by Elizabeth Zielinski, CMP, CMM | November 01, 2004

It might seem like an odd service from a small business, but many independent planners find it can be a persuasive marketing tool to offer the option of paying some or all of a client’s meeting expenses on their behalf and, in turn, billing those expenses for reimbursement.

But the process is risky. Below are issues to consider before signing any checks.

Benefits For All
In addition to performing a service for your client, the planner also can benefit from this arrangement.

Typically, you would add a management fee to the bill, ranging from 10 to 20 percent above the actual expenses incurred. Depending on the project, this process has the potential to create a significant profit center for the independent planner. However, be sure you have sufficient funds at your disposal to cover larger expenditures, as well as confidence your client can and will reimburse you in a timely manner.

Caveats to Consider
Even the most reliable clients can suffer bureaucratic delays when processing payments. Worse, legal matters such as attrition, contract termination, meeting cancellation or even a client’s bankruptcy might expose you to a financial loss or prevent your client from paying you on time.

Never take any action that could put your core business at risk if the money were not repaid on time.

Risk Management
Always consult your attorney before beginning a relationship of this nature. It’s possible your choice to pay the client’s vendors directly could alter the legal nature of your role. That is, rather than being a representative or agent of the client in the eyes of the vendor, you now become the client. If problems arise, you become the responsible party.

You also might want to consider bonding your employees or contractors, sometimes known as providing “fidelity insurance.” This is a business insurance policy that protects you, the employer, in case of any loss of money or property due to employee dishonesty, which might include the incurring of unauthorized expenses on a client’s behalf.

Spell It Out
Always include in your contract the scope of work being performed along with the associated estimates of expenses for the meeting. Outline what your requirements are for receiving payment, and fully disclose the management fee to your client in the agreement before any expenses are incurred. To cover you in the event of an inaccurate estimate, include a disclaimer stating the expenses you predicted are your best estimates and are not guaranteed.

Agree in advance what the appropriate reporting requirements are for documenting expenses. Does the client want weekly or monthly reports? Will the client require original receipts or are copies sufficient? Will the client conduct an audit of the program upon conclusion? These are some of the questions you should ask in advance after consulting with your accountant.

Eyes Open
Clearly, the risks of paying a client’s expenses are high for an independent planner. If a client has specifically requested that you pay bills on his behalf, it can be important to understand why.

If your customer simply wants to minimize paperwork on his end, you might offer the option of a client bank account. In this case, the client deposits a lump sum into an account dedicated solely to a project. You use those funds to pay the expenses.

Or, the client might ask for this arrangement to divert some risk onto your shoulders. If you have any reason to believe the client is avoiding her own liability, don’t proceed. No client is worth risking your company or your reputation.

Elizabeth Zielinski, CMP, CMM, is president of the independent firm Meeting Horizons in Fairfax, Va. (