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Collecting a fee
8

Collecting a fee

Collecting a fee

(OP)
I am a one-man shop specializing in structure design for tract and custom home builders, and a small custom home project I invoiced almost a year ago is still not paid ($1200)...the invoice was to the General Contractor for the house construction.

What would be a good next step, to notify my State Registration of Contractors?

RE: Collecting a fee

You could consider going to the small claims court, but you need to check to see what the minimum and maximum amounts that are allowed as it varies from state to state.

And if that fails, there's always 'Judge Judy' winky smile

John R. Baker, P.E.
Product 'Evangelist'
Product Engineering Software
Siemens PLM Software Inc.
Industry Sector
Cypress, CA
Siemens PLM:
UG/NX Museum:

To an Engineer, the glass is twice as big as it needs to be.

RE: Collecting a fee

Can you contact him at all? Does he answer your calls?

If not, then camp out outside the General Contractor's office with a sign posted on your vehicle your vehicle that he has not paid you after a year, take a picture of it, and post it on the net on his Facebook account. Or have your lawyer write him a nasty note.

Small claims court is always a possibility, and I hope you have a written contract which would help things go more smoothly in court.

Mike McCann
MMC Engineering

RE: Collecting a fee

(OP)
1) I think he has a "gatekeeper" named Evilorea who screens calls.

2) That sounds like backlash in the making, especially him being a contractor. Plus I don't have a lawyer.

3) Up to now, business has been conducted on a handshake business. I invoice the residential designer who is the "architect" for all these type of jobs, and he hands the invoice to the responsible party (in this case the contractor in question).

In the past I have had only a few unpaid invoices, always less than $300. Not really worth my time to pursue.

RE: Collecting a fee

Turn it over to collection. The collection agency will keep half, but you will cause him no end of inconvenience. Collection agencies start by creating collection records with all the credit bureaus and with the BBB. Then they start the harassing phone calls. Businesses really hate to be sent into collection and they will bad mouth you to anyone who will listen, but it doesn't sound like you want to work for them again.

Stay out of small claims court. Business get really bad treatment there and the "judges" often can't read a contract. You could easily end up losing and ending all of your recourse options just because the judge doesn't think you deserve $1200 without having to explain why (and small claims judgments are not able to be appealed).

A letter from a lawyer would cost you around 15% of the $1200 and does not have better than a 50/50 chance of success. Collection is probably 70/30 that you'll get $600 eventually.

David Simpson, PE
MuleShoe Engineering

Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat

RE: Collecting a fee

2
Wait, what? You don't have a lawyer? Get one NOW. Always good to have somebody you can call right away, if needed.

And wait again - you don't use written contracts? My insurance makes me promise to use written contracts or they say they'll greatly increase my premiums. I say in my contracts that if I have to argue with you for longer than X to get my money, and I have to get a lawyer involved, than you'll have to pay my invoice PLUS the fees for the lawyer. My one lawyer letter got the money, and fast.

I'd highly suggest taking a startup class at the local SCORE office, or small business helper agency office, to make sure you aren't missing anything else major, like registering your company with your state board, the county business office, etc.

Good luck!

RE: Collecting a fee

(OP)
"I'd highly suggest taking a startup class at the local SCORE office, or small business helper agency office, to make sure you aren't missing anything else major, like registering your company with your state board, the county business office, etc."


I did do a consultation with a retired engineer but it was very unsatisfactory.

I am 100% legal in regards to all that above.

RE: Collecting a fee

AELLC (Structural),
If the guy has not paid after one year, he is not likely to do so unless he needs you for another job.
open an account with Dunn and Bradstreet. Use their credit reports to check the credit worthiness of your customers, and put on the bottom of your invoice, " We report to D&B", all but the most unscrupulous companies tend to pay attention to that.
Here attached is a link to a start page on D&B.
This advice is for future jobs.

For the present, Most of the advice above is valid. Figure you have lost that money anyway, turning the bill over to a collection agency may get you some of it back, if you are lucky.
B.E.

You are judged not by what you know, but by what you can do.

RE: Collecting a fee

(OP)
The one thing that I find VERY difficult is the business end of things. I am so busy, I never do things well enough business-wise. I am going to try to visit said contractor in person first chance get on a slow day.

