Slow to Credit

by Sean Hull – January 1, 2009

Anyone with a bank account has experienced this curious phenomenon. When you go to deposit money, your bank is very quick to credit your account with a deposit. Whereas with a debit, it generally takes a few days. In other words they are quick to take-in cash, but slow to let go of it.

In business as with consulting, we’ve all experienced this phenomenon. Some clients are quick to pay an invoice, others may be slow by policy such as “we never pay invoices sooner than net 90 days” or something to that affect. Then still others are slow because they are having cash flow problems in accounting vernacular so-called “aged payables”. And for anyone who has been paying even slight interest to the recent bank failures should know what cash flow problems can mean.

One noteworthy experience comes to mind. A client had an emergency in early Spring and called us to help resolve the issue. We discussed the needs on the phone, the situation, and availability to respond. We were able to attend to the problems and troubleshoot the issue. The only issue was the client had a company policy of only paying invoices net ninety days. It seemed absurd from our perspective to expect immediate response and attention from the consultant, while the company would not compensate a penny until mid-Summer! Suffice it to say we were able to find some creative ways to get a payment out earlier, but the company-wide policy made the whole process difficult, and furthermore weakened our resolve!

Setting a precedent

At the start of an assignment, it’s important to set a precedent. Whether you know it or not, both the client and the consultant are doing this by their actions. For the consultant, do you show up on time, respond to questions and concerns, solve the problem at hand, work well with the team, and overall communicate well? These are all keys to success for the engagement. And for the client, do you respond to requests about and follow through on dotting the i’s and crossing the t’s of billing and paying invoices? Is there a document or contract that needs to be signed before payment can be made? Getting those taken care of well upfront shows you’re not waiting until the last minute to fulfill the other half of your business agreement.

Providing incentives and disincentives

Incentives can be a great way to grease the wheels so to speak. We generally offer our clients a 10% discount for full fee up front. For some clients this is a great option, and they take advantage of it. We also generally abide by the net thirty payment turnaround time. As we are a small vendor, getting paid net sixty or net ninety can sometimes create cashflow problems for us. As a disincentive to that, but to continue to be compatible, we’ve offered a 5% additional fee for net sixty and 10% additional fee for net ninety. This provides the flexibility for everyone to be happy.

As a final and concluding word, let’s all remember a golden rule in business. Two parties come to the table, discuss the problem, agree on measures to fix it and timeframe. The consultant provides said services within a given timeframe, and as promised, and the client then pays the consultant the agreed upon amount in the timeframe they agreed to. All parties make due on their promises, and everyone is happy!

Review: The Global Consultant

by Weiss & Khan

Alan Weiss is at it again, this time teaming up with Omar Khan. Khan himself is an author and consultant with global reach and brings and interesting match to Weiss’ writing with an equal flair for story telling.

The key topics of relationship building, branding, fee structures, billing and contracts all become more complicated in the global context. Cultural differences and expectations, distance, and variance of business practices in remote locations pose challenges as well as rewards.

What keeps readers coming back for more is Weiss’ no nonsense style, focusing on pragmatic questions and using great real-world stories to illustrate with. I especially loved the “straw baskets” story, where getting currency out of a particular country became so troublesome that using the money to buy straw baskets and shipping them out became the easier solution!

View The Global Consultant on Amazon

Related posts:

1. iHeavy Insights 59 – Invisibility of Skills
2. iHeavy Insights 62 – Context
3. iHeavy Insights 60 – Principal Agent