Consulting Tips

Invoicing & Getting Paid Quicker – Part 1

Share on twitter
Share on linkedin
Share on facebook

Invoicing is the lifeblood of your consulting business, but it is only the first in a number of steps to put money in your bank. The overall goal of any successful consulting practice, is to reduce the time from invoice creation to cash in the bank. Part 1 of this article looks at a number of strategies every consultant should be using to get paid faster. 

Step 1. Monthly Billing vs Milestone Billing

When I started out in consulting, I did most of my invoicing on ‘milestones’ basis, which means that I invoiced when a milestone in the project had been reached (e.g. after the public engagement stage is complete or once the preliminary concepts are delivered). The milestones are usually outlined in the original proposal by linking invoices to phases of work. The problem with milestone billing is that there are any number of reasons a milestone can be delayed, and most of them are out of your hands. Yet, to run the company, I have to pay my staff on a bi-weekly or bi-monthly basis and most of my company payments occur on a monthly basis (software subscriptions, car payments, rent, etc.). 

Whenever possible, consultants should try to bill on a monthly progress basis rather than on a milestone basis. This means that even if you and your team has only worked a couple of days on the project, you can bill for work completed each month. Of course this type of billing approach needs to be outlined in your proposal. Switching from milestone to monthly billing significantly improved cashflow in our office, but it takes a little more work gathering timesheet reports to justify the progress invoice request.

A typical progress invoice begins by stating the timeframe of the invoice (e.g. This invoice is for work completed between May 1, 2020 to May 30, 2020). It is usually justified as a percent progress estimate, or it includes a summary of hours from your team’s timesheets. In GroupThinq, you can easily import a timesheet report for a certain period (May 1- May 30) right into the invoice. Quick and easy! You can also attach a full timesheet summary for that period with the invoice. And don’t forget any reimbursable expenses on your monthly invoice. 

Ensuring your client can logically understand your invoice is the first step in getting paid quicker. Switching from milestone billing to progress billing will create much faster turnarounds in payment timing. See the GroupThinq example below.

Step 1. When doing progress billing, add the date range at the top of your invoice. Then click the import staff hours button to filter everyone's hours for the date range.
Step 2. To import staff hours for the date range of your invoice, click "Copy to Clipboard" in the top right. All hours worked during the period will be copied along with people, rates and fees per person.
Step 3. Paste your clipboard content into the body of the invoice. Add the invoice total and save. A copy of the invoice is automatically sent to your accounting person. Download a PDF copy of the invoice to send to your client.

Step 2. Request PO’s Up Front

Most larger clients like governments, large corporations and universities issue purchase orders for every projects. The purchase order number is their way of setting up a project and tracking invoices in their accounting system. Payment delays are to be expected if you do not include the Purchase Order (PO) number on your invoice. Many clients simply will not pay an invoice without a PO#, so do them and yourself a favour, and ask for the PO number up front and add it into the GroupThinq fees section and it will be automatically be added to every invoice. Some clients don’t use PO’s.

Add a PO# in the Fees tab and it will be added to all invoices.

Step 3. Set Up PO’s for your Sub-Consultants

Like your clients, it is important for you to set up a Purchase Order for all your sub-consultants on your project. You will need to track any bill payments that may come in on the project from your subs. To do that, the PO for your sub should include a descriptions of their anticipated deliverables, the invoice schedule, payment terms (most consultants pay their subs after they have been paid), and any expenses that you will reimburse. Once a bill is received from your sub, you will cross reference their invoice with the PO you issued them. The Project Manager should approve the bill from the sub because they are usually in the best position to determine if the sub has completed their deliverables. 

When you set up a PO for a sub, you need to add the subs fee to the project fees and you will be invoicing on behalf of the sub-consultant. This usually makes it easier for the client to pay one bill rather than multiple bills. But remember, you owe a portion of the paid invoice to your sub so its important to reconcile your fees vs. their fees on every invoice. You definitely need a system to track invoices and bill payments and this system must connect the project manager to your accounting person to run efficiently.  

Add a Purchase Order for all your sub-consultants. Be sure to include their scope, deliverables, fees, expenses and conditions for payment.

Step 4. Include A Summary of All your Invoices with Every Invoice

If you want to get paid quickly, include a summary of all past invoices with every new invoice. The summary should include the invoice number, payment status, percent billing, invoice date and invoice amount. GroupThinq includes a summary tab which summarizes all previous invoices so clients can see a full picture of the previous invoices and the amount remaining on the project.

Invoice Summary. Make sure you include a copy with every invoice.

In Part 2, we’ll look at your accounts receivable and upcoming ‘Overdue statements’ report as we outline more ways to get paid quicker as a consultant. 

More Consulting Tips

Fostering a Consulting ‘Collective’

Business like Southwest Airlines are using the science of swarm intelligence to solve complicated business problems like reducing boarding times on flights. But what if consulting firms could use swarm intelligence to improve the efficiency and profitability of the colony/company?

Join the conversation

  1. Avatar

1 Comment

Leave a comment

Your email address will not be published. Required fields are marked *