I'm kind of new to working the business side of the surveying profession, so I have been trying to judge the quality of the clients that I work for. I have done a few jobs for engineers and it appears that they can pay for a decent billable rate. However, getting paid in a timely manner seems to be the trick. It seems that of all of the engineering projects that I have worked on they take the longest to get paid (usually more than 90 days). Is this typical?
Bow Tie Surveyor, post: 327611, member: 6939 wrote: I'm kind of new to working the business side of the surveying profession, so I have been trying to judge the quality of the clients that I work for. I have done a few jobs for engineers and it appears that they can pay for a decent billable rate. However, getting paid in a timely manner seems to be the trick. It seems that of all of the engineering projects that I have worked on they take the longest to get paid (usually more than 90 days). Is this typical?
In my experience, yes.
A lot depends on their billing cycle and the project manager.
It would be worth your time to express your preference for timely payment to maintain cash flow. After all, every company does have a payroll to make. Discuss with the PM and their billing department to learn their billing cycle.
The terms of payment in your contract will also dictate how soon you get paid. Typically as a subcontractor you won't get paid until the client pays the engineer. Contracts are negotiable so it would be worth asking for different payment terms if you feel a 90 day billing cycle will pinch your cash flow too hard.
Just my $0.02
What Kevin said.
The further you are away from the money, the longer it takes to get paid. Find out when they submit their invoices to their client and make sure yours are in before that each month - even if it's just incremental progress billing.
There are some guys who will want their contract to state that the engineer pays on delivery rather wait for the engineer to get paid. The way I see it, if they are a good firm to work with and you want to develop them as a long term client, you've got to help them out a little too - it's not like a small or mid sized engineering firm keeps the kind of cash on hand that Apple does. And it runs both ways, if you have to subcontract aerial mapping for the project your sub is going to have to wait too. Business can be about finding customers to pay you or clients to have an extended relationship with; the latter is more difficult up front, but has (IMHO) better long term results.
I work at a pretty big firm, but last year I had a project where the billing went: me - local engineering firm - national ENR top 10 engineering firm - DOT. And the money had to flow back down the same chain. At one point I had $1.2 million in 120+ days accounts receivable. The bean counters were starting to get nervous, but my attitude was: "You know what kind of rain making stud you have to be to invoice that kind of number in the first place" 😉
When I work on projects "with" / "for" engineers, I try to work directly for the ultimate client or as close as I can, with the engineers permission.
Then I show the engineer how to request and collect retainer fees.
I've had bad experience with an engineer partner once upon a time so I am probably slightly slanted in my opinions. But to answer your question, yes, slow pay is generally typical when working for consulting engineering firms.
I've had engineering clients that screamed and hollered and peed all over themselves for me to get a design topo complete so they could turn in some preliminary functional plans and draw a percentage of their total contract. After almost an entire year I was finally paid after they had received their retainage from the completed project.
If I work for consultants nowadays, my contract specifically states my current invoice is due upon their receipt of any estimated project fees after my survey is delivered. I also charge them 10% for over 30 days.
Contracts are a balancing act for sure. No point in beating that horse. I will give a huge second to contracting as high up the chain as possible. Anything below the owner can hinder lein rights..
The comment about interest above reminded me- Make sure your contract doesn't conflict with State law. Know the limitations of what you can demand or risk having it tossed and losing out.
Most, or all of the engineering firms I have worked for, either as an employee or a subcontractor, have what they call a "mobilization fee" in their contract with the client, which is a 75 cent term for a retainer. I do the same thing now whenever I work for them. That amount is invoiced before we ever set foot on the project, but the firms I deal with have learned that if they make that payment, we usually can deliver the product ahead of schedule, which helps them invoice their work quicker and everybody wins. My standard contract states that any invoice submitted prior to the 15th of the month is due and payable by the 1st of the next month and any amount not payed within 60 days is considered late and will be assessed a late fee. I usually negotiate these terms for every project, but I don't deviate from this policy very often. I will not finance their project with firm's cash flow. Once I receive the initial payment, that becomes our major project. Our unofficial company motto is "We jump for cash!"
paden cash, post: 327624, member: 20 wrote: I've had engineering clients that screamed and hollered and peed all over themselves for me to get a design topo complete so they could turn in some preliminary functional plans and draw a percentage of their total contract. After almost an entire year I was finally paid after they had received their retainage from the completed project.
Please tell me that was the last time you worked for that engineer (it would be if it were me).
Brad Ott, post: 327623, member: 197 wrote: Then I show the engineer how to request and collect retainer fees.
