Guarantee of Payments
Guarantee of Payments
(OP)
We provide Engineering services to startup Biomass to energy companies. In the past we worked with the fortune 500 where getting paid was never an issue.
Many of these startups have received their first round of funding.
How can we insure payment at the end of say a front end engineering package and cost estimate are delivered?
Are there escrow companies for engineering firms?
Can you recommend one?
Do you faithfully issue change orders and stop work until they are signed?
Does a letter of credit help?
FYI I have been in business since 1995.
Thanks,
Rocky Costello
http://www.rccostello.com
Many of these startups have received their first round of funding.
How can we insure payment at the end of say a front end engineering package and cost estimate are delivered?
Are there escrow companies for engineering firms?
Can you recommend one?
Do you faithfully issue change orders and stop work until they are signed?
Does a letter of credit help?
FYI I have been in business since 1995.
Thanks,
Rocky Costello
http://www.rccostello.com





RE: Guarantee of Payments
1. Get a deposit (30-50%) before you start work.
2. Invoice promptly and in small chunks. This may require you to break your work into smaller phases.
-b
RE: Guarantee of Payments
If the payment is late, stop the work. The client will get the message.
Mike McCann
MMC Engineering
RE: Guarantee of Payments
Don Phillips
http://worthingtonengineering.com
RE: Guarantee of Payments
RE: Guarantee of Payments
Getting some money up front is a good idea, and having a written agreement is imperative, but the best way to increase your chances of getting paid is by careful client selection. This is particularly true of most smaller, lesser known companies.
RE: Guarantee of Payments
Poor payment is often due to miscommunication or other problem within your clients beaurocracy, including within their accounts payable group, office or person.
Payment terms should be defined in your proposal. Your invoicing should exactly match your proposals scope of work, activities, work breakdown structure, phases, deliverables, etc., whatever you use. Clear, succinct and complete invoices are mandatory; also quite rare, it seems universal practice for companies to issue confusing, incomplete, incorrect and/or extremely sparse detail invoices.
Follow up is always helpful: "...just checking you got my invoice I sent on ...". On next invoice I include previous invoice payment status: received, outstanding, balance owing, and dates.
In short, you must not give any cause for payment delay. In many years' project management late payment problem analysis could be traced to our own slip ups, often small or subtle, but enough.
I learned to treat invoices with same attention as a drawing or calculation / report: check them.
RE: Guarantee of Payments
You are making two assumptions.
1)That they can pay.
2)That they want to pay.
Many startups seem to have trouble with both. Asking for a deposit is a way to filter them out.
For most stable companies I agree with what you are saying about correct invoices and friendly reminders being key to getting paid promptly.
-b
RE: Guarantee of Payments
RE: Guarantee of Payments
I disagree about stopping work creating liability. Liability was created when you agreed to the contract. My contracts specifically state I have that right to suspend work if payment is not made but I would not do that without a few conversations with the client, and not at a critical time in a project that will hurt our relationship.
Don Phillips
http://worthingtonengineering.com
RE: Guarantee of Payments
pierdesign says "relashionship", yep, if you don't have someone on the other side that will help out, it could be a lonely journey.
Getting contracts and descriptions is all good but there will always be that one customer that will change things and demand more than their share. Suing them might get you some cash, it will loose you future work. I always see these things as a risk, so I only risk what I can afford.
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Business Page http://mech.e.tripod.com
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Motorradtraum....www.tailofthedragon.com
RE: Guarantee of Payments
- a mobilization payment (I usually go for 10% - 15%) and don't start work until it is received.
- work out a cash flow based on your proposal and set up monthly progress payments where you stay cash positive each month - that way if you do need to stop work for non-payment or other, you will have limited your exposure
- provide final draft package and have a payment milestone for it so that at that point all but say 10% of the contract value has been paid - then release the final package after receiving that milestone payment. At worse you will have 10% of the contract value at risk.
Greg Lamberson, BS, MBA
Consultant - Upstream Energy
Website: www.oil-gas-consulting.com
RE: Guarantee of Payments
And another thought - if the client is really having a problem paying because someone or some bank is being stupid about the situation, I can understand that, and will continue to work, allowing them the benefit of the doubt. But when a client diverts money that is due me in order to go on vacation or pay other subs, as has happened, I approach the problem quite differently, and with no fear, as I do give myself that latitude in the contract. Someone who does that, I will not work with again, so I have no fear of losing their business. It's a non-issue.
Mike McCann
MMC Engineering
RE: Guarantee of Payments
I can do this because the UK courts make it cheap and easy to recover money from any non-paying companies, and automatically allow for generous interest payments going back to the due date. Individuals and overseas companies may howeve rbe more trouble than they are worth.
Regards
Seán
http://www.wastewatertreatmentplantdesign.co.uk/
RE: Guarantee of Payments
You're lucky - in the States, it's frequently not worth the time to collect less than %2500.00 unless you go to Small Claims Court without a lawyer. (At $250 per hour for a laywer, plus your time, that claim money goes real fast.) Then, if you win, it's only a judgment in your favor. You still have to collect.
Your time collecting is worth money too. Better to avoid it.
Mike McCann
MMC Engineering