Discussion on:

How to get paid on time

... that you use to exact timely payment?

I am having a heck of time getting paid from most of my
clients. I do good work and respond very quickly to their
issues but everyone one of them takes their time. I don't
have a payment agreement or anything. All I do is put
Payment Due on Receipt on my invoices but that apparently
isn't enough. I even take credit cards.... LOL... good
article... I devoured it... might take that approach about a
discount for fast payment....

Thanks for the kind words, rdubrey. I've found that if you say that it's due upon receipt, they don't believe you. Most businesses operate on a 30-day payment cycle, so they'll assume that -- but since you didn't state it, they don't even take that interval seriously.

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We always invoiced as "2% discount if paid within 5 days, net 30 days". Many larger companies have a mandate for their CFOs to take discounts wherever available and penalize them when they don't. We usually got paid promptly, even if the customer was having cash flow problems.

Reading this article, I am left wondering...

"What consultant would do business this way?"

Every single professional services firm I have ever worked with when I was a full-timer required a retainer. its no surprise that now as an Independent I require one, each month, up front based on the expected billing hours. So If I'm doing a staff augmentation project (see consultant working as employee) and its 40 hours a week, an 80 hour retainer is at hand. By paying a retainer, it keeps the Accounting dept. in good practice of sending you your checks. Since they "can't" be late as at least some money will always come at the first of the month you will often get paid in 1 week or so.

My advice, as a consultant, do not work for people that do not respect you.

And if you're not good enough to command this respect, then do something else. The fact you have to play banker/accounts receivable is an insult. I think you need to re-do things Chip. You're billing policies should come into line with your other article about much to charge. Your attitude there was on point- this time its just insane we are even talking about this...

Good thought. All of my accounts are on a fixed fee, quarterly payment basis. This allows them to know in advance what payments are and I can work free and clear of issues. These are the extras I include...

Six free emergency service calls. That is the sales cookie that keeps the contract sweet, the proverbial spoonfull of sugar.

Allowance for unusual situation or new projects that are not standard for the year gone by. These are what I can bill hourly rate for and do so.

One client put in a new retina scanning system that was a new install (I could bill for that) and, later, a visual actuity program that required new monitors (Dell was terrific on quotes) and and software (which was all new and unusual so I could bill for that too).

So, I have
Annual retainers
Six free visits, that's it for the freebie.
Unusual projects - billable
Emergency visits - billable after the six.

Many of my clients are very sporadic in their work-load. I might get 20 hours from them one month, and only a 15-minute phone call the next. I've considered getting a retainer from my more regular clients, but actually those aren't the ones that give me any grief over payment.

I do a 10 net 30 for my business clients and have rarely had a problem getting paid on time even though many of my clients are small businesses which are already in trouble (my best refferer is a lawyer who works only with financially troubled small businesses). If they can't pay the full amount in cash but make something or provide a service I can use, I tell them to pay what they can and I take the rest in product or service. As long as I can pay my taxes, my help and have enough for my needs it works.

The only real problem clients I ever had were nonprofits who seem to feel that they're entitled to my services for free because I'm a filthy profiteer making money off the backs of the poor etc. Nonprofits pay 30% of my estimated bill up front or I don't even start.

...they do tend to have attitudes. However, the reality is that most are little different from any corporate client, and usually less efficient. The only difference structurally is that there are no "shareholders" or "retained earnings". Other than that, they exist like most companies do; mainly for the benefit of those working there.

Once I was bidding out a job for one; the guy I answered to was quibbeling on the price of the hardware I was selling; This guy, who I knew made at least $50/hr spent litterally a week of his time shopping out the hardware, and was trying to beat my price down by $50 on each unit. (which was pretty much all I was making on the deal) Basically, this guy cost his organization $1000 of his company's time to try to save a few hundred bucks. But when you have no profit to show, nobody seems to notice or even care.

I know this is somewhat off-topic, but...

Sometimes late payment(s) are symptomatic of an understaffed or inefficient Finance department. I know at least one company with an annual 1 Billion+ in revenue that has good people in the department, simply nowhere near enough of them.

I work in that company - in IT, not Finance - and I get the calls from vendors asking where their money is.

Considering that my office was next to Finance and knowing I saw the AP folks in until past 2100 hours almost every night (me too, obviously), I'd say they didn't have a chance in hell of doing things right or in the right way. Overhead strikes again!

