Nobody leaves a senior role thinking about invoices. Then the first one goes out, forty-five days pass, and the entire subject becomes extremely interesting all at once.
This is how I structured payment across my own consulting engagements, and where I got it wrong first. It is commercial practice, not accountancy or legal advice, and the numbers in it are the terms I ran rather than a recommendation for yours.
There are only two commercial models
Strip everything back and a fractional practice bills in one of two ways.
Recurring revenue, which is the retainer model. A fixed amount every month for a defined set of service parameters.
A single number, which is a Statement of Work - either split across milestones or paid up front.
That is it. Everything else is a variation. And of the two, I always valued the retainer far more highly than the Statement of Work. The retainer gives consistent revenue. A Statement of Work is flash-pan money: it arrives, it is welcome, and then it is gone and you are back to selling.
That preference is worth being explicit about, because it should shape how you price. If you are indifferent between a twelve-month retainer and a one-off project of the same total value, you are mispricing one of them. The retainer is worth more to your business, which means it can be worth slightly less per month.
Where payment terms belong
Payment terms live in the Master Services Agreement, not the Statement of Work.
This follows from the two-document contract structure, and it matters more than it sounds. Terms in the MSA are agreed once, at the start of the relationship, alongside all the other standard clauses that nobody argues about individually. Terms in a Statement of Work are up for negotiation every single time you issue one.
You do not want to renegotiate when you get paid every time you sell something. Settle it once, when the relationship is being set up and the client has no particular reason to push back, and then never discuss it again.
The same logic applies in the proposal. If you are going to offer a payment structure, offer it once, state it plainly and do not over-explain it. Multiple options, early-bird framing and elaborate justification all read as low confidence - and the more words you put around the money, the less confident you appear about the value.
Thirty days, and what happens on day forty
My payment terms are thirty days. It is the number finance departments are already configured for, and fighting for fourteen on a first engagement buys you very little and costs you goodwill with the person who has to make an exception for you.
The part that does the work is what comes after.
If I have not received payment by day forty, I start charging interest on the value of the invoice. By thirty days it is already late; forty is the point at which lateness has a price. In my own contracts that was ten per cent for each month it remained outstanding.
Two things about that.
First, I have charged it perhaps twice in my entire consulting career. That is the point. The presence of the clause is what stops people treating your invoice as the flexible one in the pile. Nobody sets out to pay a supplier late; invoices simply get triaged, and a documented consequence quietly moves yours up the queue.
Second, if you never set a rate, the law sets one for you. In the UK, statutory interest on late commercial debts is eight per cent above the Bank of England base rate, and it applies after thirty days where no credit period has been agreed. But you cannot claim statutory interest if your contract specifies a different rate - so a contractual rate replaces the statutory one rather than adding to it. Worth knowing before you write a number into a template, and worth taking advice on if the number you are considering is a long way above the statutory position. The government guidance on charging interest on late commercial payments sets out the default.
Beyond interest, the escalation is unpleasant for everybody. Past a certain point it goes out to claim, debt collectors get involved, they take a percentage, and the whole thing inflates. Almost nobody wants to arrive there, which is exactly why the clause works without being used.
The biggest clients are the slowest payers
This surprises people leaving corporate life, which is odd, because they used to work inside the machine that does it.
The worst payers in my history have consistently been the biggest organisations. Large enterprise clients sat at forty to forty-five days as a matter of routine, regardless of what the invoice said. It is not bad faith and it is rarely a decision. It is a payment run that happens on fixed dates, an approval chain with four people in it, and a process designed long before you arrived.
The practical consequences are worth planning for rather than resenting.
| What it means | What to do about it |
|---|---|
| Your first invoice to a large client may land at 45 days | Assume it, and do not build a cash plan that needs it at 30 |
| Chasing rarely accelerates a payment run | Get the invoice submitted correctly and early instead |
| One big slow payer can be most of a month's revenue | Concentration risk is a cash risk, not just a client risk |
That last row is the one that actually bites. A practice with three clients where one is a large enterprise on forty-five-day terms is a practice where a single administrative hiccup inside somebody else's finance function becomes your problem for a month.
What gets paid in advance
Three things, for three different reasons.
Diagnostics and discovery work are always paid in advance. Always. A paid diagnostic is the mid-tier offer that lets a client experience how you work before committing to anything large, and the payment is not incidental to it - it is the mechanism. If somebody is willing to invest at that level, I know two things immediately: there is real money here, and I am about to get an honest look inside their organisation. A diagnostic delivered on credit is just free consulting with paperwork.
Retainers run monthly in advance. A retainer paid in arrears is a loan you are making to your client every month, and the fact that it is normal in employment does not make it normal in business. You are being paid to be available and to carry a function; availability is consumed whether or not the month was busy.
Some clients pay in advance because it suits them. More than once I have had clients pay ahead at the end of a financial year specifically to get the money out of that year's budget, with the work continuing into the next one. This is worth knowing about and worth asking about in the last quarter of a client's financial year, because it costs them nothing and improves your position considerably. Their year end, not yours.
Invoicing a fixed-price piece of work
For a Statement of Work with a defined outcome, there are two workable shapes.
Deposit and milestones. On a large digital transformation that ran for two years and replaced most of a client's technology, I took ten per cent up front and then invoiced as each milestone was passed - sized to the scale of the milestone rather than split evenly. Milestones are not equal amounts of work, and pretending they are means you finance the heavy phases yourself.
Spread across the months. On smaller pieces, simply dividing the total across the months the work runs is easier for a client to absorb, because it lands in a monthly budget line rather than requiring a capital decision. On a documentation-heavy piece of work I spread the fee across the three months it ran for exactly that reason.
