Non-Paying Clients 1

[SinStrucEng]

Good day everyone,

Looking for opinions and experience-based feedback from other engineers regarding an unfortunate situation that has arisen. We have a non-paying client that has refused to settle their bill. Fortunately, this is a first for us. The bill is truly minor (~$1,500), but has been overdue since May. The scope of services was for the structural design of specific elements on a custom home. We have completed our scope of work, but the client is adamant that they will not pay until we provide additional detailing pertaining to fire separations and insulation (there are three suites in the home - it is for a large family with in-laws, grandparents, etc.). These services were not included in our scope nor were they priced.

To date the client has:
1) Disappeared for weeks on end only to return out of the blue;
2) Emailed and confirmed in writing that they would pay by a certain date (and then proceed to not pay);
3) Argued that cheque, EFT, or Interac e-Transfer are not convenient methods of payment;
4) Asked if we could waive taxes if the bill is settled in cash (this query was also sent to us in writing via email);
5) Threatened us with legal action for "delaying their project" and threatened to submit a complaint to our licensing body.

We have refused to proceed with any work or project support until their bill is settled. We have also notified our licensing body's (PEO) practice advisory team of the situation.

Per our professional practice guidelines, a number of other engineers and firms have contacted us asking about the project, and the situation, as they've been approached by the client to take over the project. We have been truthful and advised them of the situation in full. To date all of the engineers/firms have notified us that they have declined to work with the client/take over the project due to the situation, admitting that they share concerns of non-payment.

Question - Short of small claims court, what would you folks do? Is there something else that we should be doing in the meantime? Should the AHJ (municipality) be contacted and advised of the situation? Any risks or concerns that stand out? We are frankly OK with leaving the money on the table and walking away but obviously want to ensure safety and prudence are respected.

Thank you in advance.

 

[human909]

Fees? For sending or receiving money? Wow.

North America has been long behind most other developed countries when it comes to integration of retail banking.

Hence Palpal in 1998 when most of the developed world had EFT (electronic funds transfer) and later Zelle.


Every client I've ever had has used direct funds transfer. I've recently added CC as an option but that has additional costs for the customer and nobody uses it. Funds are normally received instantly, (the older system was next business day).

 

[XR250]

QB charges me 1% with a max of $7.00 per payment for ACH (i.e. they pay the invoice by clicking on it and entering their bank info) . It is going up to $10 max. in December.
Highway robbery, but honestly it is worth it as I do not have to do any bookkeeping or handle as many checks.

 

[Canuck65]

Likely easiest to walk away from the $1,500 and move on to the next projects.

In the future I would recommend requiring a retainer in the full amount for small projects with non-established clients. Saves a lot of hassle. If a client refuses to pay the retainer up front then they can go elsewhere. I find the ones that are difficult about paying the retainer often end up being the ones that are difficult to collect from.

 

[LOTE]

I typically have residential owner clients pay upfront, with the exception of when a contractor/architect that I work with brings me a client for a project they are already designing/building (and that's usually because the owner requested to pay me directly). I always have a signed agreement, no exceptions. One of the struggles is getting clients to sign the agreement even though they have already paid the invoice, despite clearly telling them they need to do both before I send them any deliverables. The agreement spells out clearly the scope of work (and what is not included), how disputes are settled, defines "degree of skill and care" of services, deliverable timelines (from the point of both signed agreement and receipt of all necessary project information), and the rates that will be charged for any changes in scope of work. If there is a change in scope, I tell the client immediately, as well as give them an estimate on the redesign costs. I have them accept the estimated redesign costs via email before proceeding.

For non-residential owner clients, I typically have net-30 terms with interest charged at 1% each month (12% annually compounded monthly), which is clearly detailed in the agreement. QBO makes this simple to implement. I rarely follow through on the interest charges and use more to say "if the payment goes through before I hang up this phone, I will wave the late fees" for those that are behind on Payment. If they ghost me, I start the lien process with a final email to the client followed by an official notice to lien sent to the owner, GC, and client. So far, that has ruffled enough feathers to get me paid pretty quickly.

I advertise taking ACH, credit, debit, and PayPal (all through QBO with payment link on the invoice) and even BTC. I then put a note on the invoice that if their company policy only allows them to pay via check, then mail it to X address. The invoice and payment link are sent in the same email as the deliverables, in addition to an auto email generated from QBO. If I client asks, I will also accept Zelle. I figure if a client is willing to pay me today, I don't care the methods they use as long as I receive it.

I have no issues absorbing the online payment fees from QBO. From my experience, a client paying online will pay within 24 hours of receiving the invoice. A client mailing a check will be 2 months after the invoice, and they will consider that "early" despite the net-30 terms. I will gladly absorb the 2.9% fee to never hear "the check is in the mail" ever again.

 

[XR250]

"I typically have residential owner clients pay upfront"

I can't imagine doing this for most. You are basically beginning your relationship saying, "I don't trust you". Most of my work is residential and my default rate is super low - none this year on over 500k of billings.

There have been situations where I do charge upfront
1) When the customer seems sketchy
2) I have to drive a long way to get to the project.

 

[rwpe]

I agree with the advice of just chalking this up to a business loss. On a side note, not sure how or if this applies, but a method we used to collect was to inform the building department of removal of our seal from the drawings. Basically, we contacted the building officials in our area to determine if a C.O. had been issued. It had not but was due to be issued that week. We informed them of the situation and that we would issue a letter to that effect, copying the client. The client was calling the day after they received the letter, desperate to make amends. Note, this was not a residence but a supermarket.