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How to deal with unpaid invoices?

rynor

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Hi Fastlaners,

I'm curious your thoughts on the topic of your clients paying your invoices late. I know I'm not the only one that deals with this, so I wanted to see how others address it.

One of my client's who I do some consulting for one day a week has been late on paying my invoices twice now. He runs a small IT company and doesn't have anyone that handles the administrative duties/payroll/accounting and such, so he does it himself. Fair enough. Now, that'd be fine and dandy if he could keep track of everything and stay on top of it, but he's also busy micromanaging his employees (I used to work at his company as a W2 employee and experienced it firsthand), doing sales/biz dev tasks, and constantly taking vacations. Part of me gives him the benefit of the doubt, but the other part of me has no sympathy for his situation since he could easily fix a lot of his issues by delegating tasks. If I was in his shoes, I'd just hire someone to help me with it so I could focus on business development and other more important things, but I digress...

Anyways ,normally this kind of thing wouldn't bother me so much, but it does for two reasons: 1) I need the income and hate having to constantly send reminders, and 2) I've heard horror stories from some of his previous contractors who have reached out to me on LinkedIn. One guy told me that the CEO owes him $15,000 in unpaid overtime. Yikes.

I just sent him an email with screenshots of the unpaid invoices, essentially saying "pay me or I'm not going to work for you anymore", in the most professional way possible. The topic was top of mind, so I wanted to hear other people's takes on it.
 
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Sizemore

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One of my client's who I do some consulting for one day a week

Is this once a week consistent enough to set up automatic payments? Maybe try to talk this person into a weekly retainer to take the distraction off THEIR plate.

Otherwise that is pretty annoying and disrespectful (especially since you know this person). If you are spending a lot of energy on it, I would put that energy into getting new clients.
 

Get Right

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My personal favorite is to go to their office and sit in the lobby until they hand me a check. Take a book.

As you get more business, ask for a retainer fee to protect yourself (your time).
 
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My favorite solution to this problem is to start collecting money in advance. Work on a retainer, and when the retainer is about to be earned out, bill him for another installment. That way if he doesn't pay you, he doesn't get any work done.
 

broswoodwork

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My personal favorite is to go to their office and sit in the lobby until they hand me a check. Take a book.

As you get more business, ask for a retainer fee to protect yourself (your time).
I like this one. Can you you pop in for a "just wanted to grab that check and see how everything was going" visit?

I had a guy try to pay his balance in discounted exotic flowers once. That was F*cking weird...
 

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I'm late on some of my invoices. Usually when the company emails me about a late invoice I cut the check the next day. Is this guy not paying you after you ask for a late invoice? If so, I'd cut off billing any more business until the back payments are paid.
 
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Johnny boy

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Hi Fastlaners,

I'm curious your thoughts on the topic of your clients paying your invoices late. I know I'm not the only one that deals with this, so I wanted to see how others address it.

One of my client's who I do some consulting for one day a week has been late on paying my invoices twice now. He runs a small IT company and doesn't have anyone that handles the administrative duties/payroll/accounting and such, so he does it himself. Fair enough. Now, that'd be fine and dandy if he could keep track of everything and stay on top of it, but he's also busy micromanaging his employees (I used to work at his company as a W2 employee and experienced it firsthand), doing sales/biz dev tasks, and constantly taking vacations. Part of me gives him the benefit of the doubt, but the other part of me has no sympathy for his situation since he could easily fix a lot of his issues by delegating tasks. If I was in his shoes, I'd just hire someone to help me with it so I could focus on business development and other more important things, but I digress...

Anyways ,normally this kind of thing wouldn't bother me so much, but it does for two reasons: 1) I need the income and hate having to constantly send reminders, and 2) I've heard horror stories from some of his previous contractors who have reached out to me on LinkedIn. One guy told me that the CEO owes him $15,000 in unpaid overtime. Yikes.

I just sent him an email with screenshots of the unpaid invoices, essentially saying "pay me or I'm not going to work for you anymore", in the most professional way possible. The topic was top of mind, so I wanted to hear other people's takes on it.

I own a lawn care company so this is a problem I’ve dealt with before.

We used to send out invoices and customers would wait forever to pay, or hold our money hostage saying “I want it nicer” until we’ve spent far too long at a job site.

Get credit card info upfront.

Tell them they need to put down a very small deposit. Run their card and keep their card info on file. Have them sign up with you and on the sign up form is a payment authorization to allow you to run their card.

