Last editedJun 20233 min read
If you work as a freelance consultant, businesses hire you to provide expert advice on a topic which isn’t covered by members of their own team. Examples might include an IT consultant, a marketing consultant or a business consultant advising on wider strategies. Being freelance means that you don’t have the luxury of a regular wage or salary, and that’s why it’s vitally important to understand the mechanics of being paid as a consultant. Identifying the best payment providers to use as a self-employed consultant means being able to maintain your cash flow and concentrate on your core business, rather than having to chase payments.
Consultancy payment options
If you work as a freelance consultant, there are a range of payment options available in terms of how you structure the billing of your clients. Among the options are the following:
An hourly rate – the hourly rate will be based on your experience and expertise in a particular field of consulting, with the final fee for the job being calculated on the basis of the hourly rate multiplied by the number of hours of work delivered.
A day rate – similar to an hourly rate the amount you charge per day as a freelance consultant will be based on experience and expertise. A day rate rather than an hourly rate is usually used for projects which run for a shorter period of time or for if a project requires you to work at the client’s business location.
Flat rate – in some cases, rather than negotiating back and forth over what a fair hourly or day rate is and how long the job is likely to last, it saves time to charge a flat fee which covers all of the time spent working as a freelance consultant.
Commission – a fee based on a commission for consulting will usually be calculated on the basis of the sales and/or income generated as a result of the commission, or a percentage of the total cost of the project for which the consultation is needed.
A retainer – a retainer takes the form of an up-front fee paid before the work is actually undertaken. The fee will either be agreed for a specific project or set length of time, or in return for the client being able to access your consulting services as needed over a contractual period.
How consultants get paid
Once you’ve decided which payment option you want to use, you need to negotiate an agreed final price with the client. Once you’ve agreed a price with a client, you need to draw up a written agreement setting out the terms of your consulting work, in case there’s any issue with getting paid once the work has been done. The written agreement needs to include the following details:
The services which you will be performing for the client
How much you will be charging for the consultancy work
When the payments will be due – you may, for example, decide to charge a percentage of the fee up front with the rest falling due once the work has been completed
Any arrangement regarding expenses on top of the fee
Any late fees charged if payments aren’t made on time
The payment methods you are willing to accept
Options for consultancy payments
Many freelance consultants opt to be paid via PayPal. You can open an account for free and the client can make electronic payments on the agreed dates. Although the payments will appear in your PayPal account instantly, it may take some time to transfer them to your bank account unless you pay a fee. Other fees incurred when using PayPal include a transaction fee of 2.9% on the amounts you receive. Although this is a fairly small percentage the actual amount paid could become significant over the longer term.
Credit or debit cards
You could opt to enable clients to pay you using a credit or debit card. In order to make this work you’ll need to set up a merchant account and, in some cases, purchase hardware such as a wireless card terminal, although many payment processing services now operate via a standard smartphone. In most cases, card payments for a freelance consultant will be processed via an app or a third party service provider. Some accounting software for consultants, for example, come with the option to accept payments, eliminating the need to purchase further equipment.
Electronic funds transfer
An electronic funds transfer is probably the quickest and simplest payment method, making it advantageous for you and your clients. Working with GoCardless means having the ability to take electronic payments directly from a client’s bank account to yours, whether as a one-off payment or a recurring fee. Payment requests can be sent to clients in the form of a link attached to an invoice, email or text message, or included as part of your website. If you need to take regular payments of a set amount (i.e. for providing ongoing monthly consultancy services) then you might want to set up a Direct Debit payment plan with the customer, while our Instant Bank Pay facility is ideal for ad hoc payments.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.