RE: Collecting a fee

With your evident prowess in excel, I think you could easily set up an efficient management system for many of the routine business activities such that only ten minutes per day would be required to keep on top of everything.... Proposals, collections prospects etc.
Client contact info on one sheet, standard proposal on another with your standard editable scope and standard disclaimer and terms from which you could generate a proposal almost instantly, job number and fee and invoice date on another sheet, and another sheet telling you days beyond invoice with the clients email address right there.... Click and email at term date (30 days?) and then follow ups as needed. A other sheet showing your pipeline.... Potential jobs in the queue and regular interval follow ups as you deem good.
At least, that's what pretty much what I do.
Easy to say now but, obviously never let an invoice go that long. I like the personal visit idea...try to flush out the problem or guilt them into a solution. After that I like the small claims court as, if you're going to expend such effort...might as well try for 100% instead of the 50% after collections....but if you lack any written afphreement! you're in a more difficult position....you'll need some kind of "evidence" for a judge.... If no paperwork could just be a note from a person who knows you did the work. I think the judge will award it to you if you did the work. The contractor can only argue that you did zero work to justify zero payment.
Good luck!

RE: Collecting a fee

By the way, that highly technical term I used above, afphreement!, was not something I learned at Harvard business, rather it was a burst of inspiration during my second beer - augmented by the genius of my iPad.
Best of success!

RE: Collecting a fee

But wait! There's more! If I am understanding your posts correctly, it sounds like your client is the designer and not the general contractor. Unless this is made clear, I think the judge might rule that the GC owes you zero, although the GC may owe the designed 1200 who in turn owes you 1200. Here, as Sita astutely implied, is where the lawyers earn their keep. I have one and am sorry to say I think we all should have one.
On my third beer, I promise, no more posts on this......
Best of luck!

RE: Collecting a fee

AELLC,
You can also look at my replies in forum thread732-359878: Non Paying Client covering my wife's experience in small claims court.
If the guy is a sleeze bag, you may never get your money.
First try is the person to person meeting on the basis of " This may have just slipped your mind.", If that does not work, consider your time and lost income attending small claims court. You may be better off letting somebody else pursue this guy.
B.E.

You are judged not by what you know, but by what you can do.

RE: Collecting a fee

(OP)
Triangled,

Yes that is true, I am a bit obsessed with Excel. I do have the business end semi-automated on Excel (I did try QuickBooks but didn't see it amenable to my type of business), but my business Excel is a bit of a mess and needs a lot of work.

I have been aware of this uncollected account because when I receive payment, I enter date and amount and that changes a red highlighted cell to green.

The way this all works: Builder (B) approaches Res Dsgnr (RD) to start on a house, RD shows B how much my fee is because RD has my fee table of XXXX sq ft = $ fee, RD gets drawings to point of where framing and other structure needs to be redlined by me, I do my stuff, RD hands over stamped dwgs and calculations to B, and at that point B either hands over a check to RD or promises to send it in the mail soon. The check will be cut by either B or the house owner.

Eventually, I get check in the mail form the RD, not even knowing who the B ever was, unless there is a plans check or construction problem. Actually this all makes sense MOST of the time to cut down on phone calls and emails.

Obviously this is all different how things are done with commercial projects, where there is an actual General Contractor known to you all along.

RE: Collecting a fee

(OP)
Berkshire,

I don't want to waste time and get all stressed attending small claims court. The way I look at it, working on said project incurred very little overhead (my overhead is nearly bupkus all the time anyway), and I had to turn away any other work while I was working on said project.



RE: Collecting a fee

(OP)
^and it's not like I had to turn away any other work while I was working on said project.^

RE: Collecting a fee

AELLC (Structural),
Then turn it over to a collection agency and move on.
B.E.

You are judged not by what you know, but by what you can do.

RE: Collecting a fee

AELLC....I also struggle with the business side. I've been in your shoes many times. My larger problem was not invoicing to begin with, so collections were sometimes way down the road after a late invoice. Some I could never collect.

As a professional you have lien rights. Most states have limitations on when you can file a lien on real property. You have likely exceeded that time limit, but keep it in mind for next time.

