'm tapping the collective wisdom here.

I guess we're back to the "you pays your money and takes your chances" school of business and I'm over-analyzing this...

Aza

the added expense of accepting check payments is greater than the the potential revenue

AFAIK $300+ annual payment checks clear for next to nothing (unless the supplier doesn't have a bank account) and recording one transaction a year seems like it would cost considerably less than recording 12 transactions throughout the year. Also, I'm under the impression that PayPal and CC clearing isn't free.

So where's the business sense in this when the marginal cost of the additional 1% is practically nothing? Particularly when that 1% is likely to be more stable long term customers. Sounds like the margins are really more generous than the 5% mentioned earlier...

Aza

PayPal and credit card payments are all automated; with most web hosts the payments route automatically into their billing software and unpaid accounts can be easily identified. With checks the added expense is incurred through the time that must be spent tracking the incoming payments, manually updating account standings, processing the payment, invoicing the client, etc.

If you had a dedicated accountant, then there would be virtually no extra effort expended and it would make sense to accept check payments. However, the majority of the web hosts on WHT are 1-2 man operations without a dedicated account manager. The extra time that would have to be spent on accepting check payments just isn't worth it to smaller hosting operations.

A $300, $500 or $1000 annual payment would be a different case as well. Such a large payment would indeed justify an extra effort to accept a check payment. However, most web hosts here charge something more around $50-$80 for an annual basic web hosting account.

AFAIK $300+ annual payment checks clear for next to nothing (unless the supplier doesn't have a bank account) and recording one transaction a year seems like it would cost considerably less than recording 12 transactions throughout the year. Also, I'm under the impression that PayPal and CC clearing isn't free.

So where's the business sense in this when the marginal cost of the additional 1% is practically nothing? Particularly when that 1% is likely to be more stable long term customers. Sounds like the margins are really more generous than the 5% mentioned earlier...

Aza
Well personaly, I'll happily accept nearly any form of payment, as long as I end up with $ or £ in my bank.
Normaly, I'll accept, PayPal, BACS, Cheque, Cash, PO, without blinking, but I'll certainly discuss any other optiion.
I just want your money, I'm not proud.
What I wont do is spend 2 hours telling you I can't accept you money.

We prefer to not deal with the hassle of the checks clearing and following of the payment (that's my personal decision), that's the only reason of why I decided to not accept checks nor wired transfer, everybody can pay with credit card or paypal on today's Internet world.

...payment checks clear for next to nothing (unless the supplier doesn't have a bank account) ... Also, I'm under the impression that PayPal and CC clearing isn't free.

So where's the business sense in this when the marginal cost of the additional 1% is practically nothing?

I agree.
Taking checks or even money orders means not having to deal with transactions costs that paypal or credit cards have, well beside the gas I burn going thru the drive-thru teller. Having a bank that is in walking distance on those nice sunny days helps too.

With local customers that I deal with face to face I will recommend check over the other payment options since I can avoids the transaction fees.
The only cost you could have is if customers checks start to bounce.

I agree.
Taking checks or even money orders means not having to deal with transactions costs that paypal or credit cards have, well beside the gas I burn going thru the drive-thru teller. Having a bank that is in walking distance on those nice sunny days helps too.

With local customers that I deal with face to face I will recommend check over the other payment options since I can avoids the transaction fees.
The only cost you could have is if customers checks start to bounce.
Bouncing cheques, buy bouncing services from me. ;)
If I was selling anything other than services, my thoughts on this would be quite diff. I think.

I see the issue of payment methods has been fully discussed, but has anyone brought up that not all data centers require contracts? Maybe as a reseller your focus should shift to companies that offer month to month or do not require 30 days or more notice of cancel for their resellers.

Given, Pay pal and credit card payments are the fastest in processing, but other forms such as Western Union, bank transfers(wire payments) as well as checks from local customers are all suitable payments. The biggest concern with check payment is that it could be over 30 days before a host will find out the check is bad and by then a reseller could have moved to another host and the hosting company is out of service with no recourse available.

We are all in it for the money and want to be sure our relationships with resellers and hosts are solid.The best way for a reseller to be able to confidently sell a hosting companies servers or services is to have a solid communication line and relationship with a representative to avoid these particular issues. Of course, knowing the TOS up front will also avoid unnecessary charges.
I hope you find what you are looking for.:)

AFAIK $300+ annual payment checks clear for next to nothing (unless the supplier doesn't have a bank account) and recording one transaction a year seems like it would cost considerably less than recording 12 transactions throughout the year. Also, I'm under the impression that PayPal and CC clearing isn't free.

So where's the business sense in this when the marginal cost of the additional 1% is practically nothing? Particularly when that 1% is likely to be more stable long term customers. Sounds like the margins are really more generous than the 5% mentioned earlier...

AzaMy bank charges me 2% + 28p for each cheque paid into my account, compared to PayPal's 1.4% + 20p.

That said I do accept cheques. As Brian said anything that leaves me with more £ in my bank account after the transaction then I will take it.

Paul

Maybe as a reseller your focus should shift to companies that offer month to month or do not require 30 days or more notice of cancel for their resellers.


According to the green eyeshade types in Accounting it costs about US$14 to process a disbursment. Clearly month to month disbursements of $30 to $50 for Reseller Hosting would not make sense. (BTW we use a Reseller Account largely as a failsafe for inhouse communications in the event of cut trunks, regional blackouts, or just the bad luck of dedicateds crashing in synchrony.)

