You are wooed by a client who promises to pay you well for your services. The only catch is that you commit fully today to do so but the payment won't roll in until December. After considering your options and the size of the offer you commit.
Finally, December rolls around. You anxiously await your payment. One day the mailman leaves you a surprise in your mail box. You open the envelope and there's your check. But, it's only for 80 percent of the agreed upon amount. There's a letter enclosed explaining that the client had mismanaged their own affairs and found that they could only afford to pay you the lesser amount. They indicate they would love to continue doing business with you and hope to be able to pay you in full next time.
Well, they did pay 80%. I have had that figure at 50%, (My retainer)
I would send them an updated invoice showing the remaining balance on that project every 90 days.
Statement every 30 days showing outstanding balance. Unacceptable to not pay agreed price they are not respecting you as a professional. They use the lure of future work to avoid full payment.
Oh, boy. This thread triggers two memories:
Working for dad about 30 years ago, we did the surveying and engineering for a single family house. The client paid about 1/2 the total bill, and included a note: "I was over my expected budget, so this is all you get." The client was a financial manager for a local company.
Totalsurv, post: 355837, member: 8202 wrote: They use the lure of future work to avoid full payment.
Yup.
Around the same time, we did the same type of work for a local builder. He paid his bills, but shorted the last one about $500. A couple years later, he comes into the office and says "Here's the $500 I owe you. Now start on my new project." Builder shorts the final bill about $2000. A couple years later "Here's your check, and the next project." On the last project, he shorted us $12,000, and did this to all his subs too. This was in 1991, and he never paid. He is still around, I don't know how.
Dad would continue to work for clients who stiffed him. "Well, he paid me for THIS job." He lost thousands this way. These people have no intention of ever paying you, they just lead you along. Even a so-called friend of his did this. A selectman in the town, and owing dad over $10k for the last project, he would invite him to lavish parties he would throw, sometimes complete with a Hollywood actor in attendance (but couldn't pay his "friend" the money he owed him).
After seeing this happen as I was growing up, I have become somewhat ruthless about this. I get 50% up front, and on many projects, the client doesn't get the final plan until he's fully paid. I have only been stiffed once (back in 2003 by one of dad's clients!) for $200. So I will never, ever work for him again, and a few years ago, I even turned down a job on a house he USED to own. That'll show 'em...
Attach a lien on the property for the for the amount owed and notify the client that you have done so. Being a purveyor of surprises, he should get a real kick out of that, and a second one whenever he tries to sell it.
Very frustrating. I recently had a general contractor as a client on a school addition, and he was upset with me because I wouldn't lower my hourly rate. Well, my first check from him was about 20% short, and I immediately jumped to the conclusion that he was trying to get back at my for not changing my rate. I took about half a day to calm down and then went by his office to question it. Luckily, this one turned out to be an honest mistake and they issued me a new check.
Send monthly statements and start tacking on interest. Put a lien on the property. Have your lawyer write them a friendly letter.
The advantage to working at a big firm is that you can afford a dedicated accounts receivable staff.
It appears that I forgot to mention that this is a client you have had for years. They set the rules and what they are willing to pay. You either agree or disagree. Your nearest competitors also do work for the same client on the same basis. You have geared up your abilities, at some expense, because of this client. You would be in a bind without their business.
Holy Cow, post: 355945, member: 50 wrote: You have geared up your abilities, at some expense, because of this client. You would be in a bind without their business.
A somewhat related cautionary tale:
When I went home from work on the afternoon of Friday September 12, 2008 I had a client who represented 50% of my billings. I was working on three development sites in downtown DC and a multi building office/hotel park in suburban Maryland for them. At 7:00 AM the next Monday I found out that they had one equity partner on all four of their current projects and three more that were in the pipeline - Lehman Brothers. Seven weeks later I was out of a job.
Even if I have to spend three nights a week at soul crushing "networking" events and spend hours of my own time developing potential client leads; I'll never have my billing from one client exceed 12% - 15% of my total billing goals over the long term.
If the 80% payment was still considerably more than I would have typically invoiced for the same work........maybe, but it would still eat at me. Allowing them to adjust your invoice based on their own failures or perceived lack of profit sets a dangerous precedent. I'd be afraid to work for them again lest the same thing happen again. Giving yourself a 20% discount and getting away with it could be habit forming.
It reminds me of working in the cell tower business. The tower companies would negotiate pricing and delivery times based on large volumes of "clean" sites close to home with short access roads. In reality we'd get a handful of sites per year, one at a time. Every site would be located in the far end of the state in an impenetrable thicket 3/4 of a mile or more from the nearest public road with the utility easements coming from the opposite direction and no place to run GPS within a 1/2 mile of the site. They'd send a site package late Friday afternoon with no warning and be mad when they couldn't have the 2-C letter on Monday and the completed survey by Wednesday. I went a few rounds on that merry-go-round, each time tightening the proposal so that if a site were too far away from the office, too far from the road, etc. that I could bill at a higher rate and have more time to deliver. I quickly discovered that they were more talented at finding ways to screw me than I was at fending them off so I quit responding to their requests for proposals. They seemed genuinely surprised that I no longer considered them a valuable or viable source of work.