The choice between them is usually about how your client's budget works, not about how your work is shaped. Ask.
The structure of the underlying document - scope, assumptions, risks, cost - is covered in what a fractional engagement contract actually looks like. Milestone invoicing only works if the milestones are defined somewhere other than your head.
Discounting for prepayment and commitment
I discount for two things, and neither of them is being asked nicely.
Prepayment. If a client wants to pay six-monthly or annually in advance on a retainer, I will discount it. Certainty of cash is genuinely worth something, and a client who has already paid for the year is a client who is not reviewing your line item every month.
Commitment. If the terms are monthly in advance but the client wants to sign a two-year or three-year deal, I discount the annualised cost. My ceiling was around twenty per cent over two years and thirty per cent over three - and thirty was a maximum rather than a starting point. Past that you are no longer being paid for the work, you are buying the commitment, and a client who negotiated you down that far has learned something about you that will show up in every subsequent conversation.
What I would not do is discount for nothing in particular. A discount given to close a hesitant deal teaches the client that your price is soft, and they will test it again at renewal.
The client you already know pays late
Sometimes you know before you start. You worked in that industry, or you know somebody who has invoiced them, or the reputation simply precedes them.
The answer is not to refuse the work and it is not to hope. It is to say it plainly and make it a condition. Something close to: I am happy to engage, and given the sector's payment history and the cost of chasing invoices over long periods, this needs to be paid for up front.
That is not an aggressive thing to say. It is a commercial position with a stated reason, and stated reasons are what make conditions acceptable. A client who cannot accommodate it has told you something useful before you did any work rather than four months afterwards.
The version that fails is the one where you suspect it, say nothing, take thirty-day terms and then spend the engagement chasing. You knew.
The invoice itself
Unglamorous, and the source of most avoidable delay.
Invoice in your company name, not your personal one. Reference the engagement or project name so it can be matched against a purchase order, and reference the Statement of Work it relates to. State the terms and give the due date as an actual date rather than a number of days, because the person paying it is looking at a list of dates.
Most late payment inside large organisations is not a refusal to pay. It is an invoice nobody could immediately match to an approved piece of work, sitting in a queue while somebody establishes who owns it. Every one of those failures is preventable at the point you raise the document.
And if the client has a purchase order process, get the purchase order number before you invoice rather than after. An invoice submitted without one in an organisation that requires one is not late - it does not exist yet.
Frequently Asked Questions
What payment terms should a fractional consultant use?
Thirty days is the working default, because it is what finance departments are already set up to process and asking for less on a first engagement creates friction for very little gain. The terms belong in the Master Services Agreement rather than the Statement of Work, so they are agreed once per client and not renegotiated with every new piece of work. What matters more than the number of days is that a consequence for lateness exists in writing.
Should I charge interest on late payments?
Have the clause. Using it is a separate question. In my own contracts interest starts once an invoice passes forty days, and in many years of running engagements I have charged it perhaps twice - because the presence of the clause is what stops people treating your invoice as flexible. In the UK, if a contract sets no rate of its own, statutory interest of eight per cent over the Bank of England base rate applies to commercial debts after thirty days.
When should a fractional consultant be paid in advance?
Three situations. Diagnostics and discovery work are always paid in advance, because the whole point of a paid diagnostic is that commitment is demonstrated before the work starts. Retainers run monthly in advance, because a retainer paid in arrears is a loan. And any client whose payment history you already know to be poor moves to advance payment as a condition of engaging at all.
How do you invoice a fixed-price project?
A deposit up front, then an invoice as each milestone is passed. On a two-year transformation programme I ran ten per cent up front with the remaining invoices sized to the scale of the milestone rather than split evenly, because milestones are not equal amounts of work. The alternative on smaller pieces is simply to spread the total across the months the work runs, which is easier for a client to absorb into a monthly budget.
Should I discount for clients who pay annually in advance?
Yes, and for length of commitment too. If a client wants to pay six-monthly or annually in advance on a retainer, I will discount it, because certainty of cash is worth paying for. On term, my ceiling is around twenty per cent for a two-year commitment and thirty per cent for three years. Beyond that you are buying the commitment rather than being paid for the work.
Who are the worst payers?
The biggest clients, reliably. Large organisations run payment cycles that sit at forty to forty-five days regardless of what your invoice says, and no amount of chasing changes a process that was designed before you arrived. Plan cash around it rather than being surprised by it, and be careful about a practice where one large slow payer represents most of the month's revenue.
What should be on a fractional consultant's invoice?
Your company name rather than your personal name, the engagement or project name so it can be matched to a purchase order, the Statement of Work it relates to, the agreed terms and the due date stated as a date rather than a number of days. Most late payment in large organisations is not refusal, it is an invoice that could not be matched to an approved piece of work and sat in a queue while somebody worked out who owned it.
Where to go from here
Two things carry most of the value here. Put the terms in the Master Services Agreement so you settle them once per client rather than once per sale. And write in a consequence for lateness that you hope never to use, because the clause does its work by existing.
Everything else is downstream of what you sold and how it was scoped, which is the contract, and of what you charge in the first place, which is rates.
The Ultimate Guide to Fractional Consulting is free and it goes deeper on this. It also contains the number behind every pricing conversation you will have: what a permanent hire actually costs a UK business by function, using the ONS median and the employer contributions HMRC and the Pensions Regulator require. That is the floor your client is comparing you against.
The Fractional Formula builds the commercial side - ICP, offer, profile, pipeline and price - in six weeks. Pieces like this one go out first in Fractionally Thinking, every Friday.
