Payment for services 9

[MotorCity]

Questions for consulting business owners:

1. Do you require any payment up front before starting a project? If so, how much?

2. How long do you allow to receive full payment?

Thanks

 

[Terratek]

Not an owner here, but can tell you the policy where I work.

First time clients = prepay 100%*
Established clients = 30 day net (often backs out to 60 days, even 90 sometimes, for certain clients that are inherently slow pay).

*Sometimes you have a first time client who is a major player. We would not require a company like GE, Amazon, etc. to prepay. We'd have confidence in their ability and intent to pay. In fact, many times, you are using the client's contract and not your own. So, policy is 100% prepay for new clients. Reality is that this is often negotiable. I have had some very large projects with first time clients where we required a substantial retainer to even get started. This has them to put skin in the game and also works to cover a lot of hard costs in the event the agreement goes south. You also have to consider what your ability to absorb the loss will be, if it does happen.

 

[Ron]

MC....we usually require a minimum of a 10-hour retainer payment. This gives us one engineer for one day to evaluate the project and determine if we can help or continue on the project. This usually works out to somewhere between $2500 and $3500 depending on the personnel involved. Also, we incrementally apply the retainer credit to invoices, holding half of the total amount of the retainer for the last invoice. We also sometime ask for retainers for work in progress, particularly if out scope of services ramps up quickly and will be significant in terms of fees.

Our invoices are due upon receipt, but we rarely get paid sooner than about 30-45 days. As Terratek notes, some are historically slow pay. We have had some go over a year before payment. Since most of our practice is forensic and litigation support, we sometimes are working indirectly for an insurer (usually for defendant). They are sometimes slow to pay, some have hourly rate limits and some have specific invoicing requirements (no bulk time billing...must be line item billing per task, etc.). Most of our work is for plaintiffs; however, we try to spread it as evenly as possible between defendants and plaintiffs so that we don't get a specific reputation as being biased toward one or the other. On the plaintiff side, they are usually self-funded and that can present challenges for slow pay. When judgments or settlements are reached, we often have to wait for the plaintiff's payout before we get paid. As an example, last April and May we were involved in a trial for our plaintiff client (a condominium association). They got a favorable verdict in the trial, but the defendant is appealing the decision so they have received no payment. As a result, we have not been paid for our involvement in the trial preparation and testimony, which to us is a considerable amount of money.

 

[jdgengineer]

We don't require any payment up front. Some clients pay us anyways which I somewhat despise because it takes me a few extra minutes in our accounting software to handle the retainer. But I suppose cash in hand is better than not.

We typically contract directly with the owner and not the architect or contractor. Our invoices state net 30 which happens 80% of the time. Remaining invoices usually paid within 90 days of initial invoice. Our invoice threatens a late fee but it's never enforced. After 90 days we generally stop work. We end up writing off about 0.5-1% and just consider it cost of doing business.

When contracted with the architect we typically see 90-120 days as standard payment timing. We don't hassle them as much regarding timing as we know what to expect going in.

We always have signed contracts in place before we start which clearly state our fees. About 80% of our fee is fixed with the remaining hourly. I think generally structural engineers are in the sweet spot of the project -- far enough along that the project will likely go forward but not too far along that money dries up.

 

[IRstuff]

Most important is the signed contract BEFORE work starts.

TTFN (ta ta for now)
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[MrHershey]

We typically only ask up front for people we've had payment issues with in the past. Fortunately not that common. Guys tend to either go find some other sucker or go out of business because all the suckers in the area have figured out their act. Probably would be more pro pre-pay if we were doing geotechnical work where I imagine you get roped in early and often do a lot of work for projects that never happen. Clients never seem to remember that you did a lot of work for them, just that the project didn't happen.

Technically we're supposed to start charging interest after 30 days but don't usually do so. It's written in every proposal we send out, we just don't typically enforce it. Some clients are great and pay us right away. A few even hound us to bill them, which is a refreshing change. For architects I'd say typical is probably 90-120 days similar to jdengineer's experience. We try not to stop work but have for guys who are several months late and/or are serial late payers. In my experience it's typically been in the 4-6 month timeframe that we'll stop work, but varies by job/client.

My favorite line for the payment run around is that we'll 'have to wait for the next check run', like the business is only capable of writing checks once a month. Also had one architect whose only accountant must have had some sort of terrible disease as he was out sick every time I called. For like two years.

 

[CBSE]

Contract are nice, and great to have in place in the event a client goes south.

HOWEVER (big however), sometimes long term clients rob Peter to pay Paul, and you don't get paid for months. They always end up paying, but it can be months. It's extremely frustrating, especially when they have said they sent a check, only to turn around and say it wasn't sent. Over the years, I have come to realize that I'm really the last man on the totum pole, and I would much rather wait to get paid, than to lose a long term client and that income flow...just have to plan on it. Frustrating as it may be, long term clients = pretty steady work.

Most payments are less than 90 days. My work is mostly contracted through the architect.

 

[bowlingdanish]

As a result, we have not been paid for our involvement in the trial preparation and testimony, which to us is a considerable amount of money.

That seems odd. If the trial had been unsuccessful for your client with no appeal, would they have paid you? If so why wouldn't they upon an appeal of a successful verdict - do you charge a % of what the condominium associated would be awarded if successful?

Do you often find yourself conflicted in that line of work? i.e. you are working for the plaintiff, and through your investigations you find all evidence points to the defendant being 'not guilty' as it were. How do you then present in court, just write off the plaintiff who is paying for your services? Or still try to convince the court it was the defendants fault?

Anyway, sounds like a fascinating line of work! How many structural engineering companies can provide this service/do you compete with?

