Protecting Yourself Financially as a Professional Consultant
As a consultant, you have very little to no protection by Government agencies should a client choose to not pay you for services rendered. You are afforded no such rights by Government Agency that an employee receives so you have to be careful in your financial dealings with Clients. As such, it will be incumbent on you to either go after the client yourself through a legal action to get money owed, or to find a way to reconcile your issues with the Client withholding payment, seek a settlement with the Client if you can to at least get partial payment for your services, or to walk away and eat the loss.
So how do you avoid this situation as a consultant or at least minimize the amounts you might lose or the frequencies that this occurs to you? Here are some tips that will help you.
- Build a strong SOW and List of Assumptions beforehand as part of your proposal and Engagement Letter. The more you have backing you up in documentation, the more you are able to hold discussions and negotiations with the Client to try to come to a settlement if a disagreement occurs.
- Try to get a retainer for travel expenses incurred to get to the project site and city at the beginning of the project. You can then setup an arrangement for repayment of this amount when your first bill is submitted. In this manner, you can at least protect your out of pocket expenses on a project which will make life easier – then your just risking billable time as opposed to real out of pocket money.
- As changes to direction, scope, resources, etc. occur during the course of a project, be sure to document each change of anything in periodic project reports to be signed off by both parties and also diligently use both Change Requests and Decision Requests throughout your project, pushing for signoffs as the project unfolds. Again, the more you document and get written signoffs on, the more you can protect yourself financially.
- Never lose e-mails you have sent the Client or received from a Client. Find a way to keep them and store them elsewhere outside of a Client’s servers. These may be useful to you if a litigation starts to occur between you.
- Never let a problem get big. If you have a chance to sort it out when it is still a small problem with the Client, it will save you potential grief.
- Build regular status reports that are delivered to the Client that document that period’s achievements of the Team. Get signoffs and keep copies of these off-site as you go.
- Get weekly time sheets from your team, again, get signoffs from the client on each weekly time sheet submitted as you can.
- Be sure to incorporate in your project documentation with the Client what constitutes a “Breach” in the agreement between you and what the consequences will be if a breach occurs. Then, act as necessary to protect yourself – see the next point in this regard.
- If a Client starts to miss payment deadlines, i.e., he begins to start slow paying you and the lags in payment start to get over-long, if you have warned him or can’t get him to explain to your satisfaction why the payments are so slow; if you feel any uncertainty about getting paid, pull your team until payment is made. If you have work done but not yet delivered, keep it off-site as additional leverage.
- Take good notes at all Client interfacing meetings. Particularly management level ones where project issues are being discussed. You can always point back to these if you have to and they can be used as evidence in a court action.
At the end of all of this, if you are managing your project carefully, your exposure will be less and if everything completed for the client is regularly documented and signed off, your chance of winning a litigation is improved if it comes to that. You cannot fully protect yourself from a Client unwilling to pay, but you can minimize both the risks and the damage done through following the tips listed above.
Interested in taking the full course? Click the image below and you can take this course valued at $20 for the discount price of only $10