I.e., the squeaky wheel gets the grease...

I've never been a freelancer, but my wife has. In her case, most of the time clients paid reasonably quickly, so she was patient when they didn't. Word does get around about clients: one trainer I know quietly charges higher rates for clients with a reputation for being slow payers...

The most extreme hard-nosed policy I ever heard of was a trainer who is sufficiently prominent in a specific field to get away with a simple policy: travel arrangements must be handled in such a manner that he never needs to use his personal credit cards for any business-related purpose, and the class does not begin before he is handed a check for the fee.

I have been using the "discount for prompt payment" strategy for over 10 years. It's not perfect, but it works far better than any other I've tried.

Dan Covill
San Diego

I once offered a large client 5% off if they paid within 30 days. They took the discount and paid late anyway. That was the last time I tried that little trick.

A sucessful professional relationship us built on trust and respect. Pulling a chicken#%$@ stunt like taking an early payment discount when not paying is simply dishonest and disrespectful. No "big" or "professional" company would tolerate that. We as independant consultants should not either.

Clients that do not pay are not worth the trouble. And I am not a bank. Clients who "take their time" paying me ultimately see that reflected each year when I re-evaluate my rates. I have some clients that literally ask me to send bills sooner than my regular cycle; they get the "A" rate. I've go others that lag months behind. They get the "D" or "E" rate, which more than makes up for whatever interest I might otherwise be making from that money.

And why be so wimpy when payments do not arrive? Forget the "Um, your check must be lost in the mail" nonsense. Be polite, but let them know in no uncertain terms that non-payment is not acceptable. Not paying you is not respecting you. I assure you; their other vendors got paid on time. And if you tolerate this behavior as routine, then I don't think you respect yourself enough either. (It took me at least a decade in this business to figure that out) Consultants who allow themselves to get walked all over usually get walked all over. And I totally reject the "We're a small business and have a hard time" argument. Hey, I'm a small business, and I've got bills to pay too. And I assure you that my vendors don't tolerate payments being a single day late without some form of retribution!

Read my post too. its a hedge from this crap!

My clients always pay me on time, sometimes in early advance if I so request. My methods are simple: follow the ancient, forgotten law of IBM.

Respect for the employee (client staff)
Go the extra mile to do a thing right
Spend alot of time making the client happy.

Next, if I have an unexpected bill, I arrange it so that something looks free or like a cookie. Clients like to think they got something for free and if it is no real skin of my back to do so = a happy client and a paid invoice on time.

I also schmooze with the client, spend time when necessary talking with staff and owners on whatever subject at hand - buy them coffee cake and maintain a cheerful attitude.

Humor: important, do not take everything seriously or the consultant and client will go crazy.

Many of the problems getting paid are solved if the consultant or service provider behaves and appears as a 'professional'. Some examples:

1. NEVER work 'on-spec' in the hopes that if you do something as a 'free sample' or 'proof of concept' that the client will be so impressed as to eventually agree to pay for it. This rarely ever happens. Spend time on paying work or marketing activities only.

2. Sorry in advance to all Australians, but I've been burned several times from Australian companies and individuals who take the work then stiff me on the payment. I suppose they figure (rightly so) that they are far enough away that there is nothing I can do about it. In most cases they are right -- and the costs involved to recover the debt would be greater than the debt itself. Use care when doing work for very remote clients.

3. Prepare and have he customer sign (or otherwise acknowledge and agree to) the terms of the project and statement of work to be performed. This should clearly spell out fiddly details like the scope of the work and rates for out-of-scope work, invoicing and payment terms, etc.

These kinds of things tend to demonstrate that you are a PROFESSIONAL (worthy of being paid!)

After the approved time sheets, invoices were mailed and held back by the vendor. After several emails and telephonic reminders the vendor would not budge and would not make payment. A legal notice is sent asking for the payment. Still the vendor will not make payment. Now they are are asking about mediation . Would that solve the problem and araange payment ultimately?? Any other suggestion , in addition to the foregoing??
Rashed

I am surprised that you don't talk about getting paid in advance. All of my clients give me prepaid blocks of time. Usually between 10-30 hours. When the block gets below 5 hours, I send a detail of the hours and ask for another block. It's the only way yo go.

... but it's not a half bad idea. I wonder if I could spring that on my clients?