If you’ve owned a business in another country or seen firsthand how a foreign business is managed, you may be surprised at some of the business practices which are common in Israel.
One of the most surprising (and challenging) aspects of doing business in Israel is the concept of shotef plus – delayed payment. Many organizations and businesses don’t pay immediately upon receipt of an invoice. In 2017, a law was passed in the Knesset requiring most institutions and businesses to pay up to 45 days from receipt of an invoice. If you expect payment sooner, this should be included in your service agreement/contract, but don’t be surprised if you are told that the institution simply can’t pay earlier. These payment terms are usually based on cash flow issues (i.e. they are also being paid late), so you may have to accept these terms if you want to work with certain clients.
Acceptable forms of payment are cash, bank transfer and checks. Checks have become less popular in recent years and they aren’t worth the hassle if you can avoid them. Your clients may want to pay with Paypal, Paybox or Bit. Check fees and ease of use to decide which of these you choose to accept. You can also sign up for a paid credit card processing app and accept payments through it. Keep in mind that the easier you make it for clients to pay you, the sooner you will receive the money.
Becoming a Supplier
If you supply services or goods to another business, they might ask you for your Nikui Mas BaMakor and Ishur Nihul Sefarim. The Ishur Nihul Sefarim states that you keep your books according to the regulations of the Israeli Tax Authority. Nikui Mas BaMakor instructs the paying entity whether they are required to withhold tax and at what percentage. These documents can be obtained from your accountant or via the Israeli Tax Authority website.
In keeping with the informality prevalent in Israeli culture, business culture can be pretty informal too. Clients often prefer to communicate via WhatsApp or Facebook Messenger and some eschew use of email entirely. If you find that this way of communicating wreaks havoc on your business processes and organization, consider signing up for a task management system. There are lots of free options out there, and you can keep everything organized in one place, regardless of the form of communication utilized by your clients.
Haggling over price is a time-honored Middle Eastern tradition and Israelis are well-versed in the art. You can choose not to work with clients who bargain or you can quote a higher price and expect to lower it in negotiations. In either case, you don’t want to lower your price below what your work is worth or to an amount that doesn’t leave you enough profit after taxes and expenses. A strategy that reduces the chance that a client will haggle is to let them know what they are getting for this price so that suddenly the amount seems low.
Meetings at coffee shops are totally acceptable in Israeli business culture. It’s understood that you may work from home or have an office space that’s not set up for hosting and your client or colleague may be in a similar situation. Etiquette requires that if you are the one who has asked for the meeting, you pay for the drinks or meals. Location should be closer to the person who was invited to the meeting and the initiator should check about dietary restrictions, including kashrut, before choosing a cafe or restaurant.
Most clients will ask you for an invoice before they send payment for a service. An official invoice is called cheshbonit mas, and it obligates the business owner to pay VAT once issued. Therefore, many business owners will send a “drishat tashlum” or “cheshbon iska” which is not an official document, in order to avoid getting stuck with a VAT expense before receiving payment. However, your client may fear making a payment and then getting stuck tracking the official cheshbonit mas. They are allowed by law to request the official, numbered cheshbonit mas before issuing payment and you must provide it.
Some clients are prompt in their payments but others may need a little nudging. Sometimes clients will even ask to pay in installments or reduce the payment that was already agreed on. Stand firm when necessary and choose clients wisely to avoid these issues as much as possible.
Once payment is made, if you are an Osek Patur, a receipt (kabala) is issued. If you are an Osek Murshe, you will need to issue a cheshbonit mas, which is a legal document and must be numbered. The ORIGINAL is what has value, so when using officially printed books the original document must be given to the payee. A digital copy is not enough for the payee to claim the VAT back on the expense.
In many cases, especially when funds are exchanged at the time services are provided, these documents are issued together in what’s called a cheshbonit mas kabala.
If you are using an electronic invoicing system, it’s easiest to create the payment request in the system and transform it into a receipt once payment has arrived.
Receipts are legal documents and it’s important to use a government-approved electronic system or an official printed booklet. Clients generally prefer to receive receipts electronically, so if you use a printed book, take a picture or scan it to send immediately and then send the paper one in the mail afterwards.
Professionalism and Extenuating Circumstances
In some countries, the lines between work and life are sharply defined, but they are a bit blurrier in Israel. Business owners may tell you why they can’t provide a service as quickly as they usually do – for example, they are taking a vacation, their baby is sick or they are dealing with a family crisis. It is assumed that you will be understanding, and that, if your project isn’t urgent, you will wait a little longer. If you feel comfortable, you can also let clients know how life events affect your productivity. Constant excuses won’t go over well, but an occasional hiccup is understood and accepted.