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In the current economic environment, avoid costly payment disputes and counterclaims by choosing clients carefully and staying on top of your receivables and collections. Managing receivables and collections now

D uring the COVID-19 pandemic, many design firm clients are facing financial challenges. In this environment, AEC firms should closely monitor their receivables and diligently manage any collections. It’s not just a matter of your firm getting paid; pursuit of outstanding fees often can prompt clients to allege your work was somehow deficient, leading to errors and omissions claims.

Rob Hughes

Here are some best practices to help design firms avoid and manage collection issues: ❚ ❚ Be diligent about accepting projects. Many design firms conduct periodic credit checks on clients from which they have large upcoming receivables and all new clients. Those subscribing to popular credit reporting services may be able to obtain credit reports on current or prospective clients at nominal costs. Additionally, you can ask for references – typically from clients’ banks and firms they’ve worked with in the past. ❚ ❚ Know your contact at the client. Be sure the contact is empowered both to authorize your services and to pay you for them. ❚ ❚ Watch relationships with slow-paying clients. Be wary of accepting work from historically slow-paying

clients. If your firm accepts the work, consider requiring a retainer to apply against the final bill. If the client is not the project owner, try arranging to be paid directly by the owner. ❚ ❚ Communicate internally. Senior professionals and managers in your firm should know of any potential financial exposures associated with their clients. If one or two clients represent the bulk of your receivables, monitor them more carefully. ❚ ❚ Insist on written, signed agreements for all projects. The contract should include: the client’s (correct) legal name; individuals authorized to bind the client; timing and frequency of your firm’s invoices; timeframe for the client to question them (but an obligation to pay you for

See ROB HUGHES, page 10


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