Last editedMar 20222 min read
As a scaling business, it’s natural at some point in your journey to want to bring in outside help to gain a fresh perspective on your operation. That’s why freelance consultants are so popular among small to medium businesses.
Not only do you bring in an expert with a completely neutral emotional connection to the business to sift through and optimise your affairs but you are only paying them for as long as you need them. They can advise you on everything from how you promote your business to where you should be allocating your resources.
But consultant payment terms are always going to vary depending on the business. Here, we’ll take you through the various payment options available and explore the benefits and drawbacks of each.
Consulting payment structure
While many businesses might be reluctant to invest in a consultant as they can be perceived as being expensive, as long as the impact they have on the business is significant enough, the price is almost always worth it.
When deciding on how to bill your consultant, however, it’s important to understand they are charging you not only for their expertise but for their time. Many consultants charge on a per-hour or per-day basis but there are several other fee structures to consider.
Hourly or daily rates
This is perhaps the most popular and straightforward option, as there should be a log of the time the consultant has spent working for your business. It’s the most transparent option and is ideal for businesses hiring a consultant for the first time.
Lump sum or flat fee
Paying your consultant a flat fee is only recommended if you understand exactly what it is they’re offering and what’s required for the project. If the brief is incredibly thorough and you don’t think any surprises are liable to pop up, this could be an attractive option. As a result, this is often the most popular option for large projects.
The results based payment method is obviously going to be beneficial for the business as they will only pay dearly for the consultant if they have actually achieved something. Generally, the consultant in this situation will either waive a portion of the fee to be paid if targets are met or operate on a per unit basis. The latter option might make sense in a scenario where results are more immediate and tangible. Either way, you are probably going to need to offer at least a base rate.
A retainer is a monthly fee that guarantees you a certain number of hours with that consultant. Retainers are a great way of keeping a consultant that has worked well for you close enough that you will always be at the top of their priority list.
Consulting payment options
Of course, besides setting up a payment structure, the business and consultant are going to need to settle on a payment method. The first step, of course, is to establish a pay rate and make a written agreement. Then, they’ll both need to figure out which payment platform they will be using to send or receive payment.
For consultants and businesses alike, GoCardless is a smart option as it allows them both to collect payments directly via direct debit. It also gives the business a greater level of control, as it’s a pull-based system, so the business controls both the payment amount and date.
It can also be used both for recurring and one-off payments so whether you’re hiring a consultant for a one-time project or are putting one on a retainer, there are various options available.
We can help
If you’re interested in finding out more about consultant payment terms, or any other aspect of your finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.