April 2008

To Retain or Not To Retain

The Retainer can be an important tool for the consultant to help with the important issue of cash flow.  Retainers tend to take several forms:

1. Retainer as an advance against future billings. 

For instance, the value of a contract is $10,000.  You ask for and get an advance of $2000 to be applied to the final billing of the contract.  This ensures the client is serious and provides a degree of security in a new client relationship.  Or it can be justified to offset special start up costs.

2. Retainer as a regular payment to ensure availability.

Sometimes a client may wish to make sure you are available, either on a regular basis or for a preset amount of time on a monthly basis.  This retainer may pay for a certain number of hours, with overages charged.  Also, this retainer can be due whether the service is provided or not.  Set this up on an annual basis, or other appropriate period.

The use of retainers may or may not be customary in your field.  But if it is, it can be important for your practice.  

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