After 3 years in this business I've finally settled on payment terms that work consistently. Net 30 was killing my cash flow and too many clients treated it like Net 90. Now I require 50% upfront and 50% within 15 days of report delivery. MLGW territory clients here in Memphis have been surprisingly good about this. What payment structures are working for you all?
Payment terms that actually work - lessons learned
Randy that's smart. I tried the 50/50 split but some clients balked at the upfront payment. Now I do 25% upfront, 25% at midpoint review, 50% on delivery. Entergy clients here in Baton Rouge seem more comfortable with smaller incremental payments. Keeps the cash flowing and reduces collection risk.
I've gone to a hybrid model - flat fee clients pay 50% upfront, contingency clients pay nothing upfront but have accelerated payment terms once savings are implemented. AEP territory here in Charleston. The key is making upfront payment a qualification tool - serious clients don't mind paying, tire kickers disappear.
Gordon here from Santa Clarita with SCE. I require full payment on contingency work within 30 days of client implementing recommendations, regardless of when savings actually appear on their bill. Can't wait 2-3 months for the utility billing cycle to catch up. Include specific language about implementation date vs bill reflection date.
Wayne from Charlotte here. Duke Energy clients are pretty good about payment but I learned to include late fees - 1.5% per month after 30 days. Amazing how that motivates timely payment. Also include language that client pays all collection costs including attorney fees if it goes that far.
Larry here from Spokane. I've found that offering a small discount for early payment works better than penalties for late payment. "Net 30 or 2% discount if paid within 10 days." Avista territory clients love feeling like they're getting a deal and I get paid faster. Win-win.
Dale from Knoxville here. TVA clients are generally reliable payers but I learned to define "implementation" very specifically. Is it when they call the utility to request the rate change, when the utility approves it, or when it first appears on a bill? I use "when Client takes first concrete action to implement recommendation."
Paula from Nashville with NES territory. I include a "payment acceleration clause" - if Client disputes any portion of the invoice, they must still pay the undisputed amount within normal terms. Prevents them from holding up entire payment over minor disagreements. Works like a charm.
Anita from Fargo here. Montana-Dakota Utilities clients are slow payers by nature, so I build that into my pricing. I charge 10% more for Net 60 terms vs Net 15 terms. Let them choose - pay fast and save money, or pay slow and pay more. Most choose the discount.
Great ideas everyone. Danielle I like the three-payment structure - might try that for larger projects. The key seems to be getting some money upfront to separate serious prospects from looky-loos. I've also started requiring personal guarantees from LLC clients after getting burned by a shell company that disappeared.
Randy that's smart about the personal guarantees. I also run D&B reports on new clients over $10k potential fees. Amazing what you find - liens, judgments, poor payment history. Better to know upfront than learn the hard way. Worth the $50 report fee to avoid a $15k collection headache.
Another thing I've learned - include specific language about what happens if the client gets acquired or merges during the engagement. New ownership often tries to void existing contracts. I require the acquiring company to honor all existing agreements or pay a termination fee equal to 75% of estimated total project fees.
Wanda that's brilliant - I've been burned twice by acquisitions where the new owners claimed they weren't bound by the previous company's contracts. Adding that language to my template immediately. Also including "change of control" provisions that trigger acceleration of all unpaid fees.
One more tip from sunny California - I include language that if client files bankruptcy, all fees become immediately due and payable. Doesn't guarantee collection but establishes your claim in the bankruptcy proceedings. Lost $28k to a Chapter 11 filing last year that taught me this lesson the hard way.