Past-Due Invoices
Past-Due Invoices
(OP)
Hi All,
First, I hope you gentlemen & ladies are doing well today. I wanted to touch base with the group and see how you all were handling unpaid past-due invoices and try to stop some of the bleeding at my own firm. For reference, I'm a sole prop in the Mid-west providing structural services, typically in the commercial/residential sectors.
Usually, my engagement letter has our billings on net 30 terms for perhaps about half of our clients and pay-when/if-paid terms (usually the AIA or DBIA template agreements) for the other half. Full disclosure - I've been stiffed repeatedly on the second group of clients and I have not enforced lien rights as I should have previously (school of hard knocks learning I suppose). I have a meeting with a local attorney to get a handle on the lien foreclosure process/timeline requirements in my state and determine how to best handle that going forward for future projects, but I'd like to poll the group and see how you folks are handling these jokers at your firms. For reference, the lien window in my state is 60/90 days (R/C) from the last date of service. Here is my process as of today:
1] We send our invoices monthly for services performed in the prior month at the start of the following month (eg. invoices are sent Jan 1 for work done Dec 1-Dec 31).
2] Payment reminders are sent 10 days prior to the invoice being late (around 20 days outstanding).
3] Payment reminders are sent after the invoice is late (31 days outstanding).
4] Payment reminders/account statements are sent at 45 days outstanding (15 days past-due).
5] I start reaching out personally at 30 days past-due - usually an email, followed by a call if I can't/don't get in contact with them.
6] at 45 days past-due, I start to become a bit more firm with the language and send another reminder - eg. "When can we expect payment" vs "Hey, reminder about this bill".
7] at 60 days past-due, I halt work on the project (if we are still moving forward). I'm not 100% sure if this should be moved up if it was the terminal invoice for our design services (eg. we are billing for 100% CD's with the expectation to begin CA at some point)? Intend to ask the lawyer about this.
8] This step isn't currently implemented but my thought is to send a notice of intent to lien at 75 days PD with a 10 day cure period and then formally lien at 85 days past-due (115 days outstanding).
I've been perhaps overly generous in the past as a result of a bad experience early. Fairly early after opening my firm, a significant client basically fired us from future projects (recommended we not be retained for future work) for threatening to stop work as a result of unpaid invoices (they were informed at ~45 days past-due that if their invoice got to 60 days past due, we pause work until they were able to bring their account current). In hindsight, I probably should have just terminated their contract then and there but I have a bad habit of people pleasing that has gotten me in trouble in the past.
Anyway, Thanks for reading and your response!
-Huck
First, I hope you gentlemen & ladies are doing well today. I wanted to touch base with the group and see how you all were handling unpaid past-due invoices and try to stop some of the bleeding at my own firm. For reference, I'm a sole prop in the Mid-west providing structural services, typically in the commercial/residential sectors.
Usually, my engagement letter has our billings on net 30 terms for perhaps about half of our clients and pay-when/if-paid terms (usually the AIA or DBIA template agreements) for the other half. Full disclosure - I've been stiffed repeatedly on the second group of clients and I have not enforced lien rights as I should have previously (school of hard knocks learning I suppose). I have a meeting with a local attorney to get a handle on the lien foreclosure process/timeline requirements in my state and determine how to best handle that going forward for future projects, but I'd like to poll the group and see how you folks are handling these jokers at your firms. For reference, the lien window in my state is 60/90 days (R/C) from the last date of service. Here is my process as of today:
1] We send our invoices monthly for services performed in the prior month at the start of the following month (eg. invoices are sent Jan 1 for work done Dec 1-Dec 31).
2] Payment reminders are sent 10 days prior to the invoice being late (around 20 days outstanding).
3] Payment reminders are sent after the invoice is late (31 days outstanding).
4] Payment reminders/account statements are sent at 45 days outstanding (15 days past-due).
5] I start reaching out personally at 30 days past-due - usually an email, followed by a call if I can't/don't get in contact with them.
6] at 45 days past-due, I start to become a bit more firm with the language and send another reminder - eg. "When can we expect payment" vs "Hey, reminder about this bill".