Then, when you’re done, charge them the full amount. The money is yours. Right away. No waiting. Don’t let people jerk you around and F with your cash flow. It’s up to you to decide when it’s done, not the arbitrary feelings of a customer.

We collect all card info and I just learned that some customers will try some sneak shit like waiting until their card expires until complaining so make sure if it’s recurring services to require an updated card before their current one expires. We use QuickBooks to run the cards automatically each month on the 1st.
 

Real Deal Denver

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I own a lawn care company so this is a problem I’ve dealt with before.

We used to send out invoices and customers would wait forever to pay, or hold our money hostage saying “I want it nicer” until we’ve spent far too long at a job site.

Get credit card info upfront.

Tell them they need to put down a very small deposit. Run their card and keep their card info on file. Have them sign up with you and on the sign up form is a payment authorization to allow you to run their card.

Then, when you’re done, charge them the full amount. The money is yours. Right away. No waiting. Don’t let people jerk you around and F with your cash flow. It’s up to you to decide when it’s done, not the arbitrary feelings of a customer.

We collect all card info and I just learned that some customers will try some sneak shit like waiting until their card expires until complaining so make sure if it’s recurring services to require an updated card before their current one expires. We use QuickBooks to run the cards automatically each month on the 1st.

I read on one of your posts Johnny that you're 22. Amazing. How did you get so on top of things? You're far ahead of the curve, but I know you know that, so just sayin...

I work with consumers directly doing legal work. I made it clear from the beginning that the consumer pays me the day I show up. No billing through the law firm - no waiting until everything is done and paying everyone at once - I get paid now. Cash. I don't take credit cards because I've heard too many stories of customers filing a protest and tying up the money in a dispute.

I don't chase money. I used to, and that got real old real fast. I have better things to do. I also do not deliver product until payment clears. If they want it faster - bring me cold crisp Franklins - no I'm not driving to pick up payment either - or do a bank transfer. Figure it out. I'm not in the collection biz, or the billing biz. I've lost a few thou being screwed in payments - never again.

You have to deal with this situation head-on. Ornery bull in the morning? No problem. Steaks on the grill tonight. Problem solved. Deal with it however you have to - but put this problem to bed now, once and for all. There are lots of fish in the sea.
 
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Andy Black

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Down tools till you get paid. I know someone with a sign in his office telling staff to “Down tools at the first sign of non-payment”.

I’m literally going through this with a big PR Agency I subcontract to in Dublin. I should have downed tools two months ago, but stupidly thought it was just them being disorganised.

Actually, I still think it’s them being disorganised, but someone there *chooses* to be that way. That someone would be the business owner imo. He/she chooses to be disorganised instead of paying clients on time.

I like the idea of sitting in a lobby reading a book. Even just arranging a visit to discuss late invoices could help. Later today I will send a short email to the accounts guys who have been giving me the run around, cc’ing the Digital Marketing Director who brought me on. I’ll ask for a meeting to discuss the late invoices and a meeting with the Director to discuss how we proceed in future.

When I was a member of the IMgrind forum one of the owners told the story of how a client owed him thousands. He sent the client a photo of his plane ticket as he was boarding the plane to visit hen. He landed and sent them a photo of a receipt for a firearm he purchased, saying he’s getting a cab now. The money hit his account before he got out of the cab.


Even if this agency pays in full I won’t work with them again.

“How you do anything is how you do everything.”

The business owner has *chosen* to not pay me on time.
 
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Johnny boy

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I read on one of your posts Johnny that you're 22. Amazing. How did you get so on top of things? You're far ahead of the curve, but I know you know that, so just sayin...

I work with consumers directly doing legal work. I made it clear from the beginning that the consumer pays me the day I show up. No billing through the law firm - no waiting until everything is done and paying everyone at once - I get paid now. Cash. I don't take credit cards because I've heard too many stories of customers filing a protest and tying up the money in a dispute.

I don't chase money. I used to, and that got real old real fast. I have better things to do. I also do not deliver product until payment clears. If they want it faster - bring me cold crisp Franklins - no I'm not driving to pick up payment either - or do a bank transfer. Figure it out. I'm not in the collection biz, or the billing biz. I've lost a few thou being screwed in payments - never again.

