Why inflexible billing policies are good

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You will find plenty of consultants, marketers, and entrepreneurs who will tell you it’s a good thing to have flexible billing and payment policies for clients. They say that as a small business owner, you can attract and retain customers this way, and so you should be flexible to meet the needs of clients.

I’m here to tell you the exact opposite. Flexible billing and collection policies usually only accomplish one thing: They allow clients to take advantage of you and your services. Creating policies that work to your advantage financially, and sticking to them for all but a few time-tested clients is going to keep you on solid financial footing.

If you’re a regular reader of my blog, you have to realize already that this post stems out of a current situation I find myself in. I relaxed my billing policy for a new client, and now I regret it. So much for being customer service oriented and looking out for the client’s needs. I really ought to be looking out for my own needs.

The last week of June, an attorney contacted me about an “urgent” matter needing my fraud investigation skills. The matter was so urgent that they needed a report from me within about 10 days. I was willing to do it, but that meant pushing off some other projects and moving this one to the front of the line.

Most of my work is done on a fixed fee basis and the billing policy works like this: Half up front, and half prior to me giving you my expert report. In certain situations I’ll require the entire fee up front, and this was one of those cases. Because they wanted a report in ten days, there wasn’t enough time to fool around with my normal half-and-half policy. Add to that the fact that I was pushing other work aside for this new client, and I felt it was only fair that the client pay the full fee in advance.

The attorney was aghast that I’d ask for my fee in advance. Didn’t I trust him? Didn’t I trust his client, a well-known organization with significant financial resources? Would I ask an attorney from a large firm to pay in advance?

No. No. Yes.

Now let’s pause to appreciate the irony here. Attorneys almost always require deposits or retainers before they’ll start their work. But this attorney is balking at giving me a deposit before I do the work?

I explained the policy to him and that it had nothing to do with the fact that his firm was smaller. Yes, I ask big firms for deposits too. It’s called “live and learn.” I’ve learned after almost 9 years in business that if I don’t get my fees up front, there’s always a reasonable chance that I won’t get paid (especially if my objective analysis of the case results in an opinion that’s not favorable to my client).

The attorney eventually agreed to my billing terms and said that he would send a check right over for me. Because of the accelerated deadline for the work, I told him that I’d offer him the courtesy of starting my work right away. You can imagine where this is going. That was a big mistake. (And just so we’re clear, I’m not talking about $500 or $1,000 or some small fee. I’m talking about a sizable fee for monopolizing over a week of my time.)

I completed my work within the 10 days, and called the attorney to talk about my results and inquire about payment. And you can imagine the dance that has been done. Multiple promises amount to “the check is in the mail.” Yet no check ever arrives. In spite of lying to me about the payment, the attorney has the nerve to tell me he’s offended that I’ve demanded payment.

It’s clear that I never should have done the work without collecting my fees up front. The only exception I should ever make to my billing policy is for a well-established client who has been trustworthy in the past. I should never make an exception for a new client, because this is what happens.

I should also follow my own instincts. If the attorney had such a problem with my billing policies before I did the work, he was going to have a problem after I did the work. People only refuse to pay for one reason: Because they don’t want to pay.

What are my chances of ever getting paid from this attorney? I’d say about fifty-fifty. He has my work product and he has no incentive to pay me.

That’s what I get for being flexible on payment policies. A big fat kick in the pants and no thanks for completing the work so quickly. So please learn from my mistakes… Don’t offer flexibility on your billing policies except in the rarest of circumstances. As a professional, you deserve to get paid. As a professional, you deserve to have a billing policy that ensures you get paid.

If you like accounts receivable and have payment terms that work well for your company, good for you. If you don’t like accounts receivable and you want to be sure to be paid for your work, collect your fees up front. A client who really intends to pay will pay according to your terms. You don’t need to accept anything less.

3 thoughts on “Why inflexible billing policies are good

  1. I understand where you’re coming from, Tracy. As a small business owner or sole proprietor, you have to not only have a rigid billing policy, but also have the belief in yourself that what you do is worth being paid for.

    Additionally, don’t underestimate the power that an up-front fee has to weed out tirekickers, nickel-and-dimers and other people you don’t want as clients, which allows you to devote time to the clients who are worth your time.

  2. Tracy Coenen

    Totally agreed.

    And I don’t mind when a client wants to negotiate about fees or payment terms prior to the start of work. But to lie about the intent to pay, to berate me for asking to be paid, and to complain about the fees and policies AFTER I’VE DONE THE WORK (on an accelerated schedule that the client demanded)…. well that just doesn’t work well for me.

  3. Brian T

    One way I’ve seen some people deal with deadbeats like this is to join the credit bureau locally (a couple of hundred bucks) and then let the person know that you’re going to report them to the credit bureau if they don’t pay in X days, and then DO it if they don’t pay.

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