How involved should a PM be in ensuring payments for completed milestones?

Question

In a project where payments are due according to a set schedule, what is the role of a PM in ensuring these obligations are met?

Example of a payment schedule within an agreement: 50% deposit, 25% upon completion of analysis and 25% upon completion of development.

Typically, my preference is to stay out of this and delegate it to Accounts Receivable. However, since this is a prerequisite to starting the next phase of a project, I feel that my involvement is required as these should be communicated to a client clearly. So if a project is stalled for this reason, they are fully aware of the cause for the delay.

The question is to what extent should a PM be involved and how should these kinds of contractual requirements be communicated to a client?

I searched around for external sources that discuss this and found this link: http://psmj.blogspot.ca/2011/03/dont-forget-about-your-financial.html

Refer to point # 4:

Collecting. Firms need cash to operate, not completed projects. As PM, you have the closest relationship to the client, and are in the ideal position to “assist” the client in the payment process. The best expression of confidence in the quality of one’s work is to insist on prompt payment for it.

Answer 1

Think "Communications," Not Collections

The nature of your budgetary obligations is obviously dependent on the definition of the Project Manager role within your particular organization. However, in my experience "chasing money" isn't the proper role of a project management professional.

For example, you are probably not an enforcer working for a loan-shark, where your project management responsibilities will doubtless include use of a lepip to ensure timely payments. However, a Project Manager is responsible for communicating the status of the project, including roadblocks or gating activities. Budget status and funding milestones would certainly fall within those categories.

If your project has defined periodic or event-based payments as gating activities from one phase of the project to another, then you should certainly be communicating with your client so that they are informed of their current responsibilities to the project, and understand their impact on the project's progress.

If the project is stalled because of payment issues, then that is simply an element of the project's status that should be clearly communicated to all stakeholders. As always, it is up to the stakeholders—in this case the client and your senior management—to determine how they want to address budgeting or funding issues that affect the project.

Answer 2

The PM is accountable for all aspects of the project, including satisfaction of money owed to all vendors, including his/her own organization. So, the involvement needs to be consistent with accountability. Delegate tasks as you see fit, but accountability for task completion and success is not transferable.

EDIT: If you are a seller of services, you would establish a "contracts" meeting on an agreed upon cadence, say weekly or semi-weekly. Payment for rendered services is nothing more than an agenda item on this meeting. As you approach a payment milestone, add payment to the agenda to discuss proper and timely funds transmission. If you are in the government, it could require funding obligation; if commercial, clean invoice with payment terms consistent with what was already negotiated or maybe new terms if you choose to go down that path.

If payment is not submitted, you need to escalate the risk. What is in jeopardy is continued work. Some large companies can continue at risk but many small firms are incapable of that: they would not make payroll. You escalate the risk and initiate whatever mitigating intervention you see fit, including communications up the chain of the buyer organization. And you simply communicate the date which you, as the PM, will stop work.

None of these communication channels is unique to this issue. You are simply deploying what you should already have in existence: a cadence to discuss contract stuff and risk management.