Consultant's corner: How to get paid

ITworld.com –

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 The 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.

I usually send the invoice to accounts payable at the company, especially larger companies, as accountants are methodical and less likely than your hiring manager to set aside your invoice. Sometimes your manager may volunteer to submit invoices on your behalf.

If you don't receive payment within two weeks after the payment due date, don't bother your client, but contact accounts payable and request a payment status. Larger companies have automated lines for doing so. In fact, if it is a large payment, you may even want to check whether the invoice is in the company's system before the payment is due. Only in the extremely rare case that you receive no satisfaction from accounting should you involve your manager. If it reaches that stage, it is probably because the company has no cash, so request a payment schedule from accounting. For example, one- third the amount due per month is better than no money at all. Be patient. Believe it or not, companies do want to pay you if at all possible. There are always legal recourses, but in seven years of consulting for dozens of clients, I've never had to resort to those.

Top 10 Hot Internet of Things Startups
Join the discussion
Be the first to comment on this article. Our Commenting Policies