You work hard for your client on a Project. You need to get paid for your services on time. Here are tips for improving your chance of getting paid on time.
1.1 Know your client. There are some firms who might hire you as a consultant who are notorious for not paying consultants on time or at all. Do not work for them. If you are being hired by a developer-created single purpose LLC, that is a red flag and you know payment may be an issue. Ask the hard questions up front about how the project is financed. Include shorter time frames in the payment provisions in your contract and stick with them. On the other hand, if you are working for a Fortune 100 Company, you know that they are solvent but many often have a 60-day payment cycle. Your contract and your expectations should be very different.
1.2 Check your Contract. Make sure you have appropriate provisions in your contract to get paid. Not all of the standard forms include strict payment terms, so check the contract form that you are planning to use. The key terms include:
1.2.1 A provision which states specifically when your invoice will be submitted each month and when payment is due for that invoice.
1.2.2 A clause that allows you to charge interest on past due amounts. Make sure that the interest you are planning to charge complies with state law. Not all states allow you to charge 18% interest for example.
1.2.3 A termination clause that allows you to terminate the contract for non-payment.
1.2.4 A final payment provision that provides that certain deliverables – like as-built drawings – will be provided only after you receive final payment.
1.3 Timely Invoices. Send your invoices on time. It’s hard when you are busy, but your compliance with the contract is key to getting paid regularly and to protecting yourself from getting in too deep with a client that is not going to make payment to you. Do not allow large amounts to build up in your work in progress and then send a huge bill to the client. It is far better to send a bill even for a very small amount on time each month.
1.4 Know the Law. Be familiar with the law that applies to your contract. Not all states allow “pay when paid” or “pay if paid” provisions. You need to act accordingly. You need to know whether you can file a mechanic’s lien and the deadlines for doing so in that state.
1.5 Comply with the Contract. If you are not paid within the time provided in the contract, you must comply with the contract provisions. Usually, they require you to give a notice of the breach and allow the client a number of days to correct the breach. Make sure that your firm sends the required notices in a timely manner.
1.6 Stop Working. Stop working if you are not paid. If you have not been paid, do not run up more time simply because you need work for your firm. You may never collect that money and you can expend that time doing something more productive, even if it is business development to find a new good paying client.
1.7 Mechanic’s Lien. File a mechanic’s lien if you are entitled to do so or assert a claim against any payment bond posted for the Project. Make sure that you are familiar with and comply with all applicable deadlines.
If you have any questions about payment or other risk management issues, please let us know. The attorneys of Gibbes Burton are passionate about helping professionals and businesses minimize risk and build success.