Being a consultant to multinational corporations and international bodies reflects your expertise. Whether you are providing insights on curbing malnutrition in Sub-Saharan Africa, providing a client with marketing insights in South East Asia, or advising a board on executive decisions and strategic planning, you might still have to worry about how to structure your payment terms with US clients.
To be honest, it can be distracting when you are shuffling through payment options or racking your head over how to draft the best payment plan, depending on the scope of engagement. Such administrative dilemmas come with the job and can be essential in ensuring you can give your best.
Understanding US clients’ expectations for payment contracts and invoicing is a crucial part of running a successful, professional consulting practice. This article explains how to structure payment terms with US clients and how your payment infrastructure affects your receipt of consulting income.
Also read: Negotiating cross-border freelance contracts: Tips and templates
The most common mistake consultants make is treating payment terms as something that lives on the invoice rather than as terms agreed in the contract before work begins. By the time you are sending an invoice, the important decisions have already been made, or not made. And this can pose future problems. A consulting contract with a US client should specify the following before any work is delivered:
Ignoring any of these details can have severe consequences, including breaching trust, affecting work results, and reducing your earnings.
For consultants based outside the United States working with US clients, billing in USD is the standard approach. Beyond this being conventional, billing in USD means the currency exchange burden falls on you rather than your client. While this may sound like a disadvantage, it gives you control over when and how the conversion occurs. A client paying a $5,000 USD invoice sends $5,000. What you receive in your local currency depends on the rate you get at the point of conversion, which you can optimise by using a platform with competitive rates and choosing when to convert rather than having the conversion forced on you at the moment the payment arrives.
Whether that is naira, rupees, or dirhams, billing in local currencies can be problematic for US clients because they may not have a payment system that efficiently manages them. International wire transfer will take 3% to 5% of your earnings during conversion, and it will be your loss, not the client’s.
The right payment structure for consultants working with US clients largely depends on the contract’s scope and duration. There is no single payment structure that fits every consulting arrangement.
The entire fee is paid before work begins. This structure is appropriate for short, well-defined engagements with a clear, fixed deliverable. This will include consultancy roles such as a one-day strategy session, a specific audit, and a defined report. This structure requires sufficient credibility and a track record because the client is paying for a service they haven’t received in good faith, hoping you will meet their expectations.
A deposit of 30% to 50% is paid before work begins, and the balance is due at a defined point. This defined point can be on the delivery date, at a specific milestone, at a particular number of days into the engagement, or at project completion.
The deposit serves as a commitment from both sides and balances the risk. The consultant has confirmed the client is serious enough to part with money before the work is done. The client has not paid for something they have not yet received in full. Be wary of being vague with the balance terms. Don’t just say “upon completion”. Instead, use “within 14 days of delivery of the final report” or “on the first business day following client sign-off.”
This is a great option for long-term consultancy engagements such as strategy projects spanning months, implementations, and phased advisory work. Payments in these situations can be tied to specific milestones rather than a specific payment date. A popular structure is to request 30% upfront, 30% upon completion of phase one, 20% upon completion of phase two, and 20% upon final delivery.
One crucial part of milestone-based payment structures is defining the milestone. For instance, you have to clearly stipulate what completing phase one means. What deliverable does the client receive? What is the acceptance process? Milestone payment structures act as guardrails. Delaying a milestone payment can be an early red flag in such an engagement.
A monthly retainer is a fixed amount paid at the start of each month for your expertise. It is basically like being on a monthly payroll. Usually, there is a fixed metric to determine the scope of work, such as a set number of hours, calls, or deliverables. If steady cash flow is a priority, then a monthly retainer structure is most suitable. This applies to long-term roles and eliminates the stress of sending an invoice every month.
You should clearly define the payment terms for your consultancy engagements to ensure everyone is on the same page and expectations are well-managed. Here are some terms you should be familiar with when drafting your payment terms:
Net terms define how many days the client has to pay an invoice from the date it is issued. Net 30 is the most common standard in US business. Net 14 or Net 15 is becoming more popular, especially for short, small engagements. For consultants outside the US, shorter net terms work better because the process from when you send the invoice to when the payment is initiated and when you finally receive the money takes time.
A late payment clause specifies what happens when an invoice is not paid by the due date. The standard approach is a monthly interest charge on the outstanding balance, typically 1.5% per month (18% annual rate). You can also opt for a flat late fee.
Your contract should give you the right to suspend work if an invoice is not paid when due. Without this clause, you have no contractual basis for pausing work even if you are being owed. Here is something you can use:
‘If payment is not received within seven business days of the due date, the consultant reserves the right to pause all deliverables until the outstanding balance is settled, without affecting the agreed project timeline.’
International payments incur costs on both sides. Your client’s bank charges them to initiate an international wire. If they use ACH to a virtual USD account, the cost is minimal or zero. You are also charged for receiving the money. Fee responsibility for international payments depends on the agreement, contract terms, or chosen payment method. Practices may vary, but it is standard for the initiating party (client) to bear the sending costs, while the recipient (contractor) often bears the receiving costs, such as currency conversion or intermediary bank fees. To avoid surprise deductions, the contract can explicitly state that payments should be received “net of all transfer fees”.
If you are billing in USD for a multi-month engagement, the conversion rate to your local currency may fluctuate over the course of the contract. Consultants often leave some room for reasonable fluctuation when charging. For very long or very large engagements, it is worth deciding in advance whether the engagement is priced in fixed USD throughout or whether it includes a rate review provision at defined intervals. Whatever you decide, having it written into the contract makes things clear.
How you choose to receive your consultancy payments is just as important as the payment terms, because it determines whether your money will arrive on time and in full.
Managing payments from US clients while living outside the US can be more challenging than domestic transactions. And since you cannot open traditional USD accounts without a Social Security Number and living in the US, you might end up with international wire transfers. When the client initiates the transfer, the payment instruction is sent via the SWIFT network to the intermediary banks that process the payment. As money moves from one bank to another, fees are imposed, usually around $10 to $25 per bank. It takes about 2 to 5 business days to complete the transaction, and the money is automatically converted at rates with hidden margins.
You can receive payments from US clients via ACH to a virtual USD account. Cross-border payment solutions like Grey, Wise, and Raenest offer USD accounts that work just like regular bank accounts. Transactions are usually free or cost under $1, and the receiving fee varies by platform. You can keep your earnings in USD and convert them whenever you like. This option proves faster and cheaper than international wire transfers.
Also read: Wire transfer vs ACH: cheapest way to receive USD
Structuring your consultancy payment efficiently helps you focus more on your work and worry less about your payments. By setting up clear payment terms and having a reliable payment solution to receive your payments, you can easily manage your payments.
Grey gives consultants outside the US virtual USD accounts with real US banking details, allowing US clients to pay via ACH. A 0.8% receive fee (capped at $10 and a minimum of $2) applies, which is much lower than for international wire transfers. You hold the balance in USD, convert at the mid-market rate with 1% conversion fee capped at $6 per conversion, and withdraw to your local bank account at a flat fee. GBP and EUR accounts are available on the same platform for UK and European clients.
Grey virtual cards offer you more flexibility by letting you pay in foreign currencies through your bank. The card integrates with Apple Pay and Google Pay, making online transactions and contactless payments easier.
Efficient payment structures, combined with the right payment system, will help you streamline your consulting cash flow. Sign up on Grey and download the app to receive consulting payments from US clients with ease.
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