Part III - The Contract:
Contract negotiations are your single greatest asset in executing your work and being fairly compensated in a timely fashion. By implementing effective strategies during contract discussions, firms can establish favorable payment terms, such as requiring net 30 payment terms, and implementing measures to ensure timely payment and enforcement. Improving payment collections through contract language requires a proactive and strategic approach. AEC firms should prioritize open and transparent communication with clients throughout the negotiation process, ensuring that payment terms and expectations are clearly understood and agreed upon. There are many “standard” or “base” contracts within AEC that are available to firms (the index at the close of this book contains a list of such resources), but we cannot stress enough the value of securing legal counsel to modify and create your own standard contracts and train your project staff on the function of the language so they can protect your firm’s interest from falling victim to redlining. Contract Negotiation Training As the first line of protection in the negotiation process, it is beneficial to implement robust training in-house for employees, especially project managers, so that they know what to look out for and how to protect the firm during contract negotiations. Many insurance brokers (for the firm’s liability insurance policy) or lawyers can and will provide training on contract terms and risk management. There are also platforms that offer continuing education or webinars on the same topics, or numerous handbooks a firm could have on hand. Enforce Contractual Provisions A critical aspect of improving collections is ensuring that the agreed-upon contractual provisions are enforced consistently. AEC firms should establish internal processes and protocols to monitor payment timelines, follow up on outstanding invoices, and initiate collection efforts when necessary. This may involve sending reminder notices, making direct phone calls to accounts payable, or engaging in legal assistance if payments remain outstanding. Clearly Define Payment Terms One of the fundamental steps in improving payment collections is clearly defining payment terms within the contract. AEC firms should specify the agreed-upon payment schedule, including the due date, payment method, and any applicable penalties for late payments. Requiring net 30 payment terms, where clients are obligated to pay within 30 days of invoice issuance, is a common industry standard that promotes timely payments. Positioning for Successful Collections & Valuing Your Services
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