Getting Paid

As a consultant, you’re considered an independent contractor under the law. This means you bear the risk of loss from clients who refuse to pay. Even seasoned consultants occasionally have difficulties getting paid on time, or at all. In general, big multinational firms tend to pay on a regular reimbursement schedule. You’re not likely to get stiffed from a large corporation unless there is a dispute over the services provided. However, large companies may take from 45 to 90 days from invoice date to issue payments to contractors.

Mitigation Measures

  • Insist on a partial payment up-front when engaging with a small firm for the first time. This could be as much as 50% of the contracted amount. Milestone payments can be built in to the agreement, as well. This provides some protection against providing weeks of work and then having to wait a long time for payment.
  • Write specific payment requirements into your engagement contracts.
  • Do some research on a new client to see if you can learn about their payment reputation. Don’t be afraid to turn work down if you get a sense that collecting your fees might be difficult.
  • For slow paying clients, be persistent in requesting payment, although don’t be a pest. You want to be a squeaky wheel, not a shredded tire.
  • If a client refuses to pay, you can send 30-day, 60-day, and 90-day send collection letters yourself, and then if the check still hasn’t arrived, have your attorney send a letter. Beyond that, you can sue in small claims court, but the normal limit for damages is between $2,000 and $7,500 depending on your state, so it might not be worth your time.
  • If you’ve exhausted your collection efforts, know when to give up and move on. Unfortunately, you can’t actually take a tax write-off for bad debts from services provided. You can, however, deduct the cost of any goods your client received from you but never paid for.
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