Getting Paid For Design Services

October 05, 2012

The last few years have been challenging for many design firms. Adding fuel to this fire, many firms are having difficulty obtaining payment for their services. In a recent and ongoing SmartRisk Survey: 81% indicated trouble with getting paid. Successful account receivable programs do not have to be time consuming or daunting. By implementing some straightforward practices, a firm can implement an effective program that gets invoices paid on time along with maintaining a positive relationship with clients.

Establishing Financial Expectations. In an initial meeting with clients, explain in a clear and concise manner exactly what your services will be and the value you bring to the project, along with clearly stating your compensation terms. Your communication should be clear in establishing the financial expectations with the client. At this face-to-face meeting, you will obtain a sense of the client’s financial capability and ability to pay for your services. If you don’t get that warm and fuzzy financial feeling, this is the time to walk away.

Contract Agreement. The boundaries discussed at the initial meeting should be outlined in the contract agreement. Include a specific scope of services for the project, associated fees, expenses and cost of additional services. In basic terms, the agreement should explicitly state your client owes you money for services you will be rendering. The agreement should also specify the terms of payment, including any payment in advance of services.

Contract Review. Review contract terms verbally with the clients before signing. This allows you the opportunity to answer any questions the client may have, and to reinforce the financial conditions and obligations. There should be no question at this point as to what services are being offered, what is expected of all parties, and how much it will cost. It is important to identify what documents the client requires when submitting invoices, and who in their organization will be responsible for reviewing them and making payment.

Retainer. For any client, but especially for new clients, and on larger and longer-duration projects, requesting a retainer is recommended. This could be a percentage of services or a set dollar amount. Even a small retainer shows a commitment by the client of financial commitment and responsibility. Specify that the retainer will be applied towards the final invoice.

Accounting Procedures and Standards. Internal accounting procedures affect any accounts receivable program. Hold your firm to an invoicing standard calling for no errors and consistently punctual delivery, allowing time for clients to review and meet payment terms. Make sure invoices are not delayed, send invoices to the person who must approve them, and then follow up with a reminder, with a phone call and in writing, when necessary. 

To help speed up payments, consider incentives to clients that pay promptly. Incentives are usually only effective when they are directed to the decision maker. If incentives are offered, considered this option when developing your fee structure.

This has been an excerpt of the July 2012 edition of ProNetwork NewsDownload the full PDF version of this newsletter to read more about Getting Paid for Design Services, including sections on Accounting Programs, Late-Payment Fees, Client Relations, Stubborn Clients, Payment Disputes, and Controlling Emotions.

About the Author: Timothy (Tim) Corbett is founder and President of SmartRisk, LLC with over 25 years of focusing on improving the performance and profitability of design firms with effective risk management solutions. Tim has held VP positions with insurance carriers, with responsibilities for underwriting, risk management and claims analysis. He is a member of American Institute of Architects (AIA), American Council of Engineering Companies (ACEC), and U.S. Green Building Council (USGBC) and sits on national risk management, environmental and business practice committees. Tim is called upon as a speaker at regional and national forums, has been published on the topics and owns copyrights to risk management strategies. Mr. Corbett holds a BS in Security and Risk Management, MS in Management, Environmental studies degree, Architectural Design Technology Certificate and is LEED accredited. Contact Info: T: 626-665-8150, tcorbett@smartrisk.biz.