A common lien limitation is 90 days after your last activity on a job. If you file a lien within that time period, it is usually valid (assuming you had a valid reason for filing!). The filing fees are usually light and many counties have relatively easy forms for filing, particularly for construction liens (some places still call them "mechanics" liens....essentially the same things). A lien can be a strong motivator to pay, particularly for a contractor, since there is usually a lending institution involved with the process and they will require that all liens be cleared before final loan payouts occur.

Most state licensing boards do not get involved with pay disputes, unless there is repeat evidence of numerous liens filed against a particular contractor for non-payment. That often indicates diversion of funds by the contractor which is usually illegal.

RE: Collecting a fee

I agree with Ron, if you wanted to collect the best way to go was through a lien.... but at a year you are out of luck. I had a client who took my plans and ran off... was an old coworker. As far as I know the project never went forward and that was the excuse for not getting paid. I knew he was going to do it to me and I was out $1,000. Well, when he comes crawling back, and he will, I will tell him to find someone else.

Most of my other projects are commercial projects that require CA. I write my proposals such that I get paid for certain milestones leaving 10-15% of the contract for CA. When time comes to sign off and I haven't been paid I refuse. This might not be ethical but it works pretty well.

RE: Collecting a fee

(OP)
Steel,

I see nothing unethical about that.

I actually wish I could be more formal, what with contracts and all. But no one in this niche of the business seems to understand or tolerate all that.

Fortunately, with the tract/custom home builders I mostly deal with, I have been dealing with them for more than a decade. They always pay, no matter what - they always get retainers up front from the potential home buyer that covers my fee.

There is never any contract between us.

The unlicensed res dsgnrs I deal with, that's a whole different animal. Talk about a mess.

RE: Collecting a fee

Quote (SteelPE)

I agree with Ron, if you wanted to collect the best way to go was through a lien.... but at a year you are out of luck. I had a client who took my plans and ran off... was an old coworker. As far as I know the project never went forward and that was the excuse for not getting paid. I knew he was going to do it to me and I was out $1,000. Well, when he comes crawling back, and he will, I will tell him to find someone else.
Maybe I'm a bit petty at times, but if someone was willing to do that to me, I'd see if there was a simple way to do it back... like accepting a project (no contracts, just verbal), but don't really do any work. Claim I'm working on it for a while, but never waste any actual time on it. Eventually they'll be in a desperate situation, at which point I'd say "Sorry, I've been pulled away and can't complete your project right now."

If they're willing to throw away a personal/professional relationship for $1k, no reason why I shouldn't feel the same towards them.

Dan - Owner
http://www.Hi-TecDesigns.com

RE: Collecting a fee

(OP)
I am in a much better mood today anyway because I took a 3-hour work break this AM and completed two major redesigns on two large custom homes, all easily because it was mostly computerized calculations.

So today I did $780 of billable w/o hardly breaking a sweat.

RE: Collecting a fee

Would that be ethical Dan? I'm not sure, I suppose if you didn't accept any money then you would be OK. That's a little too complicated for me. Just refusing to do work for him is good enough for me. Nice and clean, and I don't how to stoop to his level.

RE: Collecting a fee

I wasn't born an angel, but I try to do right by people whenever possible, at least the ones who show they deserve it. Is it immoral to do what I suggested? I'm not pimping drugs to a pre-schooler, but it certainly isn't a saintly thing to do. Still, if some people can't concern themselves with the trouble they cause me, I can at least amuse myself at their expense to even the karma scale. It's a 50/50 shot at whether or not I decide to simply move on, as you said... if I'm in a cranky mood, I'll punk 'em.

Dan - Owner
http://www.Hi-TecDesigns.com

RE: Collecting a fee

Or, just tell them to come up with the $1k + interest they owe you before you talk about a new project.

Then, if they pay require a retainer in advance for the new project.

RE: Collecting a fee

I am probably a little ahead of myself when I said they would come crawling back. I will probably never hear from the client again. Probably for the better as he always had a way of stretching normal construction practices.

RE: Collecting a fee

Dead beat clients needs to see consequences. You have all kinds of liabilities in the business, and you need to be compensated.

