how to get paid

May 29, 2011

I just watched Mike Monteiro’s recent talk “F*ck you. Pay me.” which has a lot of great advice about how to get make sure you get paid for your work when doing service work for clients. It was targeted at designers, but it rings true for development as well. His talk focused around contracts. I thought I would add a few notes about what I’ve learned in running my own business for the past two years.

I started software development consulting with many years experience in contract negotiation. I have always had a policy of never starting work without a contract. When I first started consulting, I would work hard to get a contract signed as soon as possible. Now I take the time to make sure that this is a relationship I want to get into. I want to make sure we work with clients who need our services and want to work the way we work. We have always provided great value for our clients, but the best value for clients who are aligned with us in wanting agile development processes and where there is a high level of trust.

The legal agreements document a trust relationship, they don’t substitute for one. Never surprise a client in a contract. If they are surprised, just treat it as a communication gap. Your standard contract documents your standard business practices.

When I started, I identified two areas that I would have to learn more about and do well: collections and keeping track of finances. The third thing that I didn’t know I needed to understand was cash flow. For this post, I’ll focus on collections, which is the other side of the legal concerns that Mike talked about. Sometimes, all is good, but there’s a process to getting paid and every company is just different enough to get you into trouble.

As soon as the contract is signed, ask “who can I talk to so that I understand how you process payments?” You want to know:

You want to know every step of what happens from when you send your invoice to when the check is in your bank. If cash is tight, you want to have a phone call with the person who writes the check. I would just be open with them and let them know that I run a small company and that I had to be sure my folks got paid in a timely manner.

When I establish that rapport up front, the conversations are much easier if the check didn’t arrive. Better yet, I would have a conversation like this: “Hey Betty. I sent an invoice to Bob yesterday and he told me he approved it. Did it get to you yet? Great. So, will payment go out today?” Once I caught my own mistake that way. I was using new invoicing software which had its default payment terms as Net 45, which was significantly longer than what the contract said. This company had a policy of using the longer of contract or invoice terms. With one friendly conversation, I was able to ensure the check got sent out weeks earlier than it otherwise would have.

And lastly, the most important thing to getting paid: always invoice on time.