The poor Developer Con. It is in the Con Man's Bible right after the Pigeon Drop and pyramid schemes. As he has clearly stated his intention, my suggestion is that you send him a letter outlining the terms of your contract and that you reject his proposed modifications of the the agreement. Alert him that if he has not paid the full remaining balance within 30 days that you intend on filing a suit. I would send it registered mail showing that you copied your attorney. When it is BS, you have to play the BS card.
Don't accept contracts where payment occurs months after completion of your work. You're essentially giving up all your rights under mechanic's lien law.
If your contract is directly with the owner, file a mechanic's lien immediately after completion of your work if payment irregularities occur. If you are a subcontractor, upon beginning your work also serve a Preliminary Notice of Mechanic's Lien to the owner, contractor and lender so you'll have the right to file the lien upon completion if necessary. The particulars vary considerably from State to State, the exact wording of your contract, etc., but time is of the essence, waiting until months after the fact bars you from filing the lien. Filing a lien and serving Preliminary Notice is cheap; it doesn't require lawyering up.
Will having a lien on the property prompt the client to cough up the money? It's fairly powerful, if he's just using you as an interest free loan agency. The lien makes it difficult (but not impossible, he can bond off the lien, for example) for him to refinance the project, obtain his Final Public Report (White Sheet) so sales can proceed, release Construction Bonds, etc. So paying you off may make sense to him if you have a valid lien in place and the claim is relatively small.
If he's planning to stiff you because he thinks you don't have the balls to initiate a foreclosure lawsuit because of the small amount of the claim or your risk-reward calculations don't pencil out, or if he's facing bankruptcy, not so much. Superior court actions are expensive, and: "the contractor must bear the cost of litigation in order to enforce their mechanic's lien rights. For disputes of a minor value, a mechanic's lien is not going to be a cost-effective method of obtaining payment for services.", although some States award attorney's fees to the winner. And filing the lawsuit must be done in a timely manner or the lien becomes unenforceable, although it continues to cloud title (unenforceable lien). The bankruptcy scenario, mechanic's lienholders are lower on the list, behind construction lenders, mortgages, etc., and you'll probably see pennies on the dollar if anything (ask me how I know this) |-).
The US mechanic's lien laws date back to Thomas Jefferson, and provide protections for real property contractors who would otherwise be subject to abuse by owners. If you offer underpayment or nonpayment on an undisputed bill to the guy who fixes your car, he'll simply refuse to give you your car back. No such simple mechanism exists for stiffed real property contractors, their services and materials are inexorably bound into the improved property upon completion and cannot be taken back.
I've been puzzled why some surveyors don't assert their rights when payment becomes a problem. I've heard "I don't want to gain a reputation in the development business as an a**hole", "Times are tough and I'm sure he'll pay once the first few lots are sold", "We go to the same church (same skeet range for you Okies) and I just can't face him week after week because I've sued him", and worst of all "People underestimate the value of surveying services because it's mostly invisible, so some simply stiff the surveyor to compensate; I'll make it back on the next job." One rational reason to accept a reduced payment I've heard is: 80% of the contracted fee is better than 0% after a protracted attempt in the courts come up empty, considering court and counsel costs. There may be others; I'd like to hear them.
We surveyors are an odd group, we really like our jobs with its sleuthing, research and preservation of history, technical aspects (I've never met a stupid surveyor, crooked yes), outdoors work instead of 40hrs/week in a cubicle, professional development for our entire careers and a general feeling we're providing a critical service which will benefit our communities long after we're dead. I think it's partly the reason we allow some clients to abuse us concerning the business end of our services.
The 50% retainer folks out there, good on ya'! Before I left the private sector our reputation was so good and we had such a deep understanding of the local cadastre that most of our regular clients were T&M with a ballpark estimate up front, revisable upon discovery of changed conditions, up or down. They truly understood our value added services, the fact that we would bump them up to the top of the list if time was of the essence and accepted the complexities of doing things right. OTOH, the financially on the edge out of town developers looking for the cheap lump sum survey services, 50% up front and that 50% covered 80% of our estimated costs, so we would end up in the red every now and then but generally covered the spread, even when stiffed. Of course those clients generally selected the jackleg two counties away and got what they paid for :-).
Sorry for wandering off thread but the weather's really bad today.
This just happened today, I got a call from a builder representing a client who had stiffed me for over a year then only paid when someone needed the acad file. I'll set up this contract for all money to be due upfront, if he doesn't like it, he can walk. Our typical payment schedule is 1/3 deposit with contract and the final amount due with the release of the map. If you're communicative about it upfront, people are usually understanding.
My retainer is 67%. Very few people owe me money. The amount outstanding currently is not enough to get worked up about.
I got a call today from an agency of collection. She asked if anyone owed me money. I lied and said no. Someone owes me $500 and I pay you half to get it? No thanks. I'll collect my own money before I even start the job.
I did recently threaten to take legal action against a non-paying fellah. He owed me a grand. He paid the balance in 2 payments over 2 weeks.
Going to the magistrate to start collection proceedings only cost about $120. You're not guaranteed to get anything but it puts a black mark against them. Most times, the threat of legal action is enough for the average Joe to pay up.
Filing a small claims action here runs $47.50 which is good for amounts up to something like $1500 or $2000.
