May 7, 2010
Making Sure You Get Paid On Time, Every Time
Making Sure You Get Paid On Time, Every Time By Cliff Ennico www.creators.com "I am a marketing consultant who gets a lot of business, mostly from small companies in far-flung locations around the country, through referrals. Lately it seems like every account has turned problematic for me - the clients pay late, or not at all, and still they expect me to perform my services on time. I realize these are smaller businesses and they have to be careful about cash flow, but still, I can't pay my bills if my clients don't pay theirs on time. How can I do a better job of getting their attention so that I don't have to stay on top of them all the time?" When you're in business for yourself, nothing - and I mean nothing - eats at your insides like clients who don't pay their bills on time. The best time to deal with delinquent accounts is before they happen, and you should never treat someone who owes you money with "kid gloves". By showing your customers you have zero tolerance for late or missed payments, and making sure you have your customers' respect (with a little fear thrown in), you will get paid a lot faster, and will spend a lot less time chasing down receivables. You never will get rid of problem accounts entirely, of course, but here are some tips for keeping deadbeats to an absolute minimum. Get a Retainer Agreement. It's amazing to me how many consultants fail to get written agreements with their customers before they begin work - especially in a situation like yours where there is no pre-existing relationship between you and your client. A simple one or two page agreement sends the client two very important signals: this is a business relationship - while you are a nice person, you are not their "friend" who will wait indefinitely to get paid while other, nastier people get their money on time; and this is a legal contract that you are prepared to sue over if the client tries playing games. The agreement should state clearly your hourly fee, how frequently you will invoice the client, when invoices are payable, and that interest "at 18% per annum or the highest rate allowed by law, if less" will be charged on any overdue invoice. Be sure to include a statement that you will stop work the minute there's a payment problem, and will retain ownership of all materials you have prepared for the client, with the right to sell them to other clients, including the client's competitors. An attorney should not charge more than one hour's time to prepare a "master form" retainer agreement you can revise slightly for each new client. Get an Advance. In consulting deals, the client always, always, always must pay you something up front as an advance against future invoices. Do not work with any client who refuses to prepay at least the first few hours of your consulting time. The sooner clients get into the habit of writing you checks, the better. Make the Advance "Evergreen". Your retainer agreement should contain language allowing you to require the client to continue paying in advance for services once the initial advance has been paid down. This is called an "evergreen" retainer, because you always have money in your checking account to apply against your future invoices, and is especially important when the client is out-of-state and your invoice amounts are relatively small. If the client objects, you can change the language to require payments in advance only in the event the client fails to pay one of your invoices on time. Do Some Diligence. A bank or employer would ask for referrals. Why shouldn't you? Insist on talking to at least one other consultant who's worked for them in the past couple of years. Avoid Crazy People. Be alert for signs of instability, eccentricity or just plain weirdness that signals the lack of a professional approach to business. For Example, Be Suspicious Of Any Person Who Sends You E-Mails In Which The First Letter of Every Word Is Capitalized (As In This Sentence). Get the Referral Source on the Hook. Before contacting a client that has been introduced to you via a referral, get the referral source to send you a letter or e-mail confirming that he or she is making the referral, and stating ("to the best of my knowledge") that he or she believes the referral is creditworthy and can live up to its obligations. That way if the relationship with the client sours, you have solid ammunition to remind the referral source that he is at least partially responsible for the mess you are in. While the referral source won't pay your outstanding bills, and isn't legally obligated to do so, playing on his guilt should motivate him to bring pressure to bear on the deadbeat client to "do the right thing" if the referral source has greater leverage over the client than you do. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest books are 'Small Business Survival Guide' (Adams Media, $12.95) and 'The eBay Seller's Tax and Legal Answer Book' (AMACOM, $19.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2007 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.

Posted by Staff at 1:51 AM