When Clients Won’t Pay

I was pretty naïve when I started my consulting business five years ago. Coming from 20 plus years in corporate HR, I never had to deal with collecting payments. Accounts receivable took care of that.

Now I was a consultant and had to manage my own cash flow. My philosophy was that if I provided high quality service in a timely manner, then my clients would treat me fairly and pay their invoices on time, meaning within 30 days, maybe 45. But sometimes that didn’t happen.

I didn’t have a particularly good follow-up system and sometimes those outstanding payments fell through the cracks. Several months went by and then I’d remember: “hey, that company hasn’t paid me yet!”

Now I faced a different problem: I felt very uncomfortable following up and reminding these clients that they owed me money. Should I call them, send an e-mail or text message? Would they think, I didn’t trust them? Was I being insensitive? Maybe their business was struggling and they were just putting out fires and here I come asking for my money!

It hasn’t been easy but when you need to put food on the table you push your dominance trait up a notch or two and send out a reminder or make a phone call.

The other day I was buying a used book on Amazon and it hit me: they want my money before they’ll send me the book. What a novel concept!

Maybe I was on to something that I could employ in my consulting business. The difference between Amazon and Lohoff-Gaida Consulting is that Amazon sells a product and I sell a service. Plumbers, electricians and restaurants provide a service and get paid after the customer has received the service. So I guess I have to live with my own situation: do the work and then hope for payment. Or do I?

After conversations with colleagues, reflection and even a bit of training, I’m changing my business model. My long-term goal is to get paid beforeI start doing any consulting. The short to mid-term goal is to get partial payment, maybe 50% , up front and the rest when the project is completed.

To achieve this goal I need to get out of my comfort zone regarding money. This means that I must bring up the topic of money and payment terms with a prospect or repeat client much earlier in the selling process. I’ve learned how important it is to ask up front if they have a budget available for the project. If they don’t, then we need to discuss how the project will be funded and get agreement before moving on. If there is no money then there is no commitment and they’re wasting my time. Man, is it hard for me to be so tough!

As I mature as a consultant I’m learning that being open and honest about money issues is the best way to show respect to a potential client andto myself. Less time is wasted and the stress level is reduced dramatically.