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]

Thats probably what mine is now. I have had years in excess of 50k between multiple clients. That's why I don't work direct with home owners.

There is a large amount of people who think if they don't build it they don't need to pay lol

50k that is crazy! I'm sorry you (and others) had to experience that!

I'm pretty new to the sole operator game. This thread has made me realise techniques I've been using (mostly unknowingly) to help ensure I get paid:

1. If you can, know your client. Be friendly, honest and open. This goes a long way in gaining their trust and empathy connection. If they trust and have a empathy towards you they are FAR less likely to not pay you.
2. Expectation management. Manage their expectations about costs. Nobody likes being hit with an unexpectedly high bill out of nowhere. Manage if from the beginning and adjust if needed. (I recently had a client where I essentially ended up doubling the rough figure I had given early in the engagement. I let her know the reasons and expressed my sincere frustration and explained it was outside my control.)
3. Provide discounts if strategically required. The above two tips are probably straight out of standard advice. This last one is an approach less commonly used in the professional service industry but extremely common in consumer retail. I provide minor discounts to loyal/favoured clients. I have occasional provided moderate once off discounts to residential clients where the costs have blown out. A client is much much happy to receive a $3000 invoice with 25% off than a bill for $2500. A happy client will more likely pay. (I'm not even sure if the last one is that sensible, I might just be short changing myself. But my billing rates are what I see as decently high. And getting paid a discounted fee is far better than not getting paid at all.

Those are my tips. As I said I'm new to this game of sole operator consulting engineer. However I'm not new to people management or to retail sales (I've worked minimum wage retail work in a previous 'career' life).

Also after reading this thread and thinking more. I might just make my "discounts" only applicable for payments that are on time. Again, this is all about strategy, a quick payment is a good one.

 

[Eng16080]

A few things that have worked for me, especially when dealing with non-repeat clients:

1. I always try to make it very clear what the cost will be up-front for engineering services. I generally avoid hourly work for this reason. If I do hourly work, I give frequent updates, letting the client know that it will likely take x hours for a fee of $x if they want me to proceed. I try to overestimate the hours I tell them so the fee will be a little less.
2. Any projects which involve some type of structural assessment where I might give the client an answer they don't want are potential red flags. Such projects should either be avoided entirely or there should be upfront payment. I also try to alert them of the likelihood that my assessment will not be favorable to them. I had such a project once where the owner was just shopping around local engineers looking for the most favorable assessment of their existing roof. My assessment involved replacing/modifying most of the roof. At the end of the day, we did not get paid.
3. Related to #2, another red flag is a potential project which has had previous engineers and especially where the client has expressed disagreement with previous engineers, usually implying that they know better.
4. I've found that potential clients who use some of the following phrases are potentially problematic: "I just need a stamp...", "... this one simple thing ...", "the building inspector only needs ...", "I don't need an engineer, but...", "not going to use the plan anyway, but I need..." Or if the client happens to be a builder and they're constantly mentioning their 30 plus years of experience or how a building has been standing for x years, etc.
5. I usually send an invoice immediately after work has been completed when the costs are fresh in the client's mind. I don't like only billing on a monthly schedule, for example, where there could be up to a month's delay between completing a task and sending the invoice.

 

[XR250]

This is the first one for me this year. Homeowner owes me $440 for a site visit. Finally paid me after 2 months then he disputed the charge and he is being evasive now. I am going to take him to small claims court just to f' with him even though it is not even close to be worth my time. Figure I will get a judgement against him then I can ride with the sheriff over to his house and start taking shit .

In general, my non-payment rate is about $1,000 per year.

Well apparently, I harassed this guy enough and he finally paid. Probably some of the stuff I do to collect is illegal but they can sue me I suppose.

 

[KevinChez]

Recently I have the client pay me before they get stamped plans or calculations. That is working out well.

Younger clients are using Zelle and other cash apps. I have found that younger clients pay much better than the Gen X'ers. And older clients will pay in cash.

I have been asking for a higher retainer fee. Especially if it is rush rush.

If you use an app that allows for credit card payments it is worth paying the fee to get what is owed.

Always have a contract or some sort of proposal that states commencement of services is the same as a signed agreement.

 

[PlinkoEng]

Can second using digital payment does help. The. They can't do the 'its in the mail' dance.

I do caution people taking retainers or charging up front. As it can lock you into time lines and delivery. It's much harder to drop a bad client if they already paid you. If you do take money up front always hold that money in your account until after you have delivered so you don't get in a cash flow bind if you need out of a contract.

 

[phamENG]

If you use an app that allows for credit card payments it is worth paying the fee to get what is owed.

Varies by state, but as long as you don't make credit card payments your 'normal' method of payment, you can pass the fee on to the client. That's what I do. It's a convenience fee. Again, some states don't allow it. If it is your normal method, then you can just account for the cost in your billing rates.

 

[lexpatrie]

Always have a contract or some sort of proposal that states commencement of services is the same as a signed agreement.

