Building Services fees and collections Mech/Plbg/Elec
Building Services fees and collections Mech/Plbg/Elec
(OP)
I did a search and found "some" discussion about this a few years back, but thought I'd throw this out for opinions and comments:
Nearly 90% of my clients (architects mainly, with the odd developer direct client) take over 90 days to pay invoices - "It's our policy not to pay consultants till we are paid...", and the old - can you revise this in your invoice and re-send, buying another 30 days before they need to pay.
We have a policy here of getting the Client to sign a fee proposal letter, which clearly states our terms are "30 days from receipt of invoices". I tell them - our fee agreement is with YOU, not your client, so I don't care when he pays you.
After being yelled at yesterday by a delinquent client who told me "if I didn't like working for them, there are plenty of other consultants out there...." after I pointed out that my motivation might be better to provide a bunch of edits, and another deadline change later in the week if our invoices were paid more promptly....I need to vent.
Basically we MEP types have become a commodity, and we have all accepted, for some reason, that we must provide fixed fees for unknown amounts of work, and deal with way too much scope creep, and if we can't even collect the basic fees, let alone start asking for additional services fees, what does one do? I keep getting told "that's the way this industry is, you have to deal with it..."
Basically if "all" the clients out there that we MEP consultants are servicing are all taking 90+ days to pay invoices, I can't go with the old "find better Clients" advice. So, do I keep raising my fees to cover the fact that I am helping finance the Clients' project? Then lose work to lower fee consultants......?
Nearly 90% of my clients (architects mainly, with the odd developer direct client) take over 90 days to pay invoices - "It's our policy not to pay consultants till we are paid...", and the old - can you revise this in your invoice and re-send, buying another 30 days before they need to pay.
We have a policy here of getting the Client to sign a fee proposal letter, which clearly states our terms are "30 days from receipt of invoices". I tell them - our fee agreement is with YOU, not your client, so I don't care when he pays you.
After being yelled at yesterday by a delinquent client who told me "if I didn't like working for them, there are plenty of other consultants out there...." after I pointed out that my motivation might be better to provide a bunch of edits, and another deadline change later in the week if our invoices were paid more promptly....I need to vent.
Basically we MEP types have become a commodity, and we have all accepted, for some reason, that we must provide fixed fees for unknown amounts of work, and deal with way too much scope creep, and if we can't even collect the basic fees, let alone start asking for additional services fees, what does one do? I keep getting told "that's the way this industry is, you have to deal with it..."
Basically if "all" the clients out there that we MEP consultants are servicing are all taking 90+ days to pay invoices, I can't go with the old "find better Clients" advice. So, do I keep raising my fees to cover the fact that I am helping finance the Clients' project? Then lose work to lower fee consultants......?
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RE: Building Services fees and collections Mech/Plbg/Elec
Rafiq Bulsara
http://www.srengineersct.com
RE: Building Services fees and collections Mech/Plbg/Elec
Whilst you would always sooner have the money in your account this was not much of a problem in better times with a steady flow of work and cash, but with the "rainy day" pot of cash long gone and banks unwilling to lend it is now a major problem.
What hurts even more is the possibility of companies going into liquidation, often through late payment, as you are effectively exposed to a quarter of your annual turn over at any given time, I had three go down last year and another major one would sink the company.
For this reason I now limit my exposure to any one company, although this does not go down well with some companies. I looked at charging interest on late payments but was told this is a very grey area as you then effectively become a loan company, which is slightly ironic, in any case the actual time involved in actually being able to do anything meaningful made it a non starter.
Factoring is a possibility as are debt collecting agencies but again you need to increase your costs to cover this, or work on smaller margins. One possibility put to me was to increase costs by say 20% and offer a 20% discount for payment within 30 days, however if they can get 90 days for the same cost why would they do that?
I wish I knew the answer; it will be interesting to see if anyone comes up with practical solutions other than I only work for companies that pay cash up front.
RE: Building Services fees and collections Mech/Plbg/Elec
Consulting engineers are themselves to blame who submit to such clients. Unless engineers begin to respect themselves and start making right decisions such as not to work without timely payment, do not expect respect from others.
I have no sympathy for those who inflict hardship on themselves. You sign the contract knowing full well the payment terms and yet complain, that is absurd. Complaining here for architects will not get you anywhere. Start saying no to extortion, however difficult it may be.
It is the right advice, like it or not.
Rafiq Bulsara
http://www.srengineersct.com
RE: Building Services fees and collections Mech/Plbg/Elec
The engineering field as a whole is treated like a bunch of saps, business wise. And a lot of them just take it. I still can't really figure out why.
But, I am pretty sure that Architects do like to get paid and pay their bills on time. I know some big architects out here get hit hard with all the bankrupt condos in Downtown LA. The architects don't feel like the right direction to be frustrated with.
Civil Development Group, LLC
Los Angeles Civil Engineering specializing in Hillside Grading
http://www.civildevelopmentgroup.com
http://www.civildevelopmentgroup.com/blog
RE: Building Services fees and collections Mech/Plbg/Elec
Since "everyone" in the building construction consulting business seems to operate like this, then getting out of that part of the industry altogether is really the only solution to maintain sanity and find the fun in engineering again.
RE: Building Services fees and collections Mech/Plbg/Elec
In that case I usually ask for 120 days - so if I have an invoice that is unpaid after 120 days, I can suspend services or terminate the contract. Threatening to stop work is the only method I have ever found that works for forcing slow-paying clients to send a check.
If a client balks at the 120 day limit, I always ask them: "So how many days do you plan on working without pay for YOUR client after you've sent an invoice? 180 days? 360? Forever?" Often they just haven't thought of stopping work as an option. In my experience, architects are especially bad at stopping work and forcing their own clients to pay them... but they don't mind letting you continue working forever without paying you.
Ultimately, quality and timely service is the best way to get your clients to pay you. If they like you and want to work with you again they're much more likely to pay your invoice. As nice as my standard "45 day" terms are, contract terms are generally pretty useless for convincing someone to pay you quickly if they don't want to. You can use them as a threat, but if someone doesn't like you or if they don't have the money there's not much you can do. Except stop working. My time is worth something... I don't work for free.
Tim
RE: Building Services fees and collections Mech/Plbg/Elec
Cvanoverbeke