Yes, I picked up on that fairly quickly. On engineering projects, I require 50% retainer as my notice to proceed. Its getting the 2nd 50% is what I am finding difficult. I guess in the future, I will express my expectations on what getting payment in a timely manner means to me.
What everybody said is good advice.
Specifically what type of services do you provide the Engineer(s)?
Boundary & Topo, Site planning, Subdivision Plat, any construction layout.
The area you practice in is booming, consider production housing layout. It is financially rewarding. B-)
James Fleming, post: 327622, member: 136 wrote: ..... but my attitude was: "You know what kind of rain making stud you have to be to invoice that kind of number in the first place" 😉
That was hilarious!!!!
Should we start calling you "Rainman" now? 😀
Bow Tie Surveyor, post: 327642, member: 6939 wrote: ... On engineering projects, I require 50% retainer as my notice to proceed.....
I think you have that exactly backwards. You should be getting paid upfront by your private clients.
Adjust your fees/billing rates as necessary to account for the turnaround time with engineering clients and have a written contract. Also bill time for preparing invoices and statements. These are things that have a cost which you can recover. But if you insist on big retainers from engineering clients you aren't going to do a lot of that kind of work.
Bow Tie Surveyor, post: 327642, member: 6939 wrote: Yes, I picked up on that fairly quickly. On engineering projects, I require 50% retainer as my notice to proceed. Its getting the 2nd 50% is what I am finding difficult. I guess in the future, I will express my expectations on what getting payment in a timely manner means to me.
Your contract should spell that out clearly, along with the interest rate of 18% for past dues.
The problem is many larger firms make you sign their contract, which has a "pay when paid" clause. You can object all you wnat - they will find someone else to do the work.
Norman Oklahoma, post: 327656, member: 9981 wrote: ...if you insist on big retainers from engineering clients you aren't going to do a lot of that kind of work.
To me, if they are going to make you wait for months (on top of the time you are working on the project with no pay) for final payment, that makes it all the more reason to ask for a retainer up front. Maybe I am just young and idealistic, but why do surveyors put up with such billing practices?
Bow Tie Surveyor, post: 327642, member: 6939 wrote: Yes, I picked up on that fairly quickly. On engineering projects, I require 50% retainer as my notice to proceed. Its getting the 2nd 50% is what I am finding difficult. I guess in the future, I will express my expectations on what getting payment in a timely manner means to me.
They get my final product when I get my final payment.
Jim in AZ, post: 327662, member: 249 wrote: The problem is many larger firms make you sign their contract, which has a "pay when paid" clause. You can object all you wnat - they will find someone else to do the work.
I haven't had that happen yet. I just write the proposals which state my terms if they want me to work on their project. I have heard the phase "pay when paid", but I have never agreed to it (and I think it may be illegal in my state).
Brad Ott, post: 327666, member: 197 wrote: They get my final product when I get my final payment.
I have thought about that, but I find it hard to demand my fee without turning in the product first. I have also thought about just delivering the hard copies, but withholding the digital files until payed. Of course, I would have to spell all of this out in my payment terms. Basically, I just want to communicate to my clients that I don't want my accounts receivable being used to finance their projects.
Jim in AZ, post: 327662, member: 249 wrote: Your contract should spell that out clearly, along with the interest rate of 18% for past dues.
The problem is many larger firms make you sign their contract, which has a "pay when paid" clause. You can object all you wnat - they will find someone else to do the work.
Past due is fixed at 12% (annual) in Idaho. Many other States have similar Statutes. Hence the encouragement to review contracts for conformance with codes...
For many situations it boils down to two options. Agree to their terms or they find someone else who will. It is your choice to accept those terms or not.
Of course, you should push to get things to be as favorable as possible for you, but in many cases what you want is irrelevant to them. Take it or leave it. There is no middle ground.
i worked inside a big civil/development firm for a decade, and am now basically a subsidiary of a much smaller development firm. my AR is typically longer, but it's expected. the usual process is that i'm doing the up-front work that the engineers use to design whatever is needed in order for the client to get their financing in the first place. so i'm typically not getting paid until there's at least a decent idea that the project is getting financed in the first place. this isn't always true, but a good bit of the time. but like i said, my eyes are open to that- and i'm working with clients that we know and have a history with. so, basically, the first few months there was a lag on collections, but for the last two years I've stayed busy enough that it's more just a matter of waiting for your flowers to bloom. i won't get paid on today's work until probably September, but the checks that are coming in from april work are keeping the lights on just fine.