You have to deal with this situation head-on. Ornery bull in the morning? No problem. Steaks on the grill tonight. Problem solved. Deal with it however you have to - but put this problem to bed now, once and for all. There are lots of fish in the sea.
Haha much thanks. I am ahead of others because I waste no time lying to myself or caring about what others think.
 

Roli

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Hi Fastlaners,

I'm curious your thoughts on the topic of your clients paying your invoices late. I know I'm not the only one that deals with this, so I wanted to see how others address it.

One of my client's who I do some consulting for one day a week has been late on paying my invoices twice now. He runs a small IT company and doesn't have anyone that handles the administrative duties/payroll/accounting and such, so he does it himself. Fair enough. Now, that'd be fine and dandy if he could keep track of everything and stay on top of it, but he's also busy micromanaging his employees (I used to work at his company as a W2 employee and experienced it firsthand), doing sales/biz dev tasks, and constantly taking vacations. Part of me gives him the benefit of the doubt, but the other part of me has no sympathy for his situation since he could easily fix a lot of his issues by delegating tasks. If I was in his shoes, I'd just hire someone to help me with it so I could focus on business development and other more important things, but I digress...

Anyways ,normally this kind of thing wouldn't bother me so much, but it does for two reasons: 1) I need the income and hate having to constantly send reminders, and 2) I've heard horror stories from some of his previous contractors who have reached out to me on LinkedIn. One guy told me that the CEO owes him $15,000 in unpaid overtime. Yikes.

I just sent him an email with screenshots of the unpaid invoices, essentially saying "pay me or I'm not going to work for you anymore", in the most professional way possible. The topic was top of mind, so I wanted to hear other people's takes on it.

I used to use a trick that never failed.

On all invoices put a 7 day payment rule in your invoice terms & conditions. Then add a standard "you have to pay me 1.2% a month if you don't pay on time"

Then when they pay late, email their accounts department and (politely) ask if you should make out the extra invoice to the same person/dept/whatever.

Every time I did this, I was paid immediately.
 

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money upfront. reminder series for overdue invoices. build bad debt into your budget.
screen your customers better (money upfront on first projects). normal part of business.

on the flip side. we've been late w/ vendors. we explain why (maybe we are waiting to get paid) and ask them to hang in there with us.

went 400+ days waiting for GM to pay one time ......
 
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Dan_Cardone

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If you send out late notices, on the second late notice make sure you indiciate, in big bold red letters, that a copy of this late notice was also sent to your attorney.

Watch how fast they pay.
 

rynor

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I'm late on some of my invoices. Usually when the company emails me about a late invoice I cut the check the next day. Is this guy not paying you after you ask for a late invoice? If so, I'd cut off billing any more business until the back payments are paid.

on the flip side. we've been late w/ vendors. we explain why (maybe we are waiting to get paid) and ask them to hang in there with us.

See... I can fully understand that. Prompt response and/or offering a reason why is perfectly acceptable to me. But here's how it usually goes down: I send the invoice with NET15 terms per our original agreement, the 15 days inevitably end, and then I send the daily reminders for multiple days straight. No explanation/apology. Every. single. time.

I know how the this guy operates and I've heard the stories about him not paying his contractors/vendors, missing payments, etc. I used to work with him and about 5 other people in a small, cramped office, so nothing was really a secret.

It bothers me because I'm never late on anything. I hate having debts held over my head, so I will pay them the day that they are due or even before, and move on. I probably shouldn't be holding others to that high of a standard, huh?

Guess I'll be stopping by the office soon.
 

ZCP

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then charge him more to help 'finance' his business and be clear on it ....
sounds like you think putting 'net15' on a piece of paper and emailing it makes it be...

what about if the company has an accounting rule to pay in 46?

you need to iron this out w/ your client!

you are looking at it only from your point of view instead of as an opportunity (or a wake up call)
 
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Rawseed

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When I was a member of the IMgrind forum one of the owners told the story of how a client owed him thousands. He sent the client a photo of his plane ticket as he was boarding the plane to visit hen. He landed and sent them a photo of a receipt for a firearm he purchased, saying he’s getting a cab now. The money hit his account before he got out of the cab.

Lol. That's even better than a horse head in the bed. I love it.
 

Dianne Cohen

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Hi Fastlaners,

I'm curious your thoughts on the topic of your clients paying your invoices late. I know I'm not the only one that deals with this, so I wanted to see how others address it.

