If you are running a professional services firm or a consulting agency, we know that you are working closely with your clients and have far more interaction than other industries. This can include law firms, management consulting firms, marketing agencies, and others.
Because you are constantly working on behalf of these clients, you’ve also built a working relationship. This might not be like other industries we serve such as lawn care professionals where the lawn is serviced, and a bill is sent. In many cases, you may never see the customer. But as consultants, you see your clients all the time.
That’s why when they owe you money, it’s imperative that you handle it properly.
Sometimes your consulting agency may be struggling with cash flow. Here are a few tips from our experts on how to improve the cash flow of your professional services firm.
Layout payment expectations at the beginning
While many of your clients fully intend to pay their fees on time, you will always have clients that for one reason or another, you will have to chase down constantly. Some of your clients will be very organized, have systems in place for their accounts payable, and have staff that handles this. For other clients, you may email them an invoice and it gets lost immediately.
This is why it is important for them to understand how you expect to be paid at the beginning of your professional relationship. We have met many consultants that shy away from discussions about financial arrangements but if you are going to stay on top of your cash flow, these are conversations that you must get comfortable having. There should be no doubt as to the expectations of payment terms with your clients.
Request a deposit for new relationships
You can further lay out expectations and set the tone for how your business will operate by requesting your fees upfront at the beginning of your relationship. For example, when you are signing an agreement with a new client, place in writing that you expect some type of payment when the contract is signed. If you intend on billing monthly, ask for the first month’s payment in full, upfront. And do not start any work for this new client until payment is received.
We have all experienced clients that are disorganized, sometimes difficult to get in touch with, or just do not have systems in place for their business. If you spot this in the beginning of a relationship, it’s good to double down to make sure you get paid.
Establish your preferred billing method
What we mean by this is to lay out how you prefer to charge clients and bill for your time or services. You may have already thought of this but there are several ways for consulting firms to charge. And as you might imagine, it all depends on what you are providing.
If you are an established consulting firm, it’s always good to review how you bill clients to see if it is still working for the services you provide.
You may choose to charge hourly, charge a retainer which could be a flat fee or the client could chip away at the hours used, or you can charge per project.
On that note, offer various ways for your clients to pay. We know many consulting firms issue invoices and receive paper checks but consider accepting credit cards as an alternative. You may find you get paid much faster if you offer convenience.
Collection agencies that work with consulting firms
You might not think of hiring a collection agency for your professional services firm, but it may be just one of the better choices you make to help improve cash flow. If you choose the right agency.
We mentioned that we fully understand the enhanced relationships in the field of consulting and agency work. And that’s why if you are struggling with cash flow, you need to choose a collection agency that has a major focus on diplomacy and tactful collections.
Despite the items we talked about above such as retainer fees, payments in advance we also understand you’re trying to run an agency or firm that helps move your clients forward. And sometimes you will bend on the way payments are received. But that can get away from you very quickly and suddenly you have clients that could be out 60 or 90 days.
Then you need to take action.
When you hire an agency that understands that you need to preserve relationships with your clients and that is a top priority for you, hiring a collection agency that understands these values makes perfect sense. They can provide a gentle nudge science, offer up some urgency for payment, and even negotiate payment plans if your client is struggling with cash flow themselves.
Bonus tip. Always be networking!
Consulting firms always need to be on the lookout for a new business. Your firm needs to carve out time on a regular basis to be networking, finding new referral partners, and developing relationships. Not all consulting firms as you know enjoy long-term work so you constantly need to be on the hunt for new clients that fit your firm. We understand you get busy with work, but that can quickly dry up and hurt your cash flow.
Always be out there looking for new business!