Clients who demand service (usually same-day service) yet drag their feet paying your invoices is a perplexing though common problem for many IT consultancies. It should be easy for IT consultancies to protect profitability by ensuring they only service paying clients, right? Unfortunately, it's easy to get caught up in the chaos and stress of a typical day, and then find out that you just ran up $249 in service fees deploying a $1,200 system for a client who is 90 days past due on their $5,200 invoice.
Slow-paying customers are to be expected in IT consulting, but non-paying customers must be eliminated from your client list. Here are three suggestions on what to do the next time a client with an overdue balance calls your firm asking for assistance.1: Insist clients pay outstanding invoices before responding to new service calls. When a client with an overdue balance calls with a fire drill, you should refuse service until your office receives payment in full. It may feel opportunistic and callous to remind the client you need to be paid before addressing or solving their issue, but your office won't be around to service any clients if you can't keep the lights on.
Remind the client they have bills outstanding, and then discuss what can be done to address their problem. Maybe they can agree to have the payment when you go onsite to fix the latest problem. If the client says you can charge their bill to their credit card, you should get their approval in writing before dispatching an engineer or providing remote support.2: Refuse to order equipment until a payment is received.
A client who owes your business money calls promising to enrich your office with a new project that requires the purchase of new servers, workstations, or equipment. You should not order the equipment until you receive a full payment or at least a deposit on the equipment.3: Reserve the right to disable systems and recover equipment in the event of nonpayment.
Some IT consultancies are building even more aggressive protections into their terms of sale and service. For instance, it may prove appropriate on occasion to reserve the right to remotely disable systems, servers, and routers, and even physically repossess equipment if full payment isn't made within a specific period of time.
The catch is you must get the client to sign an agreement providing your consultancy such rights before the equipment or services are provided. Also, before taking this approach, you should check laws and regulations in your locale.
If you have found other methods that work well, please share them in the discussion.
Erik Eckel owns and operates two technology companies. As a managing partner with Louisville Geek, he works daily as an IT consultant to assist small businesses in overcoming technology challenges and maximizing IT investments. He is also president of Eckel Media Corp., a communications company specializing in public relations and technical authoring projects.