If you send it to collections, and this client and others are put off by that, think if it as a way of filtering out future dead beats. You can decide now that you don't think its worth the conflict, but you are actually exposing yourself to more conflict down the track.

And - you have my sympathies! Debt collection sucks!

RE: Collecting a fee

(OP)
Please respond to this, or I will take action by contacting a collections agency. Thank you.

My fees have been historically low because I have faith in my clients to pay. But I will not allow any abuse of this trust.

RE: Collecting a fee

(OP)
WOW-

I just got an email reply from the deadbeat in question, and I can't even copy it onto here, it is so vulgar.

LOL.

RE: Collecting a fee

(OP)
I replied diplomatically (remembered the Dale Carnegie course) and he is now apologizing.

RE: Collecting a fee

AELLC - You nailed it!

General contractors yell at people for a living, so there is nothing out of the ordinary.

Stay rational, follow through on your threat, and don't take sh*t from clients now or in the future.

RE: Collecting a fee

The thing I find amazing is how quickly folks recover and forgive after the whole late payment discussion. You light someone up with a tough email on the 300th day anniversary of birth of your invoice, they fire back about how outraged they are that you would have the gall to make such demands, they feel guilty, they pay, then you happily do the next job together. Its like this dance we do.

RE: Collecting a fee

(OP)
I never has a major late payment until this.

When I was an employee I was aware of major architectural deadbeats - we always joked they learned that in college to cheat engineers.

RE: Collecting a fee

AELLC - lucky you! I have slow payments all the time. I have been in business for four years, and have multiple instances of bills being >1yr late for six figure sums. I am a two person shop, and at any time I have enough in my accounts receivable to buy several Porsche 911's. Popular reasons for retardation of payment include:
- client being an architect
- me being at the bottom of a tree where everyone has a pay when paid contingency
- someone in the payment chain having financial difficulties (a very fashionable choice with the recession!)
- under resourced accounts payable departments

They always pay in the end though.

RE: Collecting a fee

(OP)
I do only small-time residential projects, by comparison. But a LOT of them.

There must be a hugely different dynamic.

For example: One regular archi (high-end customs) is begging me to agree to some shady bulls**t because he is losing money on this job.

I tell him, if the Owner pays me directly, before Plans Submittal, I will give a discount on my fee.

Now I may have maybe reduced the fee 8%, but I got it quickly and it is in the bank with no grief. I hate grief, it slows down my work.

RE: Collecting a fee

Agreed that money grief sucks the life out of you. Also agreed that its better to be directly contracted with the owner. Architects just don't care about money, so don't put any effort into making sure its taken care of.

Most of my work is small slices of large projects, like the entrances to the World Trade Center, or a glass stair in a museum. I do a lot of structural glass. I am frequently working for a supplier to the glazier, so am 3+ subcontracts away from the owner.

RE: Collecting a fee

(OP)
LOL, did you see that recent TV docu on the building of a hi-tech tower in Shanghai. Right up your alley.

It was some advanced idea where the inhabitants live and work in the same bldg., to cut down on pollution and commuting time.

A major deal was the exterior glazing.

RE: Collecting a fee

That Shanghai building sounds Jetson-y. Facades are super important these days, and there is a lot of engineering in them ranging from blast resistance to daylighting.

RE: Collecting a fee

(OP)
They showed the pollution and the traffic there in Shanghai. Ugggh.

RE: Collecting a fee

Glass99,
You're collections management is precarious. I think if you looked at this supporting pillar of your business like an unbraced slender compression member, you might consider some additional supporting methods. But then again, Perhaps you have sufficient support elsewhere. Wouldn't mind having several Porsche's worth in my outstanding receivables! Happy for you!

RE: Collecting a fee

Triangled,
The slowness sucks and it frustrates the pants of me. It takes monumental amounts of effort to speed it up which could be used gainfully on things like marketing or doing nice creative engineering. My strategy has been to pick only a few bills which are super late, and then go nuclear with formally worded letters, joint checks, etc. I really have to create enough intensity on an individual that it dominates their attention and they get agitated enough to get over whatever the hangup is. Its better than a constant grind of whining, and usually on the next job they pay in 30 days. My mentality is that once I decide that a bill has to be paid, its black and white, and I don't let go until they give me a check. But that takes a lot of emotional energy!

