MARCH 2001

Consulting—
How to Make Sure You Get Paid for Your Work

Editor’s Note: This is Part I in a series of articles that will provide consulting engineers tips and hints to help them avoid being taken advantage of by clients. Though most consultants never experience problems with getting paid by clients, some do. By taking precautions from the beginning, you may avoid being placed in the "unlucky" category. Part I | Part II | Part III

During "boom" times, some engineers branch out, leaving their company jobs to become "independent consultants." During "bust" times, corporate restructuring and layoffs swell the consulting pool. And although many consulting engineers are probably well prepared technically, many do not have experience with the business aspects of self-employment. This lack of experience can make some easy prey for the clients who try to avoid paying for consulting services.

How can you start and maintain a successful consulting business—and make sure you get paid for the work you do?

Your Priorities Are Few in the Consulting Business

As a consultant, you are responsible for accomplishing three main tasks:

• Getting business
• Doing the work satisfactorily
• Getting paid

You’ll find many lectures, courses, and books available to help you with the first two tasks. Rarely, however, is the third task discussed. 

Most clients with whom you will do work are honest business people. The few who are dishonest, though, can cause you enormous trouble, not to mention financial setbacks. Of course, it is far better to prevent problems from occurring than to be forced to try to cure the problems after they have occurred. One way to avoid the problem all together is to know which potential clients may be difficult and therefore best avoided.

Occasionally, you will be able to make a correlation between clients with whom you may experience payment problems with the type or location of the company. Attempts to avoid payment are more likely to be made by:

• A small or mid-sized company controlled by a founder who has a personal monetary or ego stake in the company’s net profit

• A large company in which an executive’s bonus is tied to the profitability of the project to which you are contributing

• A company with a manager who has a personal stake in reducing the cost of the project

• A poorly funded company

Because the time you will spend trying to collect from non-paying clients can be substantial, you should make every effort to avoid getting into these situations in the first place.

Consider the following scenario:

You’re nearing the end of a project when your client stops paying on your invoices. He urges you to hurry and finish the project because (and consultants have heard all of these reasons before):

• He must show the product at an upcoming trade show
• He needs the product for marketing purposes
• His marketing "window" is closing

You point out that you have not received payments, but the client assures you that all is well and:

• The bill will be paid soon
• The check is in the mail
• Your check will be cut in the next accounting pay cycle
• They lost your invoice, so could you please send a new invoice
• The person who signs the checks is out of town until next week, among other reasons.

You want to believe the client, and occasionally these excuses might be true. But because the client may be taking you for a ride, take action as soon as possible. One effective time to speak up is at the end of a project status meeting. After you and your client agree on what you must do to finish the project quickly and in good order, announce that you will stop work immediately until all outstanding bills have been paid. In one case I know of, the consultant got a check as he walked out of the building.

Another way to avoid getting caught on the wrong side of the no-payment track is to get an advance payment at the beginning of the project. This advance should be sufficient to cover the amount you expect to spend while you’re doing the work before you get paid. No worthy client will object to reasonable advance payment arrangements. The more strongly a potential client objects to your reasonable attempts to ensure payment, the more suspicious you should be of his or her real intentions.

Entering a consulting arrangement with your financial bases covered will help you avoid the frustration—and financial strain—associated with nonpaying clients.

Nathan O. Sokal is president of Design Automation, Inc., an engineering consulting business. Mr. Sokal has been a consultant for 30 years.