How to Get Paid on Time

Get-Paid-First

The graveyard is filled with businesses that had cash flow problems.

If you’d like to avoid ending up with the same fate, make sure you’re not committing this classic consulting sin.

The reason most consultants don’t do this is because they are too scared to ask their clients.

Consultants ask me all the time, “my client was supposed to pay me a week ago, and they haven’t what should I do?”

That “one week” becomes two, sometimes three, six or more…

There’s a simple way to make sure this doesn’t happen to you – get paid up front.

That’s right; tell your client that you take payment at the outset of the project.

If you can’t collect 100% of the payment at the start, take no less than 50% (or 1/3 paid out evenly over the project at minimum).

The idea here is that you shouldn’t be doing work unless you’ve been paid for it.

The reason most consultants don’t do this is because they are too scared to ask their clients.

Afraid their client might think they are too demanding or simply might say no.

Clients rarely do that.

You need to shift your mindset.

And if you’re dealing with a client right now that isn’t paying you on time and has told you they need more time, tell them that’s not acceptable. That you did the work as promised and you’d like them to honor their part of the agreement. If you don’t stand up for yourself, no one else will.

Get paid, and get paid on time.

If you’d like more information about dealing with client payments and to learn how to set and increase your consulting fees check out the Consulting Fees Guide.

  • Joseph Ellman

    Michael, excellent post, as always. I typically use the 1/3 plan and have had good luck with it. I enjoyed this component of your course.

    Joe

  • Vinay Tannan

    Hi Michael, great post. What are your thoughts on building late fees or interest into your consulting contracts for overdue payments?

    • Vinay – nice to have you here. You can include them, but why not structure your agreement so that late fees and penalties won’t be necessary. If late fees are going to be necessary, you probably don’t want to work with that client. If you do include them, make them reasonable as you don’t want that to be a turnoff and potential deal breaker (as a surprise in your proposal).

      • Thanks Michael for the quick reply. I think the ideas you’ve presented here make sense in some cases, but there are instances where it might be difficult to get paid (in part or in whole) upfront, e.g. where the project scope is largely unknown; where billing is strictly by the hour; where it is subcontract work and the contractor can’t afford to pay until their client pays; etc. I think one could still explore upfronts or retainers even in these cases, but there’s also a place for late fees or interest in the situations where those wouldn’t work. In my experience, there have been good clients that were late to pay due to some unforeseen circumstances and the late fee provisions might have made the collection process more straightforward.

        • Vinay – I don’t recommend getting involved in a project without clear knowledge of the scope and I recommend against hourly fees wherever possible.

  • RikkiyahM

    Hi there! I’m new here and I’m finding everything to be extremely helpful, THANK YOU!! I do have a question,though. I recently started consulting for money (i did this for free in my spare time for a long while, shame on me). I took a consulting project two weeks ago with a mid-size org via referral from a former coworker, who works for my client and is my contact. I haphazardly agreed to a fee well below even my “normal gig” rate and started working immediately. Last Friday, I submitted my first invoice for work performed that week (which has not yet been paid). As I begin building my structure, I want to bill 50% of my charges up front with a payment schedule for the balance, to be paid in full by the completion of the project. I want this new client on that program asap and the invoice I’ve drafted for tomorrow reflects that (its for 50% of the total project plus 1/2 of the balance as its a 5 week assignment).I have a touching-base call with the client tomorrow morning and I intend to explain my new billing schedule then, before submitting my invoice. I’m so incredibly nervous! Am I doing the right thing? Any suggestions for delivery?

  • Bongie Geniston

    Hi Michael, I am planning to start my own consulting firm here in the Philippines, Do you have any sample of contracts that I can see? and how much they gonna pay me? thank you Michael!