Credit: Matt Greenslade
To grease the wheels of payment, Elyse Engelhardt recommends following up every bill with a phone call.
Elyse Engelhardt is neither an architect nor an accountant, but that didn't stop her from becoming the chief financial officer of high-flying New York firm Fox & Fowle Architects (FXFowle Architects since 2005). She arrived there as its all-purpose administrator nearly 30 years ago, when the firm had eight people; as it grew, so did her responsibilities. In 2001, she left to join AP3D Consulting, which advises design firms on business management (her bailiwick) and information technology. One of her biggest clients is, not surprisingly, FXFowle. Her recent work for the firm has included helping it convert to new software (Deltek Vision), which handles not just accounting and project management, but also marketing and human resources. Part of her job is making sure the changeover doesn't disrupt the creation of timely and accurate invoices, because no firm can succeed unless it gets bills out—and payments in—on time.Buy the right software.
Lots of computer programs for running small businesses don't work very well for design firms, Engelhardt says. Often, the architect's fee—either a fixed amount or a percentage of construction costs—is allocated to four or five project phases, but work is billed progressively each month. A program like QuickBooks wouldn't properly track the amount previously billed (and the amount still owed) by phase. You'd have to create spreadsheets in another program, Engelhardt says, and that's a headache.Make sure you have a system for expenses.
When you set up accounts with your vendors—companies like FedEx, your printer, and your messengers—make sure they require a project code for every single charge. That way, when the bills come in the door, amounts can be allocated to specific projects right away.Educate your project managers.
It's the project manager who makes sure that employees complete time sheets and who reviews consultant invoices, so it's essential that he or she understands what you need, and when. On a new job, Engelhardt recommends setting up a tentative billing schedule in advance. Then, when you meet with the project manager, you just find out where things stand.Get every employee to keep time sheets.
“The only thing architects sell is time,” Engelhardt says, so it's important to know where your time is going. Even if a job isn't being billed by the hour, you'll still want to know—for planning purposes—how many hours it ate up.When you begin a new project, ask for a retainer ...
If you don't have a payment history with the client, ask for a retainer, which should be a minimum of one month's billings. Mention the retainer in your proposal if there's a chance you'll start work before you have a formal contract. And specify when the retainer will be credited: If possible, you'll want to hold it until the final payment.... and a markup on consultants' fees.
“It costs real dollars to carry consultants on your books,” Engelhardt says. A markup of anywhere from 5 percent to 15 percent is normal.Once the bill is out the door ...
“My system is to follow up every bill with at least one telephone call,” says Engelhardt. The first call is from accounting to accounting; it can be, “Did you get the bill? Does it have all the information you require?” The second call is project manager to project manager; it may be, “Is there anything else you need in order to authorize the payment?” The third call, if necessary, is principal to principal, to ask when the payment can be expected. A good time for that call is about 40 days after the bill went out.But if you're billing the government, be patient.
Public agency record-keeping requirements are arduous, Engelhardt says. Sometimes, it takes three or four months to get the bill in the right format and then obtain the necessary approvals. At least with the government, you know you're going to get paid. Sadly, that can't be said of every client.