I like being an architect. I love having my own practice. I adore my office, a scant ¾ of a mile from my house (in Atlanta, this is practically unheard of). I have an incredible passion for the project types that I work on. I delight in a job well done and praise from my clients – I loathe getting paid when client’s don’t hold up their end of the bargain. I’ve finally figured out a few things:
- Know your client – check out their story and/or references. If they are on the up and up, they won’t be offended if you make sure they have the ability to pay.
- Get a retainer up front (hopefully enough to cover the raw cost of labor to prepare the work).
- Don't be too nice of a guy (or gal) and give away tons of work for free.
- Learn how to file a Mechanics Lien in your state – get the form and have it on hand.
- Find a “black hat” you can have make a few phone calls as your preliminary “collection agency” – it could be a colleague, your accountant, or a business associate, essentially someone who is not internal to your practice and can be objective about asking for the money.
- Find a real collection agency you can talk to before you need them – you’ll pick a better one to use.
- Don't be afraid to fill out the Mechanics Lien papers and send a copy (via certified and regular mail, of course) along with a Demand Invoice. That gets more slow payments in than any other tactic I know of.
- Don't be to willing to walk away from money you earned – unless you know that the time/effort to collect it will be too hard, painful, or if the client is vengeful (may get a claim on your policy – see “know your client” above).
Funny, since I have taken the time to educate myself on the topic and get a few simple policies in place, the “bad debts” my firm experiences have declined – sort of like the preparation has emanated a new air in the firm and my clients don’t want to go there. It's like my karate Sensei tells us, “If you’re prepared, there is a much better chance you’ll never need to really use any of this self-defense stuff.” (Thanks, Sam!)
—Lisa Stacholy, AIA, NCARB
Comments (3)
Mark W.,
The lien laws vary by state; defiantly verify the criteria for the jurisdiction in which the work is, and at your place of business.
In Georgia (where I am), the Mechanics Lien Law is the same for residential and for commercial – they make no distinction and it has the following requirements:
• The lien must be filed within 90 days of the last date of service.
• The lien is valid for 12 months.
• To “stick” to the land, the lien must be perfected within 12 months of the last date of service. It is the “statutorily prescribed series of steps a lienholder must take in order to establish a legally enforceable lien on the property of another.” My experience is that the “cost” to collect is less than losing the fees:
• The lien filers service I use costs $125-150 for a standard lien (rush services are of course extra…Keep up with your clients and you won’t need this). The lien filers also take care of proper, required notification and documentation to the landholder.
• The collection agency I use does work on contingency… They do not require any account fees or monies from me – their fee comes directly from the person who I liened. If there is an Instrument of Collection (i.e., a properly filed lien), their “fee” is 30% of what they collect. I think the highest percentage their Schedule of Fees listed was 75% fee if the account is over 24 months and there is no instrument of collection.
• I have two projects which I have turned over to them and things look very promising. I really like the fact that they need to do their work to get their fee. I discussed the situation with my engineers (whom I still owe for their services) and we all agreed that a net 50 cents on the dollar was better than nothing.
My lessons:
• In addition to requiring retainers, I have “new” clients complete a financial questionnaire which I developed, based loosely on the form which the Associated General Contractors provides for contractors to have owners complete prior to commencing construction. It has been very effective when negotiating with new and prospective clients.
• As hard as it is, I am getting much better at making the completion of construction drawings a “cash transaction,” in that when I finish the project and the drawings are ready for permitting, I require the owner deliver a check to me and I release the drawings.
• Apparently (in Georgia) when your contract says the owner must pay within 30 days, you have extended credit to them, and the normal “rules” don’t apply and you have lost the option to use Small Claims court as recourse.
• Always make a photocopy of the check which your clients pay you. If all other avenues fail and you wind up in court , after the judge finds in your favor, you can ask for the court to garnish the funds immediately (when you can present a copy of a check used for prior payments, the courts can order payment from that account to you). Yes, this “feels” a little militant but you deserve to be paid.
Posted by Lisa Stacholy, AIA, NCARB | July 7, 2008 9:42 AM
Posted on July 7, 2008 09:42
I was just looking into educating myself on filing a lien. You have to do it within 4 months for residential, longer for commercial. It seems to make more sense than using a collection agency which would probably want half of the debt if they get the money.
-Mark Wittenberg, R.A.
Posted by Mark Wittenberg | July 3, 2008 1:20 PM
Posted on July 3, 2008 13:20
Hi Folks,
I remember there was a SPP Journal a few years back that had a lot of marketing information. I found it back in the archives of 2004. The link is http://www.aia.org/spf_nwsltr_0404.
Maybe its time to go at it again and see what new things have turned up.
I have a friend who told me that a roll of trace on the sidelines of her kids' soccer game was a great lead in for folks to first know that she was an architect and then second to discuss their issues as a lead to getting residential work. I tried it at my son's rugby game but the game moves much too fast and I couldn't keep focused on the work. Maybe I'll try again next season.
Posted by Louis Smith, AIA, NOMA | July 3, 2008 11:37 AM
Posted on July 3, 2008 11:37