Question:
Our contract for a consultant needs to be updated, and our finance team asked us to rephrase the payment section to clarify whether we are paying for the following year of service or for the completed year. I wanted to check if it is normal to pay upfront, or if you should pay for the completed year… Your assistance is greatly appreciated here.
Answer:
Both methods (paying in advance or after services are rendered) can be normal; it depends on the nature of the engagement and the parties’ intent.
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Paying in advance (as your draft states) is common when:
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The services are ongoing and predictable (like an annual retainer or standing consulting agreement).
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The contractor is reserving availability for the coming year.
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The client wants to lock in rates or secure priority service.
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Paying after the completed year is common when:
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Services are variable and depend on work completed or milestones.
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The company wants to verify delivery before payment.
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There’s an internal policy against prepaying future obligations.
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So, both are fine, but finance teams often prefer paying after services are performed for accrual/accounting reasons (to match expenses to the period of service). If the consultant relationship is more of a “retainer-style” agreement, prepayment can be justified.
I hope this helps.
Lisa Smith, SPHR, SCP
Note: This blog post is for informational purposes only and should not be construed as legal advice. Always consult with a legal professional for advice specific to your situation.
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