Five tips for getting clients to pay

Getting clients to pay can be the bane of work for consultants. But by following these five tips, you'll keep the cash flow steady.

Working as a consultant means you’re the boss. It also means, at least when you’re starting out, that you’re the billing department. Mishandled billing can spell disaster for your business venture. To keep the cash flowing, follow these five tips for making sure you get paid on time—or at least close to it.

Tip 1: Know whom you’re going to work for
Be careful whom you do business with. When you’re starting out, it’s tempting to agree to do work for anyone, but resist this impulse and do due diligence before starting a job. This effort can pay off big time when it comes to getting paid.

The first step is to evaluate clients thoroughly before you make a decision. A good way is to meet them at their office. Your first impression will give you a chance to follow your instincts. Even if you can’t gauge a client’s digs, consider the size and stature of the company. Is it a startup with no Web site, no landline phone number, and no real way of proving its worth? If so, potential compensation could be a problem. If you believe the company is solid, consider an agreement that pays some of the fee up front as a show of good faith.

Tip 2: Bill on time
Once you take on a project, make sure you send your invoices out in a timely manner. Create an invoice that looks as professional as the rest of your work, and send it within 12 hours of completing a job to the client’s satisfaction.

Word and Excel have plenty of templates you can use to create an invoice. Just be sure that each invoice you send has a unique number and that it accurately describes the work performed. The invoice should contain all the required information: the word INVOICE at the top, your federal company ID number or Social Security number, and your vendor number, if the client has assigned you one. A lot of consulting fees get held up by incomplete documents, and you want to make the payment process as smooth as possible for the client company.

From the beginning, know the person who handles payments in your client’s company so you can send the invoice to the attention of the correct person. Always reference your client if he or she is not the one who will process your payment. That way, the accounting team will know where to go if they need information about your invoice.

Tip 3: Don’t make assumptions too quickly
If you don’t receive payment on time, give the client the benefit of the doubt for a few days. Then follow up with the company’s accounting department. Be pleasant and courteous, and ask what the payment status is. Anger and nastiness won't speed up your payment and will only make future contact unnecessarily stressful.

If you aren’t getting anywhere after repeated phone calls, and the payment is over a month late, talk to your client. If you’re dealing with a small business that has no accounting department, I recommend waiting at least two weeks before initiating a call that should essentially be a friendly reminder: “I just saw a note on my assistant’s desk with a list of overdue payments. If you get a notice in the mail, don’t worry about it—I know you’re going to pay me. We just have a standard policy to send out notices to overdue clients.” This is a low-key way to remind the client that you’re aware of the debt. Often, a check will come within two days of such a phone call.

Tip 4: Establish late fees, penalties up front
At the start of any project relationship, make sure your client understands that you charge late fees for delinquent accounts. Your invoice paperwork should indicate this information.

Be certain that your written agreement or contract clearly states that all accounts not paid within terms are subject to an X percent monthly finance charge. Include that statement on all of your invoices and make sure your terms are also clearly marked. Some states have limits on how much you can charge in late fees. Find out more about these legalities at Nolo and Findlaw.

Tip 5: How to handle a deadbeat client
If, despite all your professional billing approaches, the client still hasn’t paid, it’s time to send a formal debt collection letter before you turn the matter over to a collection agency or take the client to Small Claims Court.

While you're legally allowed to send such a letter, you must also comply fully with the law, so again you need to do your homework. You can’t, for instance, threaten violence or physical harm to your client or the client's property. You can’t send a letter full of obscenities, claim that the client owes more than the actual amount, pretend that you’re a lawyer, or threaten any action that you do not actually intend to take, such as garnisheeing wages or reporting the client to a credit agency.

To help make sure your collection letter has the right tone, I’ve provided a sample debt collection letter, shown in Figure A. This one is generic enough that it should be legal in all 50 states. Check with your attorney if you have questions or if you make modifications to the letter.
Figure A

John Doe Consulting
ABC Expressway Drive
Watchamacallit, WI

September 1, 2003

Client Company
123 ZZZ Drive
Fuggetaboutit, IL


This is to inform you that there is an outstanding balance of $______ owed by


Goods or services were provided on ___________________, and accordingly the bill became past due on___________________.

The account is in serious arrears at this time. This letter serves as your notice that we intend to proceed and pursue all legal means necessary to recover the debt owed. Please remit payment at once to avoid further action.

[signature block and title]

For many consultants, the billing and invoicing aspect of a business can be a boring and tedious task, but don't put it off. If done right from the start, it won't become a major burden. As these tips illustrate, it’s also worthwhile to talk with a legal professional about business laws and legalities.

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