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Long time to collect fees

Long time to collect fees

Long time to collect fees

(OP)
I am an electrical/mechanical design engineer in TN, just starting my own firm.  So far, so good - my accounts receivable keep growing, but converting receivables to cash is becomming a problem. A few of my clients, God bless 'em, pay by the 10th, but most are over 90 days past due. Is this typical in the design business?  Or am I not being aggressive enough in collecting.

RE: Long time to collect fees

(never mind what the Purchase Order or Invoice stated in writing and they formed a legal contract by agreeing to a commercial transaction with your firm...)

I've heard this too many times:  "I can't pay you until I get paid by MY customer."  Then you'd better go see your banker.

A few options:

Down payments.
Progress payments.
Retainer.
Timed software licenses that don't get renewed unless payments are made.
Schmoozing the client well ahead of payment time to establish a relationship of "need to pay this guy".
Send Guido and Rocky over to visit your client.  shadessad shadessad
 

TygerDawg
Blue Technik LLC
Virtuoso Robotics Engineering
www.bluetechnik.com

RE: Long time to collect fees

I work on phased payments.  My ability and willingness wto work is directly related TO BEING PAID ON TIME.  ie, no pay, no work.  They'll find the money real quick if the project is halted and the subs know it's because you have not been paid.  

I also do not release any final stamped calculations or drawings until the bill is brought up to date.  

I also go by another motto here... "Piss poor prior planning on your part does not constitute an emergency on mine".  

No more Mr. Nice Guy here...  bigsmile

Mike McCann
MMC Engineering

RE: Long time to collect fees

Here in CA we have the legal ability to file a mechanic's lien.  Of course, this only is applicable when working on real property improvements and you have a contract with the owner.  One simple thing I have done to move payments along is to have a polite discussion with the owner about the preliminary lien notice that I need to perform in order to protect my lien rights.  For owners, just being made aware that I can put a lien on their property, that wakes up their checkbook.

Jim

RE: Long time to collect fees

Yes, I remember CA having those notices - and I think Oregon as well, if I remember correctly.  As an owner's representive working on CA project back in 1991, I still remember getting on the phone with the general contractor immediately after getting that notice in the mail - and remembering it was only 6AM Pacific time when I called (pre-cell phone days, thank goodness).  I started to watch and track the lien releases from the folks who filed the notices and I remember thinking - this is great, now I know who's really on the job (subs of subs, and material suppliers) and not get surprised by someone not paid for a load of dirt.  I think Ohio went to something similar about that time.  In Ohio, the owner records a Notice of Commencement to make it easier for people to file their Notice of Furnishing.

I do get in the habit of sending my customers monthly statements - even if paid up - unless there has been no activity in like 60 days or more.  It reminds them I am still there or that they have an aging account (especially when it shows up in the 90 day box).

Before I send a statement out showing a 60 day outstanding balance, I call the client to see how things are going, to see if they need anything, ask for feedback on the project, and the ask them if they knew the invoice had not been paid.  A lot of the time, the person I work with was not aware it was not paid and takes care of it.

I guess I have been lucky to not have to chase a client for 180 days but I did have one (architect) who was waiting to get paid and I did have to wait like 120 days.  But as long as their story stays consistant and appears honest with me, I'll work with them.  

I do budget about 10% of my billings as uncollectable so I do not have to count on these to pay the bills.  If I get the 10%, bonus for me.

 

Don Phillips
http://worthingtonengineering.com

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