How To Get Paid
By Robert J. Smith, PE, Esq.
From time to time, design professionals experience a "lose-lose" result in what originally appeared to be an attractive project. Not only does the client fail to pay all or part of the professional fees and expenses, but the design professional also loses a client and may even become the target of a countersuit.
The billing and collection aspects of your practice are essential to your firm's profitability. Using proven business management methods can help you avoid communication problems, collection delays, and even countersuits.
Getting Paid for Basic Services
There are several practices that can dramatically improve collections without destroying the relationship between the design professional and the client.
Have a written contract with appropriate contents.
- Require a signed contract from the client before starting work. All too often, eagerness to begin work makes the contract seem like a formality that can be settled later. This attitude leads time and again to collection problems and significant compromises on fees paid. By using standard forms (for example AIA B-141 and EJCDC 1910-1) and by telling every client that it is firm policy to have a written contract before starting work, you can avoid this dilemma
- Include a clear and detailed description of the project scope in the contract. It should list gross square feet of building area or some other quantitative parameter
- State the services to be provided in the contract as "basic" services versus those that are "extra" or "additional"
- Include provisions for interest on late payments and award of attorney's fees in the contract, whenever it is permissible or obtainable, if court action is required for collection. Without these inclusions, you might not be able to obtain interest or attorney's fees
Communicate While Billing
- Improve the content of the bill. The client is interested in knowing what a project manager or design engineer did for the number of hours indicated on the bill. A computer printout is a cold and uninformative piece of information. If your invoice can't include narrative information describing the services rendered, take the time to develop a detailed transmittal letter. This explains to clients that they obtained their money's worth. List significant accomplishments or progress made for the billing month, along with a projection of activity for the coming month or two.
- Bill promptly. Unless otherwise agreed, don't allow bills to accumulate as work progresses. Give priority to getting your firm's bills out.
- Follow up. If payment has not been received in 35 days of the filing date, contact your client's accounts payable department to inquire if the bill was received, whether there are any questions regarding the bill, and if the bill is in the payment cycle.
This is considered a sound business practice as opposed to dunning.
Getting Paid for Extra Services
An area of frequent misunderstanding among design professionals and their clients is payment for additional services. Clients may be surprised when they get bills for additional services beyond the lump sum of the project costs.
The first step in avoiding controversies in this situation has been addressed above — have a written contract clearly listing what is and what is not included in the basic fee.
Further, the design professional should not perform additional services until the owner has issued the appropriate authorization.
Finally, extra services should be broken down as such on each bill with reference to prior written authorization by the owner.
You can create a "win-win" situation: getting paid on time without prompting expensive counterclaims and losing your client. By using comparatively simple management practices, you can avoid uncollectibles and enhance your bottom line.
is a principal in the national construction law firm of Wickwire Gavin, P.C.
Madison, Wisconsin
Edited by Lisa Schuetz
This article is based upon work supported by the University of Wisconsin–Madison Department of Engineering Professional Development. It is for general information and distribution. It is not intended to provide specific solutions or advice for specific circumstances, which should be sought from appropriate professionals.