Now before I get a bunch of totally correct observations that $14 seems high, remember they have a formal accounting proceedure. A purchase order must be completed by the requestor. Amounts under $2,000 need only one approval, larger amounts have pretty complicated approval processes. Accounting checks the approvals, deducts the amount from the proper budget(s), issues the payment, and records the disbursment when the instrument clears.

What doesn't show is that every week Accounting tallies up the budgets and presents each program with a statement -- something like a credit card statement. Four times a year all the numbers are consolidated into a report to the Securites and Exchange Commission and naturally there are quarterly taxes to be calculated. At the end of the year the books are reconciled and the auditors come in. All that overhead is lumped into the cost of a transaction -- so I suspect $14 is pretty typical.

Thanks for the comments. They're giving me a far better sense of business practices in the Reseller Hosting market than I imagine I would have gotten otherwise.

Aza

;4950415']My bank charges me 2% + 28p for each cheque paid into my account, compared to PayPal's 1.4% + 20p.

Wow Paul, in the colonies there may be a transaction charge of perhaps US$0.10 if you have a very low balance on an interest bearing checking account.

It certainly would make sense to avoid checks if it costs 2% to clear a local (same currency and same country) check on your side of the pond.

Aza

Wow Paul, in the colonies there may be a transaction charge of perhaps US$0.10 if you have a very low balance on an interest bearing checking account.

It certainly would make sense to avoid checks if it costs 2% to clear a local (same currency and same country) check on your side of the pond.

AzaThe account was mis-sold to me, lucky I am still in my free banking period. But I am still gonna be moving to a new bank that offers free banking "forever".

Paul

;4950541']The account was mis-sold to me, lucky I am still in my free banking period. But I am still gonna be moving to a new bank that offers free banking "forever".

Paul
That's good, I can breath again, the charges you spoke of scared me.

Seriously, I'm sure others would like to know which bank is offering 'free banking' forever, sound a bit like 'unlimited'.

can you share, is it hush hush, is it US only ?

That's good, I can breath again, the charges you spoke of scared me.

Seriously, I'm sure others would like to know which bank is offering 'free banking' forever, sound a bit like 'unlimited'.

can you share, is it hush hush, is it US only ?It's an Abbey Business account. Their home page is here (http://www.anbusiness.com/).

Not sure if they have a US division but it's a UK based bank.

Paul

You have to think in terms of a product, if your going to prepay annually, this means that your buying a service for 1 year. It doesn't mean your buying a service for however long you want. If you choose to cancel 6 months in, then you should have only bought 6 months.

It's just like buying a product, if it's functional your not going to get your money back, lots of places have refunds based on downtime and such, this would be your product warranty. If nothing happens that affects the product warranty, your not going to get a refund.

If you choose to cancel 6 months in, then you should have only bought 6 months.

The argument that one should buy 6 months if one will use 6 months and 12 months if one will use 12 months implicitly assumes that the vendor will provide consistent service.

As one can see on these pages some Reseller Hosting vendors run into a spot of trouble and once great service has turned sour.

Given the hassle of moving sites and getting set up with a new vendor, I doubt if customers would change Hosts just for the fun of risking a year's prepayment and joy of moving a whole bunch of sites.

In fact, after checking with almost 60 vendors I'm quickly finding that the following three questions serve as an excellent litmus test for the attitude as well as business savvy of prospective hosting vendors (assuming annual charges are US$300 or more):

1) Do you take annual prepayments?

2) Do you take corporate checks for the annual prepayment?

3) Do you guarantee a prompt prorated refund of any unused balances should the customer cancel at any time during the prepaid term of service?

That said, I can certainly understand why the responses to these questions would be meaningless to out of country vendors or for lower cost annual plans. But they seem to be pretty revealing otherwise.

Aza

In the case of my company:

1) Do you take annual prepayments?Yes

2) Do you take corporate checks for the annual prepayment?Yes, as long as it is a cheque drawn in Pounds Sterling, and all funds will be credited to your account 7 days after we recieve your cheque.

3) Do you guarantee a prompt prorated refund of any unused balances should the customer cancel at any time during the prepaid term of service?Personally yes I do, but I do not advertise it as it is subject to your account managers decision.

In short, most companies will have the same policies for the first two, it is the 3rd question that you will get a huge amount of difference in.

Paul

;4950694']
In short, most companies will have the same policies for the first two, it is the 3rd question that you will get a huge amount of difference in.Paul

Yeah, Paul, I'd have predicted the same thing. Here's how it broke down among the 63 US Reseller Hosting vendors I checked with:

Don't take annual prepayment -- 12

Of the ones who take annual prepayment:

Won't take a domestic check for the annual prepayment -- 34

Of the ones who will take annual prepayment by check:

Offer no refund of remaining balance on cancellation -- 13

Now my data is skewed because I asked the questions sequentially so I never tablated the refund policies of vendors who did not take a check. It could very well be that all the vendors who declined checks also would not have refunded unused balances.

There's other skewing because I didn't bother with ultra low or ultra high cost vendors -- I was biased towards slightly above median priced CPanel equipped services.

On that note, I have to step away from this thread and go back to giving my employer the value for money they're entitled to...

Thanks all for your input, I hope I was able to contribute as much as you did.

Aza