 

[Triangled]

1. Do you require any payment up front before starting a project? If so, how much?
Like some of above, no, unless they've had trouble in the past. It makes accounting a little more complicated than we want for what we do. And then, if there's a problem, I'll likely give them just one more opportunity, on a small job, to rectify their credit history.

2. How long do you allow to receive full payment?
our terms are 30 days. 45 days and we're whining. 60 days and they're hearing from me.

after a while, we learn a company's ebbs and flows.....really good on payment turnaround for 8-9 months and then, slow for 3-4 months as they get clogged up at year's end.

 

[Terratek]

When determining your payment terms, you might want to review the lien process requirements for your state. This may be your only real means of recourse in the event of a no-pay. Similar to a landlord evicting a tenant, there is a lawful, time sensitive procedure that you have to follow to place a lien on a property for non payment of services. Knowing the lien process may help you develop your payment terms and rules for exceptions.

 

[Ron]

BowlingDanish....all good comments. The association has severe money issues, without regard to the jury's award. We would have problems being paid either way; however, our odds are much better with a good trial outcome. No, we do not get a percentage of the award. That would be unethical. Our code of ethics states that we cannot do contingent fee work. The lawyers can and that makes their work very lucrative, but we're the poor schlubs who can only work hourly or lump sum! I don't have a problem with that though, as doing contingent fee work would cast a shadow over our credibility. We are and will remain objective in our work and let the chips fall where they may!

The way litigation works, is that if the attorney who first contacts us likes our opinion, we usually continue. If he doesn't like our opinion, but knows we're right, we become "hidden" litigation consultants to him, and not designated as the project's expert. We are then protected under Attorney/Client privilege and don't have to do depositions or trial testimony. We then help him ground-truth the claims of the other side and to some extent, even his own expert, so that he doesn't get surprised in a trial, mediation or arbitration. If he doesn't like our opinion and wants to try and find another consultant who will support his position without question.....well, so be it. We don't go there.

Most cases never go to trial. They settle for some compromised sum so that essentially everyone loses something. We don't care whether we work for the plaintiff or the defendant. We have to be objective in our assessment. Sometimes that objectivity works against us, but that's ok. Perhaps the best compliment I've gotten over the years is when an opposing attorney calls me for his next case.

If we are working on a case for the plaintiff and we find that the defendant is "not guilty", we say so....and we try to do that as early as possible. The same is true when we work for a defendant and we find the defendant (our client) screwed up. We have to let them know that. So no, we are not conflicted with such. I've been doing this a long time, and with a very small group of very competent and trusted colleagues. Our reputation is always worth more than the fees or the answers on any single project or case.

There are several larger, even national firms that do forensic work. Some employ a variety of engineering specialists. That is not our goal. We like being small and busy! Most of our business is repeat or referral. We do essentially no marketing.

Yes...it's always interesting!!

 

[Ingenuity]

If he doesn't like our opinion, but knows we're right, we become "hidden" litigation consultants to him, and not designated as the project's expert. We are then protected under Attorney/Client privilege and don't have to do depositions or trial testimony.

Ron,

In the case where your opinions do not align with your client/attorney so you become a "hidden" consultant, and IF the case does indeed go to trial, are not the other party/ies able to discover your "hidden" opinions/documents via legal discovery, or is that still protected under Attorney/Client privilege?

 

[MacGyverS2000]

Most cases never go to trial. They settle for some compromised sum so that essentially everyone loses something.

Except the lawyers, of course...

Dan - Owner

http://www.Hi-TecDesigns.com

 

[bowlingdanish]

Very interesting stuff, thanks Ron.

The lawyers can and that makes their work very lucrative, but we're the poor schlubs who can only work hourly or lump sum! I don't have a problem with that though, as doing contingent fee work would cast a shadow over our credibility.

I'm not sure I'm so noble...

 

[Ron]

Ingenuity...in most cases, a litigation consultant's work is protected under attorney-client privilege. One has to be very careful with that though, as sometimes a sharp attorney on the other side can pierce that privilege cloak!

MGS2000....yep! Exactly right.

BowlingDanish...it can be a fine line to walk. I've seen engineers and architects in forensic work compromise their integrity. Some suffer for it, some don't.

 

[XR250]

I only ask for a retainer when the client is long distance or I just have a bad feeling about getting paid.
I usually get stiffed for about $700 per year. Not enough to call the lawyers or file a lien.
I am pretty vigilant when the payments are late and will bug the crap out them until it does. Works pretty well.

 

[berkshire]

Be very wary of any statements like “Can you just get on it, we need that stuff now, and we will handle the paperwork later."
This is a guarantee that you will not get paid.
B.E.

You are judged not by what you know, but by what you can do.

 

[bowlingdanish]

BowlingDanish...it can be a fine line to walk. I've seen engineers and architects in forensic work compromise their integrity. Some suffer for it, some don't.

I feel as though engineering is different to law - the rules are based on science and physics, not human creations of legislation and order. If an engineer compromises their integrity I feel they also compromise their credibility. You can't argue a case based on fundamental evidence and physics that is wrong - you will get found out if the other side has a competent expert. I wouldn't say the same about law. Law is a web of precedence and interpretation that is constantly evolving - there is no correct answer, so integrity becomes subjective.

No, we do not get a percentage of the award. That would be unethical.

I strongly disagree with this. Deceiving people, fabricating information, or jeopardising counter evidence is being unethical. Accepting a percentage of an award is just as ethical as the process you follow to receive that award. If you present factual, relevant information that is true and to the best of your knowledge accurate - how is receiving a percentage of the award unethical?

I'm tired of being a schlub - but that doesn't make me unethical