I'd be absolutely floored if that was enforceable. I suppose it's like the "if you hurt yourself, you're screwed" thing on the back of a lift ticket. It's not enforceable but it deters some people.

I have yet to take a credit card. Though if I had something set up, sure, fine. But I've not set it up and get relatively little demand for it, too. People have boxes of checks they write three a year, so it's almost a public service, helping declutter the world one check at a time.

I'd stay away from Zelle, that's not a particularly secure application. Lost $1,000 that way, once.

Anything that involves giving our your banking account information is probably poor practice. When I see somebody like, say, KPFF or DeSimone or TT, or AECOM taking Zelle, then maybe I'll consider it. Until then, I'm fine with checks that take a week to arrive. Where I am, people are generally honest, and on the design work I typically do a contract. This kind of stuff is not the lifeblood of my work, and having to chase it a little, that's fine. The stuff I don't get paid for becomes fodder for the next seminar I present. So it "earns" in a different way.

(Also, if you use the internet archive and have an account, I recommend changing your password, they got hacked recently, scorched earth hacked), and the whole whatever that company was that leaked the SSN of half the planet, yeah I seem to be in there, according to one of my credit cards that offers free monitoring.

do caution people taking retainers or charging up front. As it can lock you into time lines and delivery. It's much harder to drop a bad client if they already paid you. If you do take money up front always hold that money in your account until after you have delivered so you don't get in a cash flow bind if you need out of a contract.

Gonna go out on a limb here and say most contracts for small projects like this don't have any timelines in them. Mine certainly don't.

If you have a cash flow bind on a retainer for a small project, you have larger problems than that. Your practice is teetering on insolvency. And returning the funds for the deposit isn't fully necessary to sever a contract, there's the possibility the contract allows you to keep that, and or you can return it later. Timing matters on a lot of these things. NOT that I'm an attorney.

I, personally, don't like to hold things hostage for payment.

 

[XR250]

I use QB Online which gives the option for bank draft, CC or other methods. I generally only allow bank drafts through QB, checks or cash.
If they want to use a CC, I turn on that option in QB for that invoice and add 3% to their tab.

 

[PlinkoEng]

If you want an easy way to do alternative payments QuickBooks is good. It sends out a link they can use so no direct ACH like Zelle. It's also easy. Fees are in the middle.

 

[phamENG]

I use QB Online which gives the option for bank draft, CC or other methods. I generally only allow bank drafts through QB, checks or cash.
If they want to use a CC, I turn on that option in QB for that invoice and add 3% to their tab.

Wait a minute. Does QB let you do that now? Last I checked they didn't.

 

[SinStrucEng]

Wait a minute. Does QB let you do that now? Last I checked they didn't.

Yes it does. We also use QB online.

 

[phamENG]

Great. Thanks for the info. Not having that feature was one of the reasons I passed them up a couple years ago.

 

[XR250]

Great. Thanks for the info. Not having that feature was one of the reasons I passed them up a couple years ago.

There are many other reasons not to use QB - primarily that Intuit is the worst company ever. My Accountant and Bookkeeper require it though.

 

[phamENG]

Intuit is the worst company ever

In the interest of not running into a political discussion on US tax policy and the involvement of the private sector, I'll simply agree with you.

Its ubiquity does have a certain value, though.

 

[LittleInch]

Do you guys not have bank transfer payments available?

Most people for things like this in the UK and Europe just quote a bank sort code ( 6 digits) plus an account number (8 digits) and account name.

International ones are a bit more complicated and take a bit longer, but similar.

For a big amount you normally send a token amount first, get the recipient to confirm receipt, then send the rest. Most / all telephone / internet banking or banking apps allow you to do the same thing.

i don't think anyone under 30 actually knows how to write a cheque / actually have any.

 

[phamENG]

Do you guys not have bank transfer payments available?

Yes, but there are usually fees associated with those, too. Less than credit cards, of course. For small time clients - non-business clients, really - they may not understand that their credit card rewards have an actual cost being paid for by the businesses they buy from, so they'd rather use their credit card to "earn points" than pay a fee to their bank and not get anything.

 

[ChorasDen]

Yes, but there are usually fees associated with those, too. Less than credit cards, of course. For small time clients - non-business clients, really - they may not understand that their credit card rewards have an actual cost being paid for by the businesses they buy from, so they'd rather use their credit card to "earn points" than pay a fee to their bank and not get anything.

On that topic, for a long time, not sure if this is still the case, but if you made quarterly US tax payments online using a credit card, the general charge from the organization collecting the quarterly tax payment was something around 1.9% of the taxes paid. So if you paid with a credit card that gave 2% cash back, you came out ahead.

 

[LittleInch]

Fees? For sending or receiving money? Wow.

 

[SinStrucEng]

In Canada (Ontario) we have Interac E-Transfers which are done via online banking (apps and website). They are either free or $1.50. Either way, not bad. 99% of our bills are paid by that method.

 

[PlinkoEng]

Wait a minute. Does QB let you do that now? Last I checked they didn't.

It's called payment links in their system. It's really easy for clients.