Consulting Clients Don't Always Pay
Here's a story about an IT consultant that got himself in a jam and his client wouldn't pay…
I'm certain this is going to be one of those “the devil is in the details of the contract,” but I need some advice.
My client hired me to do some analysis work and listed 10 scenarios they wanted analyzed. The Statement of Work listed the scenarios and specified that I would be paid for 10 days of consulting at a fixed daily rate.
I needed to use an analysis package hosted on the client's private network. The assumptions built into the model were riddled with errors. Because of the remote hosting and the errors, each analysis run took many hours and kept producing unreliable results. I met with the client daily to go over the previous day's effort and the poor results produced.
In the end, we were only able to produce one effective analysis after two weeks of effort. The client now does not want to pay the invoice because the 10 scenarios were not completed. My view is that the client was paying for my labor as an operator of their package. The client's view is that they were paying for valid deliverables.
The Statement of Work dictates, among other things: We will abide by the direction given to us by the client, if during the 10 days of services, they want to change the activities performed. With that in mind:
- We were told what to do every day.
- We were told not to modify the business rules in the system.
- The business rules in the system did not reflect reality.
- We were told to run the analysis anyway.
- When we ran the analysis in a manner that was recognized as valid, the numbers returned were valid within the scope of the application. The client didn't like the numbers because they deemed them as unrealistic.
In the end I did get my client to pay by doing the following:
- call
- call again
- call again (repeat N times)
- tell people who speak to client
- appeal to shame
- call more
- imply legal action
- stir the shame pot again
- call more
- Insist on a date for when check will be mailed.
(1 votes, average: 4.00 out of 5)
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What I suggest is always go for upfront payment depending upon the project. Do fix a fixed budget that will surely help you from such scenario. Always start with upfront depending on the task expense so that if later on he declined you do not suffer for the work done.
My suggested solution to the 'double whammy' would be for clever young (and not-so-young but energetic) consultants to get out on their own and build their own practice. Network with others to build partnerships. And most important, learn how to deliver value-based services that guarantee real measured (not dubious) results - linking fees to the agreed benefits/value measured. Forget working with the Big companies who will want to maintain (ie cling onto) their old ways of working.
I've experienced this as well beforehand. The best thing you can do is demand 50% min upfront if they want the service they need to show they have the money to pay for the service. If they can't show the money then they are no good to do business with, doesn't matter how good the intentions. You could do a credit check on them if they agree to it, and then go from there, but that's about as good as hiring out a collections firm that will ensure that you get paid for IT consulting that you have given them. I would certainly never put forth the IT consulting work upfront without something tangible including strong trust in place upfront. See the funny thing if you look at it is they could still run away with 50%, but some type of clear upfront collateral keeps them honest as they already have put forth some kind of committment.
Questions about non-paying clients are something I encounter a lot when talking to computer consultants in the small business arena. Of course, no one has to stand for non-paying clients (there are plenty of opportunities to get those that DO pay on time), and it’s really about managing expectations from the beginning. If you ask the right questions of prospects while qualifying them in the stages before they sign on for work you can often identify potential problems and avoid a world of trouble. For those that slip through the cracks, you can learn from mistakes and move onto better prospects.
I provide a lot of resources for computer consultants in my Computer Consulting Kit that answers a lot of questions about how to manage difficult situations when growing your computer consulting business. Thanks for providing this story to which I’m sure many consultants can unfortunately relate!