Ask a Project Manager #11: How Can I Avoid Money Disagreements with Clients?

Published

September 2, 2021

Author

Abby Fretz

Illustrator

Picture this: a project is ticking along nicely, all stakeholders are content with the progress, everything is looking rosy... and then, BOOM, a disagreement about scope and budget arises... and starts to spiral. How do we avoid this? By being super clear on finances from the get-go and setting up with great contracts. Easier said than done, eh? In this next instalment of Ask a Project Manager, Abby shares her wealth of knowledge on how to create client contracts that reduce those tricky dollar disagreements!

Dear Abby, 

Do you have any tips on how to avoid money disagreements with clients?

Thanks,

Cautious PM

Dear Cautious PM, 

You’ve touched on one of the most common sources of avoidable project angst for digital projects. We’ve all experienced it – a project can be going along swimmingly, all stakeholders involved are happy with each other and how things are going, and then a disagreement about scope and budget can single-handedly unravel the trust and goodwill you’ve worked so hard to build. 

The good news is that there is a lot you can do as a project lead (with support from your team!) to set your team up for successful conversations about the value of the work you are doing (and the associated effort and cost).  

We will talk in depth about several of these factors and how to effectively build them into a project. Some of them, like ‘good client fit’ we will assume are true for the sake of brevity (future article anyone?!). 

Foundations for healthy conversations around money

  • Ensure good client fit (they align with your company’s client and project goals)

  • Client stakeholders are prepared for the project, and have the internal team support they need

  • Everyone understands the value of the project (and the value of working with your team)

  • Your teams have invested in a paid, discovery, research and alignment phase prior to building a scope or estimate

  • You’ve all aligned on project goals and strategy

  • The project contract is simple and easy to reference

  • Project boundaries are set early and you’ve defined a clear ‘fire route’ when things don’t go to plan

  • Teams participate in frequent evaluation of progress and, if needed, reprioritization

Establish trust and alignment early

Your client stakeholders may be coming to you with very little knowledge of what it’s like to be a part of a digital project. They will have varying degrees of design and technical expertise and may be starting the engagement with some pretty intense anxiety or fear around the experience, the outcomes, and whether their budget will get them to a final product. 

As a project lead, you have several potent opportunities – from the very first sales conversations – to build trust with your client stakeholders and generate excitement about the epic collaboration you’re about to embark on together. 

If in the sales and onboarding process, you and your team can speak confidently about the value you provide, you will be much better equipped later to have tough conversations about scope creep, money (and how that corresponds to the project estimate). 

Demystify money and process and talk about value

If your project lead spidey-sense tells you that these difficult client conversations around scope and money may be due to confusion or a lack of project knowledge, consider spending some time with your team evaluating your sales and intake process (build a workshop around it!). 

When you come up for air, you will have co-created a team guidebook (and your own “Scripts for tough conversations”) for how to clearly communicate project expectations and establish transparency-based trust with your stakeholders!

To start, you might pose some of the following questions to your team:

Defining value in multiple project paths

Have we given our client stakeholders options? Do they know that there are many viable approaches to an end product?  If not...

  1. Consider providing budget-aware clients with several tiered estimates and talk about the value in each, why each tier is priced the way it is. If you’d like to read more on this, value pricing expert Jonathan Stark speaks extensively on how to communicate value at each level of “three-tier pricing”.

  2. Practice talking about the value of a “minimum viable product” (MVP) and how you might collaboratively define an MVP and strategize what future phases might include.

Discovery, research, and alignment

Are we spending enough time asking the right questions about what the client and their end users actually need or want?  

If not, and you’re building project agreements before you know what you should actually build, consider selling a separate discovery phase first.  

A separate discovery phase will bump up the odds of having fewer disagreements on project approach, and will result in a more accurate definition of scope and estimation.

You are now basing your scope and estimate on a deep understanding of what the client and end users actually want and need.

Defining scope, estimates, and value

Are we confident enough to talk with our stakeholders about how we build an estimate and scope for a project and the value we are providing them? If not…

  1. Build scripts with your team that will help you confidentially explain how you build a project plan, how you expect to collaborate and/or support them as a stakeholder team, and what they can expect to get out of the project. 

Change to scope and prioritization

Do our clients understand how we will build alignment around project goals? Do they know how we will be tracking the scope we have aligned on? Do we have a ‘fire route’ for how we will handle the inevitable surprises that come with any project? If not...

