December 08, 2000, 9:47 AM — I have always been paid for my work, but the length of time before the check arrived
has varied tremendously and, in some cases, I have had to take actions to receive my
hard-earned money. That is one of the disadvantages of consulting compared to a real
job with its reliable and steady paycheck. But if you manage the process properly, then
it seldom is an issue.
The most important rule is to work with clients that are going to pay. There is a
simple formula: the larger the company, the more likely it will honor its bills.
However, larger companies are also more likely to require that you follow their billing
procedures exactly. I have had to wait months for all the right paperwork to be ready
before getting paid. As for smaller companies, generally they will pay if they are
established and not having cash-flow problems. So a little upfront investigation about
a company's financial state can yield dividends. As for startups, be extra careful,
especially if the company is still in its formative stages in which people and liquid
assets can suddenly evaporate. Unless I happen to know the people involved, I usually
ask for a prepayment.
Sometimes you will be offered stock in lieu of cash compensation, in sum or in part,
but the value and legality of the stock can be hard to assess, and any payoff is likely
to be far in the future. That may be of interest to more entrepreneurial consultants,
but I avoid stocks other than what I buy after being paid in cash.
The next step is issuing invoices. Presumably your agreement (see the prior column
agreement: What each party expects) has spelled out the framework for doing so.
Perhaps it's a monthly invoice, or maybe you've completed a specified milestone or the
entire job. Generally, I attempt to complete a substantive amount of work before I
issue an invoice because each time a manager authorizes payment, he or she will do a
mini job appraisal. I also wait a few days or a week after finishing work before
issuing the invoice so that it does not appear that all I care about is their money.
As for the invoice itself, make sure it looks professional. It needs to clearly
state that it is an invoice. It should have a unique number. It should itemize the work
performed. If there is a purchase order involved, you must include the number. If the
company assigned you a vendor number, include that as well. I also give my business
registration number for my state and tax ID number to keep the accountants happy. If
there is a signed agreement, I refer to the agreement and the date of execution.
Include your manager's name and his contact information. Finally, specify the payment
terms, which normally are 30 days from invoice date unless negotiated otherwise.