I think it hinges on the type of client, and what your clients are used to as a practice. I find that repeat clients tend to pay more reliably; it may be that they are professional clients, like GCs, who are more used to cutting checks- or they understand if the cash stops flowing, so does future work...

Are you doing commercial or residential projects?

I once had someone who our company paid out call on the exact day that the check was due every month and ask if they could send over a courier. They would follow up with, when can we send the courier over please and would just keep sending emails and calling. I will tell you that having someone constantly bothering every month has a way of getting to you and you will ensure that your accounting department is "on it".                                                                     Even the rich developers love to leverage the money they have in the bank, so if it means passing off paying someone so they can close a new land deal, they will. Another option is to add the late charge on the bill or add a discount for paying early.

no good solutions but i've been getting phone calls from a client who wants us to issue some addendum drawings, unfortunately he also owes us $1,000 from 3 years ago.  He's getting pretty pissed, yet apparently not pissed enough to pay us

i think the only reason we even took this new project is that we forgot about the money owed until recently (i wasn't here at the time)

I know a little about this. 

In my business, I work to make collections easy and quick. This means I mostly ignore collections and have been lucky. I've been stiffed a couple of times, but luckily for small dollar, probably $500/year on average. 

In my previous business (15 years ago) I spent a lot of time on collections - mostly because I needed the money to make payroll, so getting it was more critical.

Here's what I do to make sure I'm paid:

1) Ask for 50% retainer up front, before any work begins. On larger projects, the retainer is not 50%, but there still will be a retainer.

2) Remaining 50% before the drawings are delivered. On larger projects, monthly "progress billings" (so I get to decide what I'm billing for each month) and then final payment before drawings are delivered.

3) For good, ongoing clients, I don't require the final payment before providing drawings, but for new clients or people I have a bad vibe about, I want a check in my hand before I give them drawings. 

4) Then, when you are having trouble getting paid:

- Lots of phone calls

- Ask them if there's another way you can get paid, such as a payment plan, a discount for paying now, credit card through Square. 

- I've never sued anyone for payment and glad I haven't needed to. I'm not going after someone for $500, it's just not worth it to me. 

- I have withheld work over lack of payment. This usually gets people moving. 

- I also send my invoices with a stamped envelope with my address on the return address and the "TO" address. Then, all they have to do is write the check. It's a small cost and I think it helps sometimes. 

- Also, with larger organizations, before you even start, talk to them about their payment schedule and how it works. Sometimes, it takes them a month to just process the invoice and another month to pay. Sometimes, you need to hit an exact date if you want it paid this month. You need to know their rules, so you can get your invoice right too - sometimes if you invoice incorrectly they won't pay it. 

- I also make the "retainer" payment part of the LAST invoice. Therefore, you can invoice the "final" invoice before you are done with work, then the "last" invoice is already paid. That way, you don't get stiffed on the last invoice. I also make the retainer non-refundable (although I've refunded in a couple of cases with small projects that the owner's canceled before we did any work). 

PS: you can also go to a collections agency. Sometimes they will buy your accounts receivable and other times they take a percentage of anything they collect. This is probably only useful for really dead invoices, because you end up paying the collections agency a lot of money. But it might be worth it to collect large invoices you might otherwise not get anything out of. 

Is this a cash flow problem or a payment problem? Cash flow can be managed. I built up fairly significant business reserves which has decreased the urgency for prompt payment. I can easily go 90-120 days even on large jobs without getting antsy. Generally clients want to pay their bills. (The number of bad apples out there is really pretty small.) I send regular 30-day notices and that's about it. Worst case I talk to the client to ask if there is a reason why payment is late - 9 times out of 10 that will resolve it. 

I also work on the opposite side of this equation and pay a number of consultants. If I am late on a payment, usually a single call from the project manager I am working with will resolve the issue. I find it incredibly annoying when I get emails and calls from someone at an accounting department I have never met. Also, if you bug me too much, I do get less inclined to work with you in the future. If someone called me the day payment was due or worse sent a courier to pick up a check - I'd tell them to f*** off.

I always felt area architects should go together and set up independent agents to wrangle contracts & payments…maybe a person who is an architect, but not an attorney….for clients to get mad at. Money collection is always a killjoy with clients no matter how you broach it….”what, you again”.

Almost always sent a courier to pick up, the payments never seem to get in the mail.

Holding back deliverables is a real trick, had a client fire me midstream and just gave the half-finished drawings to some schmuck who cut my tile block off and pasted his on…problem solved. Got the usual “It’s not worth it….” from my attorney.

It’s like working with electricity.

If there are issues around getting paid, I've found that they happen at the end of the project, when the client doesn't feel they  need us anymore.

To put a stop to this, we set up the repayment schedule for our initial retainer so that we have zero exposure at the end of the project.  It's all written into our contract in black and white, but a client would have to connect the dots between our payment schedule, and the separate section on repayments of the retainer, to figure this out.  Only one client's done this in 15 years.

Say we get a $10,000 retainer.  The contract says we'll credit that back 10% to the client at the end of SD, 20% at the end of DD, 30% at the end of CD's, 20% at the mid-point of CA, and the last 20% on our final invoice for services.

And we set up the payment schedule for CA so that, for the last invoice says $2,000 for services, less $2,000 retainer credit = $0 due.  So far it's worked like a charm.

that's one of jaffe's laws.  the value of a service is inversely proportional to the completeness.  or something like that.

My attitude is this: clients are people who pay their bills on a timely basis - everybody else is a deadbeat. I don't much mind pissing off a deadbeat.

My contracts/agreements all require a retainer paid up front to cover the "float", plus language that explicitly states all work will stop if the AR goes over 30 days and will not restart until the AR is current, at which point a remobilization fee may be charged (at my discretion).

Wow, great feedback. Thanks.

We're doing all sorts of work from high end residential to some urban planning. We're landscape architects so contracts are inherently much smaller than architecture. We probably send around 150-200 invoices a year.  Lots and lots and lots of small invoices for rendering work, quick studies, sketches, etc. We're small.

We do the 30 day notice thing, helps a little I guess, but for some reason lately clients have been taking upward of 60 days or more. We've never required a retainer, maybe once or twice. Tough to do the stop work thing with all of the small invoices. Those are usually tasks we turn around in a matter of days, no time for retainers, contracts, etc.

I like jcarch's approach for the larger contracts.

With the acceleration of project schedules, fueled by quicker communication and CAD assisted turn around for deliverables, it is interesting our billing systems are still so archaic. With so many invoices a year, you may burn through 1/10th of the project budget just putting together a proposal letter.

I guess I am wondering if for some projects, is it better to be gauche and ask for the money before you start work than it is to be exhausted chasing it down months after the project has ended? If a project is going to be less then a week, why not just collect payment before putting the work together. Maybe it only seems so wrong because it is the fast food model.

Most of our work is hourly. We might give an estimate prior, but more times than not we just get started and send a bill a week later when we're done.

won and done williams -

The reason the General Contractors I have worked with in the past have sent a courier each month was because the bills monthly were over a million. Usually for anything over $750,000 we always requested it come by courier to us and would have it sent that way. In the event that your payment is over $1 million for the month, we would generally courier it to you, especially seeing that you have Sub Consultants which are needing to be paid as well.

Sometimes the reason payments are late is because there is a hold up with the JV partner of the developer. Additionally, if the payments don't fall in line with the monthly forecasting, sometimes the developer has to move money around because the cash isn't laying around. We have also held up money because the consultants were trying to bill on complete drawings when they weren't complete. Instead of asking for some of the fee to be reduced in the bill, we simply would just wait for the work to be completed then pay out.