  1. Practice talking about how you will collaboratively define and document a set of project goals that will help make tough decisions around scope and functionality. 

  2. Share a very simple decision tree illustrating how you’ve managed changes to scope in the past. For example, when would you reprioritize features or functionality (eliminating lower priority features) vs determine a change required additional budget?

Stakeholder roles and project impact

Do our stakeholders understand the value of their own roles on the project – how they can support a healthy project or what they might do to take the project away from the project goals, scope, and timeline? If not...

  1. Give them a simple breakdown of what your team’s roles and responsibilities will be on the project AND the roles the stakeholders will play (RACI’s to the rescue!).

  2. With your team, think about past project experiences and build a list of how clients impact a project’s health (manage their own stakeholders’ expectations) and what they could do to extend timelines and pull the project away from your agreed upon goals (delayed feedback, introducing new voices to the project, etc). Share this with your clients!

Build crystal clear project contracts

You and your team have now written an excellent operating manual with ideas for building early trust and establishing super clear communication around goals, scope, estimates. You (and your clients!) now know how you will approach any new need or request introduced to the project. 

Best case scenario you have already done a separate, paid discovery phase with the client team and the content of your project contract (including scope and estimate) should be familiar to them. The contract now serves as a clear definition of the terms of your engagement.

One effective approach to working with your sales team to make better contracts (or do this on your own if you are a freelancer!) is to build a list of contract improvements based on feedback from your team’s project retrospectives.

Examine when estimate and scope disagreements came up.

When did stakeholders misunderstand or pull away from the scope and approach you’d agreed to? Why did those disagreements happen? The “Five Why’s” exercise can be a super simple and powerful method for your team to get to the root cause of an issue.

Following is a list of tried and true contract components that can greatly reduce confusion and disagreements around money: 

Eliminate milestone-based billing

Make your invoicing schedule simple, time-based and super clear. 

Many people tie invoicing to the completion of key project milestones. Their team’s ability to get paid is then dependent on whether a client has been able to stick to the timeline for the project. A client might contest that a completed deliverable is no longer to their liking or they might have misunderstood the milestone. With milestone-based invoicing, they could pause payments even though your team needs to continue to work on that project. Consider structuring your billing around regular intervals through the duration of the project. 

Assumptions and what is NOT in scope

If a list of what is included in a project scope can be confusing to a client, consider adding a section for outliers. What do you assume to be true about the project and what is NOT included in the project?

If you have run into the issue of clients assuming the cost of purchasing fonts or stock photography is included in the estimate, then always include a couple bullet points calling out that it is an added cost on top of the project estimate. 

If your stakeholders are frequently confused about their role in content creation or acceptance testing, add details about what aspect of content creation or QA is expected from the client. 

This list of what is NOT included and assumed to be true often unearths misunderstandings or disagreements during the process of contract review and negotiation.

This means your team doesn’t have to painfully unearth them after you’ve already started the project!

Define your “fire routes”

In “Ask a PM #8: How Do I Protect Myself in a Project Timeline?” we talked about several contract clauses designed to hold clients accountable to not only sticking to the timeline (the “Pause Clause”), but to not introducing new complexity (the “Mystery Voices” clause). Both of these challenges introduce disagreements around a change to project terms and potentially lead to disagreements about whether the client is responsible to pay for this added complexity or scope. 

Use these clauses to not only identify some common project challenges, but to define what you will do if the challenge does come up. 

It is completely understandable that money and scope will be at the root of many project challenges.

By spending the time early in a project to educate and align with your stakeholders. you will have already addressed the root cause of many of these common project disagreements. Remember, you are operating in the best interest of the product you are creating and it is simply your responsibility to point out when you are being taken away from the project goals and focus. And by now, your clients will know how you are going to resolve these disagreements.  

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About the author

Abby is a digital project management train­er and con­sul­tant at Loud­er Than Ten and is pas­sion­ate about con­nect­ing peo­ple inter­est­ed in digital project management to access to the right set of tools and resources. She has taught Dig­i­tal Project Man­age­ment class­es for Girl Devel­op It, guest lec­tured at Uni­ver­si­ty of the Arts’ con­tin­u­ing edu­ca­tion pro­gram, co-chairs DPM Philly, and men­tors peo­ple in the field of dig­i­tal project management.

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