7] at 60 days past-due, I halt work on the project (if we are still moving forward). I'm not 100% sure if this should be moved up if it was the terminal invoice for our design services (eg. we are billing for 100% CD's with the expectation to begin CA at some point)? Intend to ask the lawyer about this.
8] This step isn't currently implemented but my thought is to send a notice of intent to lien at 75 days PD with a 10 day cure period and then formally lien at 85 days past-due (115 days outstanding).
I've been perhaps overly generous in the past as a result of a bad experience early. Fairly early after opening my firm, a significant client basically fired us from future projects (recommended we not be retained for future work) for threatening to stop work as a result of unpaid invoices (they were informed at ~45 days past-due that if their invoice got to 60 days past due, we pause work until they were able to bring their account current). In hindsight, I probably should have just terminated their contract then and there but I have a bad habit of people pleasing that has gotten me in trouble in the past.
Anyway, Thanks for reading and your response!
-Huck
Talk To Other Members
RE: Past-Due Invoices
-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates
-Dik
RE: Past-Due Invoices
With that said, I have a good dozen-plus long term clients that are on Net 30 and pay like clockwork. I bend over backward for them. One group is even on Net 90. But after 8 years of doing regular work for them, I don't mind net 90, and I'm the only one they ever call.
RE: Past-Due Invoices
Another successful strategy is charging a deposit or a retainer fee of sorts. It's helped with easing the cash flow for late payments, but also helps with preventing total loss on cancelled projects.
Interest charges or flat fee late fees are also handy, although harder to implement than I thought. For reference I'm a pretty small fries solo guy...it's usually <$10k for most projects, and quite often it has been in the $500-$1500 for my past experiences with late payments...this makes it even tougher because it's literally a drop in the bucket for the contractor that they are willing to just fuggetaboutit.
I think you are approaching it right with Steps #1 through #6.
RE: Past-Due Invoices
RE: Past-Due Invoices
You tend to loose about 5% I think, but then you get paid on 30 days or whatever you agree with them. You do need some sort of firm Purchase order or contract for them to take on the debt and that there is no reason left why they can't pay ( things not issued or defective ), but can work well.
e.g. https://fundbox.com/resources/guides/invoice-facto...
Anytime I bought things when people used factors the accounts people hated them as they were constantly being called, emailed and generally harassed by these companies to pay up.
Remember - More details = better answers
Also: If you get a response it's polite to respond to it.
RE: Past-Due Invoices
I have automated emails at 3 prior, due date, 3 days after, then once a month. I charge 1%/month compounded and write it into my contract. I generally waive the late fees if I receive a check for the original invoice amount. It's more of a motivator for people to pay.
I have one customer that generally pays about 60 days after I invoice (on net 30). I figure this is them collecting invoices at the end of the month, then mailing them 30 days later, and I only check mail once a week. I have no issues with this since they are consistent.
I recently sent a notice to lien to find out my customer (a sub on the project) got thrown off the project for not performing, and they had already been prepaid for my engineering services. The GC finally made me whole, but it took 18 months! The GC also wasn't paying late fees.
RE: Past-Due Invoices
If its a small outfit where i'm dealing with the owner, They are usually pretty good and pay quickly after a late reminder.
I won't send out a reminder until 30+ days overdue. I invoice net 20. example: invoice issued Sep 30, not paid by Oct 20, still unpaid today, I would be sending them a reminder about now, and also asking about the status.
If I'm still not paid by the 20th of the next month, I will start asking my point of contact "who in your organization do i need to talk to, to get paid". Again, this sparks embarrassment on their end and things usually come through quick.
I've got one unhealthy relationship with a certain contractor who is very friendly and collegial, but pays chronically late, pays the invoice in installments that he makes up, and often skips the last invoice or last installment of the invoice. He still likes to use me but sometimes complains gently about the fees. I always price him based on the 3-6 month wait for the money, + the missing final installment, + the grief of the whole arrangement. About double what i would charge someone else.