So you are learning how to start a consulting firm. Good for you! Hopefully, you will make many sales, and find lots of clients to bolster your income.
Of course, if you do not stay on top of invoicing, success might not come as smoothly.
I wanted to give you a few business tips to make invoicing, and keeping track of accounts receivable, a little bit easier:
- Appoint one person to handle invoicing. If you are a one-man show, you will either have to tackle this yourself (possible in the beginning, but not long term) or hire an assistant, or outsource the task.
- Make sure your consulting fees, costs and how they are calculated, are crystal clear from day one. By including specific terms of sale in your contract, you mitigate the risk of problems later on. Rather be too specific than too vague!
- Keep track of time spent on a project, specifically if there is more than one consultant on a project, or if you are being paid per hour. Not charging for billable hours could cost you a lot of money.
- Expenses should also be carefully tracked, and remember to enquire from the client beforehand which expenses, if any, they will cover! Its actually vitally important to know this BEFORE you price, so that, if necessary, you can include it in your rates!
- Invoice as soon as possible. Your clients may have specific payment cycles, that delayed invoicing will interfere with, not to mention that the longer you leave it to invoice, the longer it will be until you get paid.
- Always number your invoices. This simple measure makes the whole process much easier to manage. And maintain consistency in invoicing – do not use random numbers – stick to a system.
- Whenever possible, itemize your invoices. Include as much detail as possible, and if necessary, include a cover letter, explaining the various charges.
- Always follow up that the client has received the invoice! Sounds simple, but not doing this, and assuming that it has been received, can lead to endless problems. Or, hand deliver your invoices if possible. Either way, make sure they have been received.
- Lastly, confirm with your client that everything on the invoice makes sense.
Following up invoicing can be tedious and time consuming, but, to ensure your consulting business’s long-term success, it is vital.
If an invoice does become a problem, either because your contact is not available, or because the client is unhappy with the cost or the service rendered, make sure you address that issue as soon as possible.
While it may not be ideal, and you may not wish to, dropping your invoice price can sometimes speed up the payment process, and avert the need for litigation or other extreme measures.
The best way to address problem issues is to discuss the matter with the client, and where necessary, negotiate. Even 50% of something is better than 100% of nothing.
When all else fails, collection agencies or litigation may be your last avenue, but only consider this route as a last resort – your relationship with your client will be irreparably damaged.