My business strategy revolves around doing big firm work at big firm rates with small firm overhead. As such, my margins are quite good so the whole logic that many big firms struggle with about cash flow and financing is not super relevant. Part of the slowness of payment is that I don't have an accounting department to chase down payments. The main thing that bugs me about the slowness is just the longer its outstanding the higher the risk is that they won't pay at all.

I have considered hiring a bookkeeping service to keep on top of billing and collections on a more automated basis. Does anyone do this?

RE: Collecting a fee

(OP)
glass,

I haven't had such problems until recently. It is driving me crazy. I think the solution is to let it be handled by an independent bookkeeper, as you suggest. Maybe even a "moonlighting" bookkeeper.

The definition of a structural engineer: overdesign by a factor of 1.999, instead of the usual 2.

RE: Collecting a fee

it took an extraordinary amount of emotional energy for me to drive a rented car on ireland's narrow roads on the left side of the road with my stick shift in my left hand. and i forgot how much energy it took to learn to drive when i was 16. but now i drive unconsciously, just checking my dashboard routinely to verify gas in the tank, velocity, oil pressure tire pressure, such that most of my emotional energy is now concentrated on the xm radio station. i rotate the oil now routinely, not because i am alerted by grinding or hammering sounds (did that), but because of an established routine of replacement every so much distance/time. as smart as you are, you can do this for your business too.

RE: Collecting a fee

Well done, and good ending...

Interestingly I predicted the downturn in the New Zealand economy back in 2007 based on slowed payments to the very large company I was working for at the time... This was based on advice my father gave me: It is not the work which slows first, but the payment for work. There are economic reasons for developers and others to continue work Engineers and Architects do for them, but the payments are often coming from their previous (of even future financing) of work. So it is the performance of jobs other than the job you are working on which predicts payment of your bills, and as a result, makes your accounts a good litmus test for both individual firms and the economy as a whole.

RE: Collecting a fee

Triangled - yes, you are right, bill collection is something you get better at like anything else. Every day that passes I have a little less shame about asking for my money. I appreciate your wisdom on the topic.

What is a good target for the size of an accounts receivable? I understand the industry standard for larger firms is about 100 days. A colleague claims to have hit 40 days, though I am skeptical/jealous.

RE: Collecting a fee

Should speed of payment be one of those fundamental criteria when you are doing marketing? Do you pursue potential clients based on their creditworthiness?

In my world we are all chasing the innovative work and sexy architects, but should we be instead focusing on how many days they take to pay? I don't want to turn into one of those fusty old man firms where they obsess about liability but do crappy conservative design for even crappier margins. My first priority has always been working with client who I trust and communicate well with and shares design priorities, not necessarily with good money managers. I am actually a bit mistrustful of architects with good accounting departments because they use those clever bean counters to get out of paying bills.

RE: Collecting a fee

Glass:

First duty to the public, Second duty to my family and Profession... For the latter two getting paid is the number one measure of success.

RE: Collecting a fee

Sorry, should have made my point more clear: Get serious about your bills, and yes a professional accountancy could be a great service for you.

RE: Collecting a fee

(OP)
I still haven't gotten the check from this deadbeat - despite his promise.

The definition of a structural engineer: overdesign by a factor of 1.999, instead of the usual 2.

RE: Collecting a fee

AELLC - you got this person's attention with your formally worded threat email, now you have to keep them on topic with softer follow ups:

"I just checked my mail box, and didn't find anything from your office - can you offer any update on when you will be able to process the payment?"

This joker only owes you $1200 right? Its not like they are going to have to mortgage their house to get that done.

RE: Collecting a fee

Quote (glass99)

AELLC - you got this person's attention with your formally worded threat email, now you have to keep them on topic with softer follow ups:
No.

Now is the time you follow through with the punishment detailed in your letter. If you do any less, you will be immediately viewed as a pushover, and you might as well kiss any hope of payment goodbye.

Dan - Owner
http://www.Hi-TecDesigns.com

RE: Collecting a fee

Agreed; Break out the consequences.

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