The consulting industry is among the most dynamic and rapidly developing sectors in the world of business, with recent trends indicating that there is no sign of it slowing down.
While the independent and dynamic nature of consulting offers a whole host of benefits, it also comes with its own unique set of challenges – particularly when it comes to payments.
A recent report from Plum found that 11% of freelancers all will face late payment on invoices - and more than 7% of these will be written off entirely as bad debt. More than just a temporary inconvenience, late payment for consultants can have serious cash flow implications - which creep into the realm of both business and personal finances.
To better understand the difficulties consultants face in receiving payments, we will explore the consequences of delayed payments, the importance of a well-structured payment system, and offer practical advice and guidance on enhancing your consulting business's payment systems to tackle the issue of late payments.
Table of Contents
- Payment challenges in consulting
- The impact of late payments
- The value of organised payment systems
- The benefit of direct debit payment gateways
- Practical tips for efficient payment
Payment challenges in consulting
For consultants, timely payment is crucial for maintaining both financial and mental well-being. With close to one in three consultants reporting that they are paid late - leading to cash flow problems and heightened anxiety - handling payments in a timely manner must be a priority for any consulting business.
Late payment in consulting - which is often compounded by payment terms like “net 30” which can delay cash flow - can directly affect the consultant’s ability to cover expenses and reinvest in their business. Addressing these challenges requires clear payment terms, and payment processes that encourage timely payment and effectively manage late ones.
The impact of late payments
For independent consultants and freelancers, getting paid on time is among the biggest challenges in business. Beyond the obvious repercussions and the immediate financial impact, the mental toll is equally significant: with one recent study from Cloudlancer finding that 75% of freelancers experience anxiety due to late payments, and 45% reporting late payments to be a point of significant stress or concern.
Establishing clear and concise payment terms is essential. Outlining payment expectations that include due dates and consequences for late payments plays a fundamental role in creating a transparent financial relationship. Sending polite reminders and follow-ups is one thing, but having a systematic approach to collecting payments is a far more important step in ensuring consultants receive their payments on-time.
The value of organised payment systems
Organised payment systems that effectively manage the process of collecting payments offer a transformative solution for consultants facing payment challenges. These systems streamline the payment process and reduce the amount of time consultants spend on administrative tasks (such as invoicing and payment tracking) - which take them away from valuable work.
With the right payment systems in place, consultants and freelancers can have a centralised financial management solution that enables simple payment collection - as well as payment and financial data insights - that help to make informed business decisions.
The benefit of direct debit payment gateways
Direct debit payment gateways provide a simple solution to managing payments for consultants. Direct debit payment systems enable consultants to efficiently handle recurring payments, reduce the time spent on manual collections, and ensure regular business cash flow.
These systems, like the one provided by Ezypay, supports consultants in handling multiple payment methods and currencies and facilitates flexible, global business operations. While the Ezypay platform offers an array of sophisticated payment handling functionalities, its core value lies in reliably and efficiently collecting payments to effectively eliminate stress, and provide financial stability for independent consultants.
Practical tips for efficient payment
Collecting payments can be a challenge for consultants. Whether you’re working on a one-off project, or an ongoing retainer basis, some practical payment tips may include:
- Request immediate invoicing – don’t delay after the project is complete
- Provide clear and up-front payment terms that include late payment fees
- Try to accept multiple payment methods to suit different customers
- Allow automatic, direct-debit payment to collect payments - where possible
- Follow up on late payments or outstanding invoices before they become a problem
- Enforce late fees – enforcing fees is never fun, but ensures clients understand consequences for missing or delaying payment.
- Always be polite – as frustrating as late payments can be, it’s important to always maintain professional dialogue in communications regarding payment.
In short: it’s important to stay ahead of the curve when it comes to collecting payments – one or two missed payments might not initially seem like a major issue but will ultimately cause major cash flow problems in the long run. Ezypay takes away this administrative headache, giving you the time and energy to focus on running your business.
Discover why over 6,000 businesses choose to partner with Ezypay for their recurring payment needs – reach out to learn more.