One of my client's who I do some consulting for one day a week has been late on paying my invoices twice now. He runs a small IT company and doesn't have anyone that handles the administrative duties/payroll/accounting and such, so he does it himself. Fair enough. Now, that'd be fine and dandy if he could keep track of everything and stay on top of it, but he's also busy micromanaging his employees (I used to work at his company as a W2 employee and experienced it firsthand), doing sales/biz dev tasks, and constantly taking vacations. Part of me gives him the benefit of the doubt, but the other part of me has no sympathy for his situation since he could easily fix a lot of his issues by delegating tasks. If I was in his shoes, I'd just hire someone to help me with it so I could focus on business development and other more important things, but I digress...

Anyways, normally this kind of thing wouldn't bother me so much, but it does for two reasons: 1) I need the income and hate having to constantly send reminders, and 2) I've heard horror stories from some of his previous contractors who have reached out to me on LinkedIn. One guy told me that the CEO owes him $15,000 in unpaid overtime. Yikes.

I just sent him an email with screenshots of the unpaid invoices, essentially saying "pay me or I'm not going to work for you anymore", in the most professional way possible. The topic was top of mind, so I wanted to hear other people's takes on it.

Is there any way for you to get paid ahead of time or upon/before delivery? I know in some industries that is difficult. But I've dealt so many times with the late payment that I would not "deliver" until I get paid.
 

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Agree with @Andy Black, if you can't get paid in advance, at least stop working until it's made current.

If you want to add icing to the cake, add a startup fee every time work had to be ceased and re-started due to a delay in payment.

We'll be adding a clause moving forward that if your account is delinquent (which will be defined), we don't work until we're paid. We usually do pay-in-advance services anyway, so I've only run across this a handful of times, but it takes way too much energy away from actually running the business.
 
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ChrisV

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I did web design a while ago. I would just shut down their entire site until they paid me.

So glad I don't have to deal with those types of clients anymore.

My solution is to just work with super high quality clients.
 

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First step is to stop doing any work or delivering work to this guy.

Not much else you can do other than keep following up with them.

In the future never work first. Get paid a retainer for your work. If they don't pay, you stop working.
 

Andy Black

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What’s the first thing we do when we realise we’re digging a hole?

Stop digging.


@rynor ... Have you downed tools? Have you told them you’ve downed tools until you get paid (I’m whatever language works for you)?

What will you do to get caught up on those outstanding invoices?

What will you do to prevent this happening again? With this client or with future clients?


A nice phrase that I keep top of mind:

“Money can’t be in two places at once.” (Blaise Brosnan)

When the money is in their account then it’s not in your account.

Are they actually a client if they’re not paying you?
 
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I own a lawn care company so this is a problem I’ve dealt with before.

We used to send out invoices and customers would wait forever to pay, or hold our money hostage saying “I want it nicer” until we’ve spent far too long at a job site.

Get credit card info upfront.

Tell them they need to put down a very small deposit. Run their card and keep their card info on file. Have them sign up with you and on the sign up form is a payment authorization to allow you to run their card.

Then, when you’re done, charge them the full amount. The money is yours. Right away. No waiting. Don’t let people jerk you around and F with your cash flow. It’s up to you to decide when it’s done, not the arbitrary feelings of a customer.

We collect all card info and I just learned that some customers will try some sneak shit like waiting until their card expires until complaining so make sure if it’s recurring services to require an updated card before their current one expires. We use QuickBooks to run the cards automatically each month on the 1st.
I was going to say the exact same thing. I keep the credit card information on file for people that are doing recurrent billing. There is software that will automatically charge the customer if it is the same price each week/month/ etc.
 

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As @ZCP said, budget in bad debt. It is something that is just apart of doing business.

Collecting payment upfront or setting up a card on file is a must, and if you get objections, always offer some form a guarantee to help ease the customer. It should be a win-win for both parties. If they are skeptical even with a guarantee, they're not a good fit and can go elsewhere.

When I first started and was only handling 30-50 transactions a month, I didn't have any bad debt, but once I started cranking out and doing more volume, it started popping up here and there.

I have a monthly service package and process over 400 transactions every month automatically. Every month without fail, I have a dozen or so credit/debit cards that decline as the number was changed, or it expired, or insufficient funds. I send out an email/call them and get a new card to put on file. Most people give me new card info with an apology, but some just will go ghost and the money is gone. Services are terminated when the balance go overdue, nobody gets any work from me if they have an overdue balance.

