How Can Overdue Accounts Receivables be Minimized?

by | Oct 12, 2023 | Project Management, Topics | 0 comments

Accounts Receivable management is critical to the Consultant’s financial well being.  Sometimes, when a Client isn’t paying its invoices on time, it can be “the canary in the coal mine”.  While most Clients start out with good intentions of paying invoices in accordance with the terms of the contract, if they get behind, they can be tempted to seek relief by alleging a design deficiency and perhaps followed by a professional liability claim.  The following are some proactive actions that can be taken in an attempt to discourage potentially financially damaging Client behavior:

  • Call the Client as soon as the invoice has had time to be received.  Ask if they received the invoice.
  • Ask if they understand the invoice and if it is in an acceptable format with appropriate back-up.
  • Ask if they agree that the value of the services rendered during the invoice period is consistent with the amount of the invoice.
  • If the answer to all of the questions is “yes”, ask when receipt of payment can be expected.  If the answer is “no”, the Consultant’s project manager must work with the Client to get to “yes.”
  • Document the phone call with an e-mail to the Client with a copy to the project manager.
  • Follow up immediately if the payment doesn’t arrive on time.

The person making the call must have excellent diplomatic customer service skills to avoid offending the Client.  Use of the above procedure can reduce payment time by as much as two-thirds.  Additionally, it sends a message to the Client that on time payment is important.  If the Client is having a cash flow problem, the Consultant may receive preferential treatment when the Client is deciding which invoice they should pay, believing that a slow-pay situation will not be allowed to slide.

Want more?

A book entitled “A Guide to Managing Engineering and Architectural Design Services Contracts – What Every Project Manager Needs to Know” is available to assist design professionals in managing their professional services contracts.

Click here to learn more.

Get In Touch

Lowe Consulting, LLC
John M. Lowe, Jr., P.E.
Happy Valley, OR