Show Me The Money

Most disputes between consultants and their customers can be easily avoided with proper planning. Voltaire once said, “When it is a question of money, everyone is of the same religion.” Your customers don’t want any surprises, and neither do you! The following suggestions will help ensure that you and your client are on the same page before you begin work:

  • Your customers shouldn’t be shocked when they open your bill. Let them know what to expect in advance by preparing a written agreement that is signed by both parties. If the figures you provide are estimates, make sure that fact is clearly noted on the agreement. If it is a flat fee or maximum fee, note that as well.
  • Good faith estimates are sometimes wrong. If you come in under your written estimate, your client will be happy. But what if the project takes more time and money than expected? Protect yourself by accounting for the possibility of overage in your written agreement. One way to handle this is to include a statement that you’ll obtain customer approval before proceeding beyond the estimated number of hours. Another strategy is to designate a specific, allowable overage. For example, “Actual hours will be invoiced, not to exceed 115% of estimate unless approved in advance.”
  • If you establish a flat fee for completing a project, what happens if your client changes the focus of the project or places additional demands on you? Should you just “grin and bear it?” Avoid this problem by including a clause in your written agreement that makes your price “subject to any change in orders or specifications.”
  • Make sure that you and your customers share the same expectations regarding the scope of work and timeline for completing the project. Prepare a detailed scope of work statement that outlines the responsibilities of both parties to the agreement. Include a list of deliverables or outcomes that will result from the effort. Establish a timeline for completing various stages in the project. Allow for adjustments to the scope of work and budget upon mutual written agreement.
  • Set your payment terms before you start the work, including a payment schedule. For instance, will you invoice your customer once at the end of the project, monthly, or upon completion of various phases of the project? Also spell out when the other party agrees to pay—for example, net 30 days.
  • Sending your invoice to the right person can dramatically speed up the payment process. Find out in advance who you should direct invoices to and include their name and department on both the mailing envelope and the invoice itself. If you will be invoicing a particular customer regularly, find out if there is any additional information that would be helpful to include on each invoice.

Addressing these issues upfront by preparing a written agreement will help ensure that your customers are satisfied with your work and you receive prompt payment for your services. For additional information or advice, talk to your accountant or attorney.

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