As a Senior Project Manager, one who has worked both 'on the payroll' and as a "Freelancer", I have had the responsibility to ensure my projects are actually paid for and by my clients. This has been true for SAP, Oracle and i2 projects as well as Hubspot and Salesforce contracts.
Getting Paid Means Contract Compliance is Key
Do You Have Time and Expense Contract Compliance Under Control?
During one particularly challenging Supply Chain Management focused project for a cold roll steel mill located in Europe, my invoices were not being paid, even though they were signed off by the CEO!
In fact, he sat beside me throughout the project to ensure the CEO sponsorship was both visible and obvious.
Imagine how uncomfortable and potentially damaging to the our relationship it was when I had to politely bring up the lack of payment issue, which was rapidly approaching the seven figure zone.
He was genuinely at a loss to explain the issue, so we began a round of 'Lets play Columbo'. By asking why the requisite 5 times, I was eventually able to track down the owner of the issue, who, in this case, was the CFO.
CFOs don't Rush to Pay You
Even if they have no particular reason not to!
What I eventually found out from him was that our invoices did not comply with their billing requirements. They had internally defined processes and procedures that demanded that all incoming invoices be formatted in a particular format with very particular billing terms - and would not pay them unless they were - even when it meant they were not in compliance with a contract they had signed!
They actually wanted to pay them, but their IT system, which was 'long of tooth' was simply technically incapable of dealing with variations and thus, they had a bad reputation with their suppliers for paying late.
From the outside looking in, what you experienced was yet another company not paying their bills on time. The reality was, at least in this case, more complicated yet it was easily avoidable if there had been both better systems and clearer communications between all parties.
Lessons for 1099 Contractors
- Know what your contract requires for you to get paid.
If you've been a consultant for very long, you will have already experienced the complex variety of payment terms and conditions that exist out in 'the wild'.
If you work through a third party, which is highly likely, then what you may not know is the particular invoicing requirements that exist between your agency partner and their end customer.
This may or may not be relevant to you, depending on whether you are dealing with a 'back-to-back' payment terms type contract or not.
Whatever is your particular case, you don't want to create any friction in the payment gears.
- Automate your time and expense management system.
But make sure your client can deal with the automation.
If you're using an automatic online approval tool, such as the ones we provide as part of our 1099 management service, you have to ensure your client is actually able and willing to sign off electronically on your time and expenses.
In many cases, you may find that your client is unwilling to sign off anything online, possibly as a result of false advice from their internal council or due to cultural reasons.
But one way or another, you have to get your time and expenses signed and submitted, on time, every time.
- Keep track of your own numbers regardless of the system you use.
We have set up our own 'SAP Professional Services' equivalent system, but have learned that we need to keep track of our revenue and expenses to be used to audit what our own Accounting & Finance system produces each year at tax time.
- Contract Compliance automation incurs cost you won't be reimbursed for.
It used to be simple to submit time and expenses on a project, you just scanned your receipts and submitted an excel via email to be approved by your client.
Or so it seemed simple.
What you may not have known is that someone, usually on the clients side, perhaps actually on the recruitment side, actually printed out and matched your receipts to those invoices and if there was a no match, you didn't get paid.
You may have even been forced to tape each individual receipt to a piece of paper and then scan them and submit them as well as submit the originals.
This wasn't for your benefit, it is for the benefit of the accounting function.
That process cost money to execute and also, cost money to store those pieces of paper.
Mistakes were and are made, sometimes intentionally, sometimes not.
But the green eye shade crowd lived to catch them.
No one was happy.
- Time and Expense Systems don't just happen, they have to be designed and procured.
You may have a perfectly acceptable solution for your own billing purposes.
But you may also find that you are being shut out of many projects or relegated to subcontractor (meaning most of the margin is being skimmed off by too many layers above you) status because you don't have an enterprise class time and expense system that your clients will accept.
- You aren't able to build enterprise value of your own if you don't have a simple contract compliance system in place.
You may not even want to build and sell your business but if you do, having a system that helps you get and establish direct client relationships is a key to building enterprise value.
If you're a smaller player, even a one man band, getting that first direct client relationship is like striking gold in the klondike in the Yukon.
You want to not only price your services correctly, you must make yourself extremely easy to do business with, and having a simple time and expense system in place is a prerequisite.
- Avoid Revenue Leakage and know how much you are leaving on the table.
Ever get to the end of a project and notice that the team begins to disperse before the project finishes?
If you're not careful, the infrastructure that gets you paid will disappear before you get your final payment.
You need to make sure you are submitting your time and expenses as early as possible as perfectly as possible with an audit trail for every piece of information.
It is also imperative to get this task done before they close down the Purchase Order or Internal Order for that particular project.
It is not unheard of for funds to become unavailable for a project once it is 'closed' and should you be loligagging around when it comes to submitting your final time and expenses, not that you would ever wait 3 or more months to complete this task, (err hmm), then someone within the client's organization is going to have to take action to 'refund' the project.
They may not see that as a high priority and you may experience significant to permanent delays in getting paid.
Don't Struggle with Contract Compliance
If you're in the consulting business, the last thing you need to be doing is time and expenses manually. If you're an SAP consultant, you make your living implementing IT systems that are designed to simplify and automate this process. We've made it easy with our own Time and Expense system setup.
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Got comments or questions, we'd love to hear them! Have you run across any other issues with contract compliance as a consultant? Just use the form below to submit them.