· gospel according to dan · 5 min read

Unpaid invoices? What surveyors need to know.

Receivables may not be receivable at all.
💡The following is an excerpt from Dan Beardslee’s “The Management Handbook for Land Surveyors”.

Rule 13:

Receivables may not be receivable at all.

There’s no mystery here. Almost all surveyors have accounts overdue by 90 days, 180 days, or more. The fact is that many of these accounts will never be collected. You’ll simply write them off.

In the meantime, you have paid all the expenses associated with doing the work – you paid your office rent, you paid your employees and paid their taxes, you paid for you equipment and all the other expenses. So essentially you have given this client money. It’s one thing to lend money by giving credit, but just giving away money is completely foolish.The idea of being in business is to take in money, not give it out. Remember that.

An account you show as an asset may be a fantasy.

Preventing Collection Problems

This rule, similar to rule 12, highlights the importance of collecting money from your clients upfront and is your most valuable tool for preventing future collection problems:

Implement Upfront Payments

  • Require Deposits: Collect a percentage of the total fee upfront, typically 50%, before beginning any work. This ensures that the client is committed and reduces the risk of non-payment.
  • Full Payment Before Deliverables: For certain services, require full payment before providing the final deliverables. Clients are more likely to prioritize payments when they realize that project progress hinges on their timely payment. If the job is small and has no deliverables (property staking, etc), just have it paid in full before the work starts.

Clear Payment Terms in Contracts:

  • Interest Penalties for Late Payments: Include a clause in contracts that stipulates an interest penalty for late payments, compounding monthly. This can serve as a deterrent against delayed payments and compensate for the inconvenience caused by late receipts.
  • Detailed Payment Schedule: Outline a clear payment schedule in contracts, specifying milestones and corresponding payment amounts. This helps manage client expectations and provides a structured approach to billing.

Effective Communication:

  • Regular Follow-ups: Make sure to notify clients when nearing the budget limit and ask how to proceed, ensuring transparency and preventing disputes over unexpected costs.
  • Overdue Reminders: Send polite reminders to clients when payments are overdue. Regular communication can often prompt clients who may have simply forgotten about the invoice.
  • Registered Letters: For clients who remain unresponsive, send a registered letter as a formal reminder and a precursor to potential legal action. This step often signals the seriousness of the situation to the client.

Client Vetting and Relationship Management:

  • Assess Client Reliability: For new clients, especially those without a prior payment history, require full or partial payment upfront. Extending credit should be reserved for trusted clients with a proven track record of timely payments.
  • Build Strong Relationships: Foster good relationships with reliable clients. Repeat business from trustworthy clients can provide a steady revenue stream and reduce the risk of non-payment.

The Nuclear Options

Sometimes no matter how many reminders you send, your client just won’t pay. Maybe they didn’t like the result of the survey, maybe they’ve been dealing with you in bad faith and never intended to pay. Whatever the reason, here are some options surveyors sometimes consider when things go bad:

  • Threaten or File a Mechanic Lien: Inform clients that unpaid invoices may result in a mechanic lien on their property. This legal tool can motivate clients to pay to avoid clouding their title and adding complications during property transactions. Note that the effectiveness and process of filing liens vary by state, and some may require periodic renewals. Also, liens can be very expensive and time consuming because they are ultimately a legal process, and there’s no guarantee when you will receive payment.

  • Small Claims Court: We’ve heard of surveyors taking clients to court, which really is the option of last resort. Given all the costs, frustration and time involved, nobody wants to do this unless the job is worth a significant amount of money. If you find yourself exposed to a lot of risk on a large project, do whatever it takes to collect upfront, have sensible milestone billing, or anything else to reduce the risk. Ususally the only people who win in court are the lawyers 💩.

Additional Protection

To protect your business, you need to keep detailed records of communication with your client. Invoices, agreements, and work records must be tracked to ensure that if you decide to take legal action, you have your i’s dotted and t’s crossed. Most of this information should already be tracked and reported, but if you are still using pen or paper, an online system like Cyanic Job Book would be beneficial for your firm.

Job Book keeps track of your client’s contact information, and all job financial data including hours, expenses, invoices and budgets. You will be able to see who is almost overdue on payments, and send out reminders before it is too late.

With Job Book, you’ll be able to see who your best and worst clients are (and what kinds of jobs make you the most money), so you can make the best decisions about what jobs you should take on.

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