For the work I do that isn't monthly recurring billing, we require a card on file and a % payment up front. Sometimes, people will pay the deposit and then change their cards to try to get one over on you. This doesn't really happen at low volume, but when you're doing high volume it's just going to happen, there's some shitty people in this world. Anything under $500 isn't worth my time to pursue and try to collect beyond sending out some emails. Any work I do that's over $500, I have a method to reposses the work I did in the result of a credit card bouncing and them not paying.

I keep bad debt at around 1% of my gross revenue. If it goes down, great. If it goes over 1%, I put more effort into collection actions.
 
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Andy Black

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Tips from my accountant:

Emails aren’t enough. Ring them. The person who shouts loudest is the one who gets paid.

I had rung a couple of days ago asking to be put through to the name of the guy in accounts. The receptionist came back to me and said “He’s in a meeting, can I take a message.” Yeah, right.

It’s in my calendar as a recurring reminder to ring every day now.

Go to their office. Bring copies of all the invoices (because the first thing they’ll say is they don’t have them). Ask if there’s any reason they’ve not been paid.

Bring your kids. They don’t want kids in their reception. The kids are on school holiday and I might have to take them anyway.

My accountant offered to come with me - so I could tell them my accountant would be coming with me, and so the two of us can sit in reception.

Keep a note of all the communication, calls, visits, etc.

Send a final email saying you’ll have to speak to your solicitor (lawyer) next.

Then speak to your solicitor and/or get a debt collection agency involved.

I’m expecting it won’t need to go that far, and that this is their MO for doing business.

Funny though, they’re a PR Agency and I’ve already warned a couple of contractors who were going to work with them that they’re late payers and to make sure they get paid on time.
 

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We had a well known motorcycle manufacturer want some customised promotional products off us several years ago. They are an historic brand dating back to 1898 so we manufactured the goods and sent them out. Took something like 3 months to get paid when our terms were 30 days. They did the same on the next order. I ended up chasing them for weeks and kept getting the run around (they had serious financial issues at the time we learnt through the trade press).

On their next order they called us a week later wondering where their products were as the dealerships had all run dry. We simply told them due to their poor payment history they no longer had a credit account and all goods had to be paid for in advance before manufacture. Within 24 hours the money was in our account.

Sometimes you have to play hardball especially when it's their issue and they need you.
 

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I had this happen to me a few times.

The main tip I would give is to remove any emotion from the entire process. You can sense OP's frustration and anger with his customer. That's not going to make it easier.

I'm sorry but going to sit in the lobby is a low-status move. Really, your time is worth so little you can afford to sit in the lobby for a few hours? Not to mention that it's bordering on stalking/harassment.

Automate the process and remove all emotion.

Designing your invoice collection should be a part of your business design. Every process should be described and made objective. In this case, make sure that your invoice collection is described in the terms of your contract. Make sure you tell them this before they sign.

If they don't pay after the invoice is due, in phase 1, stop work, send an email and call them up.
If they don't pay 15 days later - send a more urgent email
15 days later - stern email and threat of legal action
15 days later - legal action - a letter from a lawyer's office.

All these emails are written out in templates - from very friendly to extremely serious. Just follow up and gradually escalate and work on other clients in the meantime.

My brother is a lawyer and his office is specialized in invoice collection - his fee is 10% of the amount recovered from the client. Pretty cheap price to pay if you ask me.
 
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Guest-5ty5s4

Guest
On large projects, a great trick I have seen on (very, very) late/past due invoices is this...

Book another project with the same customer (the more urgent, the better).

Complete the project on time.

When they are ready to receive the final result hold the finished product until they pay you all of the money they owe you from before.

Works every time.

(a less aggressive alternative is to just say you can't do any more business with them until they settle their past due debts. But less aggressive = less effective)

But yeah, if they are already in violation of the past contract terms - as in, they never paid you (!!!) - you have negotiating power.
 
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Equilibrium

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I will chase debts off the planet.
I won't even care if it's a loss at the end.
Why? In the long term no one wants to screw me over.

Often I have people picking up devices.
They get the device with a pin, which is in a safe, which they get by paying the invoice.
No pay? no device.

Other services are paid electronically up front.
I don't talk with people who don't fill out my qoutes form for one reaosn.
before you can talk, you have to accept a small line (in your face) that asks if you agree or deny payment.
Click deny we don't talk I don't care. Click agree and I can and will use that in court.

Payment before services.
And my rep as not letting someone get away with it is worth more to me than the bill.
 
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