The businessed

Published in the BRW, October 2012 by Leo D'Angelo Fisher

Dale Gillham is philosophical and just a little cross about consultants, lawyers and accountants and their billing ways.

"At the end of the day," he says, "their business is to charge you money." The co-founder of investment education company Wealth Within says that, as the business has grown, so has the need to use external expertise. 

It took a while, Gillham admits, but he eventually realised it was his business to ensure he didn't pay one cent more than he had to.

"In the first three or four years we were naive. We'd get these big bills and we just accepted it," says Gillham, executive director of the Melbourne business he started 10 years ago with managing director Lea Zerbes.

"Lawyers are the worst when it comes to overcharging. 

They're relying on you being ignorant [of the law] or compliant It's disappointing as a business owner, because you expect others to behave as you do and do the right thing."

Gillham recalls an occasion when he was looking to engage a new law firm. 

He and Zerbes met representatives of a city firm for two hours, going over the needs of the business, and were surprised to receive a bill for the meeting. "We refused to pay and we never heard from them again," he says.

Gillham's hard-won lesson: it pays to question a consultant's or professional adviser's invoice - if necessary line by line - and when the occasion demands, refuse to pay the invoiced amount.

A mid-tier law firm engaged to create an employment contract for Wealth Within charged the company $9000. When Gillham presented the contract to a management meeting one of his executives recognised it as a pro forma contract that had been used at his previous company and was able to produce a near replica with only minor variations. Gillham confronted the solicitor with the two documents and offered to pay $1200. He accepted.

"We quite often get our legal bills reduced dramatically," Gillham says. 

"We question time sheets, we query amounts charged for phone calls and reading emails, and we get lawyers to explain why a particular task took so many hours to complete."

Law firms that overcharge don't get a second chance. "In 10 years we've had a dozen solicitors. 

You've just got to keep changing until you find the one that's right for you."

When a marketing consultant strayed from the original project brief, Gillham and Zerbes sought to get the consultant back on track. 

But when the final strategy document was submitted the consultant had obviously ignored those instructions and delivered a set of proposals that had little bearing on the report Wealth Within expected.

The bill came in for $12,000. 

The consultant was summoned and Gillham and Zerbes went through the report, comparing what they had asked for with what was delivered. 

The consultant agreed to accept payment of $3000.

"In the past three years we've been very specific in documenting what we expect from a consultant, including time frames, outcomes and budget, prior to a project commencing," 

Gillham says. "We always go back to that document if there is an argument. 

If work is undertaken outside our agreement without our permission, we won't pay."

Questioning bills for professional services is something that happens "again and again", Gillham says, but despite the frustration there is no question of not using consultants.

"In a small business you need to have high-quality consultants around you to help you grow your business," he says.

As a chief financial officer for the past seven years - most recently for Hobart based listed agribusiness company Ruralco - Fergus Leicester is well practised in keeping consulting expenses under tight rein. 

Many disputes about charges and outcomes, he says, can be traced to a lack of clarity when the consultant is first engaged.

"It's critical that both sides are absolutely crystal clear about the scope of a project, the goals and the terms of engagement. 

If that alignment doesn't exist at the outset, chances are the project will not end well," he says.

Leicester, who now works as a contract CFO, says it's at this early stage that the metrics and milestones by which project results will be measure should be agreed to. 

A consulting project should also create new capacities within an organisation. These should be identified and agreed to at the outset.

"At the end of a consulting project a business should be better placed to deal with future growth or a particular issue - cost control, for example - and that capacity stays with the business."

The principal consultant with Melbourne information security and risk management consulting firm Trusted Impact, Ron Speed, agrees that "the discussion upfront" with a client sets the tone for the relationship.

"For us that discussion, which should take place around the scoping stage, is an investment," says Speed, a former director with accounting firm PwC.

"That's when we establish the kind of value the client is looking for. 

As a consultant you want to make a difference, so it's important to have that clarity on all sides from the outset."

Trusted Impact avoids disagreements over charges by preferring a fixed-price model with contracts stipulating time frames and the work to be performed.

Fixed pricing is becoming more common among management consulting firms, says Tony Chapman, the director of Launceston-based Sara Redman & Associates, who is doing a PhD on how organisations use consultants.

"Clients like the certainty. 

Fixed-fee arrangements reduce risk for the clients and ensure that everyone is clear up front about what the outcomes will be and the process for getting there," he says.