Tips on getting paid promptly?

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Author Message David G. Axt, CCS, CSI ,SCIP Senior Member Username: david_axt Post Number: 1649 Registered: 03-2002 Posted on Friday, April 20, 2018 - 04:11 pm:    Recently my clients are getting slower and slower to pay me. My invoices state to be paid within 30 days but realistically I know I will probably get paid within 60 days. Lately though some of my clients are over 60 days late and some are even over 90 days late. Any advice would be appreciated. Thanks. David G. Axt, CCS, CSI, SCIP Specifications Consultant Axt Consulting LLC Michael Chusid, RA FCSI CCS Senior Member Username: michael_chusid Post Number: 385 Registered: 10-2003 Posted on Friday, April 20, 2018 - 04:33 pm:    I found it useful to provide terms. X percent discount if paid within a specified number of days, full amount thereafter. (5% 10 Net 30, for example, is a 5% discount if payment received within ten days otherwise full (net) payment 30 days after invoice date). It is enough to motivate many clients to pay early. Michael Chusid, RA FCSI CCS 1-818-219-4937 www.chusid.com www.buildingproduct.guru David G. Axt, CCS, CSI ,SCIP Senior Member Username: david_axt Post Number: 1650 Registered: 03-2002 Posted on Friday, April 20, 2018 - 04:43 pm:    Michael, That is a good idea. I will give it a try. I will also tell my clients that after 60 days I will stop work on the project no matter where we are in the process. I will also ask for an extension of time when I do restart the project. David G. Axt, CCS, CSI, SCIP Specifications Consultant Axt Consulting LLC Michael Chusid, RA FCSI CCS Senior Member Username: michael_chusid Post Number: 386 Registered: 10-2003 Posted on Friday, April 20, 2018 - 04:46 pm:    Don't wait until 60 days to tell them you are stopping work. Write it into your contract. Michael Chusid, RA FCSI CCS 1-818-219-4937 www.chusid.com www.buildingproduct.guru Ron Beard CCS Senior Member Username: rm_beard_ccs Post Number: 444 Registered: 10-2002 Posted on Saturday, April 21, 2018 - 03:13 pm:    Over the years, there are certain clients who are typically slow payers. For those clients only, I have tried the percentage charge for amounts received past a certain date. I have found that it is perceived negatively. What I have found to be more positively received is a bonus for paying before a stated date. When I submit my fee proposal, I explain to them upfront that my actual fee is based the amount based on all stated dates being met. I allow 30-days to pay because many clients don’t bill their clients (the owners) until they receive my statement. The bonus ‘discount’ is more like 20% not 5%. "Fast is good, but accurate is better." .............Wyatt Earp J. Peter Jordan Senior Member Username: jpjordan Post Number: 1033 Registered: 05-2004 Posted on Sunday, April 22, 2018 - 11:24 am:    Mr. Beard's observations are interesting, but the 30 days is most often too short. Assuming prompt invoicing and payment cycles, payment in 25 to 30 days would be based on diligent architects and owners as well as an understanding of the accounting cycles of each. I have one client that bills just after the first of the month and anticipates getting paid at the end of that month or right after the beginning of the next. If I submit my invoice after the 5th of the month, the soonest I can expect to get paid is a little less than 60 days out. I usually invoice after submission of the specifications so I may or may not make it into the optimal cycle timing. This particular client will sometimes invite me to invoice before the submittal of work product so I can make the billing cycle, but I am reluctant to do so unless the difference is only a day or two. Many architects in this market do what is called "milestone" invoicing which means submitting an invoice at the end of SD, DD, CD, Bidding, and Construction phases instead of monthly. While I wonder at how they can manage their cash flow, it does seem to work for them. The fee for the CD phase is sometimes broken down into 50%, 80%, and 100% increments. If I invoice for a 50%, 80%, 95%, and 100% submittal on a job that is invoiced only at the end of the CD phase, it is not going to get paid until the end (assuming "paid when paid"). I is useful to make the attempt to understand how and when your client will typically invoice their projects. It us more useful to have a conversation about a particular project and how they expect to be paid. Managing cash flow is the most challenging part of a design practice and is usually more difficult than managing profitability. You can be extremely profitable and not be able to pay your bills. You can also be loosing money and have a lot of cash in the bank (sailboats for all the principals!). The second instance is not terribly frequent, but poses its own challenges. The best answer is to generate enough