Client A wants to hire your business as a subcontractor to assist them with supporting the business needs of Client B. Client B is Client A’s direct client. Client A requests that your business agreement be sent to them for final approval and signing and that your business invoice be sent directly to Client B for payment. Whoa. That should be a red flag and a signal to put the brakes on for some serious conversation.
Why? Because part of the responsibility of the entity signing a contract is also assuming responsibility for timely payment. The terms are clearly stated in your agreement, remember.
For accounting and tax purposes whoever signs the agreement is legally responsibility for what’s outlined and agreed upon in the agreement; being among other things, your payment. The business who signs the agreement is also the business who will receive the W9 during tax time and who you will need to chase down should payment be late or reneged.
When a business suggests avoiding paying you directly it signals they don’t have the available cash flow to operate their business. Never, never assume this responsibility (and risk) from them. It would be wonderful to hire subs, reap the benefits of their skill and dependability, only to dump the headaches of getting payment from their client on the sub. Not.
The lead client (Client A) needs to lead their business and shoulder the full responsibility. No passing the buck when it comes to agreements and payments.
Sensing Client A is experiencing a lack of cash flow, consider suggesting these three options:
- Creating cash flow: When Client B pays Client A suggest leaving the funds in Paypal so a Paypal payment transfer is made directly to you the same day rather than waiting for the payment to be transferred to Client A’s bank (taking 3-5 days) and then paid from the bank account.
- Stagger Invoicing: Or, Client A invoices Client B on the 15th or 20th of the month knowing that you will be invoicing Client A on the 30th or 1st of the month. When working with a fixed monthly rate all parties know the invoice amount that is needed and the early invoicing on Client A’s part allows time for funds to be received and on-hand when you send your invoice. Ultimately, Client A needs to chase down funds from Client B, not you.
- Hand-off the client as a referral: Contract the work directly with Client B so the middle person is removed. Client A may still serve as a project manager on the project on behalf of Client B if Client B desires. All paperwork will then be signed with Client B and invoices made to Client B – Client B now becomes your direct client.
In this economy, situations happen more often than before. Avoid getting tangled in another business’s poor operational and management issues. Whenever in doubt about how to move forward – tangle-free – time is your friend. Use time to give yourself thinking and breathing room. Seldom, in our line of work as virtual assistants is rapid-fire answers needed. We don’t deal in life threatening events as a police officer or firefighter does.