work from a diverse client base on a consistent basis so that the cash flow remains somewhat consistent. Since it is easier to do in a larger practice, this is difficult to implement in a spec writing practice which tend to be very small firms. J. Peter Jordan, FCSI, AIA, CCS, LEED AP, SCIP David G. Axt, CCS, CSI ,SCIP Senior Member Username: david_axt Post Number: 1651 Registered: 03-2002 Posted on Monday, April 23, 2018 - 03:14 pm:    Currently I am working for an architect whose client is developing an apartment building. My invoice is 90 days overdue. The architect keeps assuring me the owner has promised will pay him any day now. I wonder how the owner would react if one of his tenants was late over 90 days on the rent? Would the owner accept the excuse of "I'll pay you rent when I get paid."? A while ago I informed the architect that I have stopped work on this project. There is a deadline of May 1 for bid set which I will not make even if I get paid today. One of my fellow specifiers says that I am obligated to fulfill my end of the contract even if the architect does not fulfill their end. I disagree. One of the elements of a contract is "consideration" (payment). A contract is an agreement to exchange goods and/or services. I give them specifications; they give me money. No money; no obligation to give them specifications. David G. Axt, CCS, CSI, SCIP Specifications Consultant Axt Consulting LLC Ron Beard CCS Senior Member Username: rm_beard_ccs Post Number: 445 Registered: 10-2002 Posted on Monday, April 23, 2018 - 04:23 pm:    On rare occasions when the Architect has claimed that he has not been paid by the Owner client, I have verbally threatened to file a mechanics lien against the Owner’s property. I have never actually ever had to follow through on the threat but it works very quickly if my client was not telling me the truth about his being paid. "Fast is good, but accurate is better." .............Wyatt Earp Phil Kabza Senior Member Username: phil_kabza Post Number: 606 Registered: 12-2002 Posted on Monday, April 23, 2018 - 04:55 pm:    I've only had to take Ron's lien filing approach once - many years ago - and I got paid the same day. It doesn't even matter if the lien is enforceable; just its presence on record is enough to give the lenders and title companies fits. David: I tend to agree with you on the issue of fulfilling contract; these situations have to be evaluated individually from a business perspective. Do you keep going down the road with a valuable architect client? Make sure you know your lien laws before you stop work; many lien laws have deadlines based upon the date of last providing services. Robin E. Snyder Senior Member Username: robin Post Number: 729 Registered: 08-2004 Posted on Monday, April 23, 2018 - 10:20 pm:    This really depends on the client. I stopped offering discounts for early/prompt payment because the firms that pay quick would pay quick regardless. I offered one firm a 15% discount to pay within 90 days, they never took advantage of it. Actually, i added a surcharge of 15% for payment over 90 days, depending how you look at it. Decide if this is a client you no longer want before stopping work. Just because they take over 90 days to pay does not mean they are a disposable client. My biggest client takes FOREVER to pay, but they do pay and the projects are challenging and fun. I just know my cash flow will be 4-12 months on their projects and plan accordingly. I have other clients that pay on receipt, and some that pay before i even start work. It all balances out. If you don't want to work for that client, or you sense you won't get paid, then stop work (depending on terms of your contract) David J. Wyatt, CDT Senior Member Username: david_j_wyatt_cdt Post Number: 242 Registered: 03-2011 Posted on Tuesday, April 24, 2018 - 09:30 am:    If I were David, I would meet my commitments but not deliver the documents in a use-able format until there was credible assurance of payment. This can be accomplished in somewhat the same manner as the “Look Inside” feature on Amazon when browsing for books. Your client can see the work is finished, but cannot mis-appropriate it. Such a method preserves your professional honor without allowing yourself to be played for a fool. It is hard to know how a discount will be perceived. Some may think your service is over-priced if you knock off more than five percent for early payment. A strategy I developed was to reward fast payers with an "esteemed client discount" when I quoted a project. They could see my standard rates compared with the rate they were enjoying because of their good business practices. It gave a better impression than offering discounts when I billed them. The specter of a lien is motivating. It is more subtle than the outright threat of a lawsuit while demonstrating that you are a legitimate business entity that must be taken seriously.