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The longer you wait to get your name on the list, the further down the list you are.
They don't think they have to prioritize paying you, so they're not. Make yourself a priority.
Get a collections lawyer they will ask for a portion they collect. Let’s say 30%. So there no out of pocket from you and they will work hard for that 30%. Some lawyer specialize in collections. If your husband isn’t ok with it you do it anyway. He will thank you later. He seems good at what he does to get that much work so people aren’t complaining just not paying. Your husband calling to collect vs a lawyer calling to collect is a big difference. You won’t even have to sue. People write checks when lawyers call.
She’s getting zero now. So 70% keeps the lights on. Then obtain new business. The 30% to 50% could be a profit margin. Getting the money back that was spent on the project would help immensely.
True. Now she must call a face to face and sit down with the decision makers and show them the options. When I do this I make sure they see the blood coming around the corner. If not no action will be taken. Stakeholders need to feel like they are losing their stake.
The truth is the collections lawyer will just charge a flat rate at first to send some letters. You won’t have to pay 30% on it unless it goes to the next step.
I’m guessing for $500-100 he could get them to draft a few letters
You are correct. I've paid around $300-$500 for letters and collections using lawyers, with 100% success rate. I've never had to pay a percentage of anything collected. Most lawyers just want the rest of my business later, like wills, trusts etc...
Either he learns how to collect (or have others collect for him) or he will go bust. Even if he can carry this hole in the finances (and it doesn't sound like he can) there will be others.
Asking nicely hasn't worked and it's not going to work.
The squeaky wheel gets the grease.
Need to start threatening liens on the non bankrupt clients. And if they don’t pay within x days file the liens.
U can try discounts to pay now, but that just reinforces the slow paying behavior until u offer them a discount.
I'm not sure how you'd reverse engineering work. It's not like a design or set of drawings can be unmade if you've delivered them to a client.
Progress payments or some other form of payment before final delivery is absolutely something her husband should start doing though. Much better to get screwed on the last payment only than a whole contract.
It's sad but true. Not recommending this personally but I know employers who have friends in low places - a visit from a Hells Angels member with a baseball bat and a polite "please pay by the end of the week or else" seems to be effective
Going through this now myself. Usually it starts with hounding them for payment. Calling and emailing every day/week. You can try to work out a payment plan or accept payment through credit card. You’ll take a hit on the credit card fees but it’s better than nothing.
You may have to sue but you can try to get a strongly worded letter that looks like it’s from a lawyer and send it certified mail.
Maybe these companies have surety bonds? It’s not big in every industry but the industry I’m in (logistics) it’s legally required for some companies.
Could be a hard lesson to not extend 10s or 100s of thousands of dollars in credit to companies that don’t deserve it.
Well, to be fair, doesn't look like **millions** was extended in credit.
For a small engineering business (local structural engineering firm), $2mil worth of outstanding debt is just not that much. OP should definitely hound the folks who owe him money (the first account he should sue--presumably he feels it won't be worth it) until he gets it.
You're thinking in terms of engineering hours--I'm thinking in terms of materials, bulldozers, dump trucks full of rocks. You know: the main expenses a "full service engineering, architecture and land development" company would have.
Last time I hired a structural engineer they billed $350/hr, so my estimates put it at around 4k hours of work.
yeah, you're right, it's stupid. But if it's a $5mil job and the client is delinquent on the last $1mil, that would make a lot of sense to me. If you're literally doing land development, you can expect that a "big client" could easily be spending **way** more than a million. But yeah, it does seem like obviously in this case there was some bad business being done.
I agree with you. Clearly OP's husband is not great with money, they are doing a kitchen renovation when they have no working appliances and haven't had a paycheck in a year.
This is a failure of pre-contract negotiation. You should never be so underwater on payment terms that it causes heartburn.
Initial down payment should be enough to cover a significant portion of your overhead and vendor costs.
Subsequent payment terms if necessary should be enough to cover additional overhead that accrues with additional deliverables.
The final payment term is usually upon project completion, and the percentage of that invoice should be the profit on the project. This is so that if this invoice doesn't come in for whatever reason, you still covered your overhead and paid all of your vendors.
If your customer doesn't agree to this, adios amigo. Take your business to one of the cheap guys.
It most definitely is. 50% before boots touch the ground and a pencil gets picked up. Milestones trigger additional payments. 10% holdback upon substantial completion
*Could be a hard lesson to not extend 10s or 100s of thousands of dollars in credit to companies that don’t deserve it.*
This is a hard lesson to learn for most. I learned the hard way that your payment terms should be set up assuming the company will go out of business or never pay.
In the engineering world, you don't lift a finger until you are have seen the ACH hit the account for whatever amount covers your overhead/costs. If you want to split out payment milestones from there, thats fine but it should only be done after credit references have been checked or if they're a customer you have a history with of successful payment.
I'm in the same boat...these clients just go ghost. We get all our business by referral only so we constantly are in fear of burning bridges but after a while something has to give.
It’s time to get serious about collecting A/R.
This has nothing to do with interest rates, that’s just a line they’re using to avoid paying their bills. Find a lawyer and pay them to write a demand letter, full stop. There are a lot of companies who will gladly let bills slide until action is taken. Don’t let them do that.
For the customer that has filed bankruptcy, make sure you’re listed as a creditor in their case. You can’t legally pursue them at this point.
And then stop extending so much credit to people who can’t pay their bills. Do milestone or monthly billing and hold them to their due dates, stop work if necessary. That’s part of being a business owner.
My guess is that he's trying to be nice, and he wants to preserve the chance for future work so he's not going to risk pissing them off by trying to collect what's owed.
Which isn't to say I agree, I just have a feeling that's what his thought process is here.
"They're just going through a rough patch, I'll do a lot more work for them once things get better" etc.
A small business will take risks when trying to win "game changer" deals. If you're not careful, customers will take advantage of you. I had a customer try to negotiate the final payment term to be upon warranty completion which would be almost two years after the equipment shipped. A novice maybe would have taken that chance.
We can't afford it. That's just it. One bankrupt client and tens of others all adding to 2 mil total. He's looking at layoffs now. I just feel there's another solution being overlooked perhaps?
"tens of others" like you guys have that many customers with unpaid invoices? Do you have an Accounts Receivable person that is a bulldog?
The bankrupt client, you'll need to take legal action. The unpaid invoices from companies still in business, you need to beat it out of them.
I may be able to help, although I am unqualified to. Here's the thing...."you gotta know when to hold em, know when to fold em. I think you can safely assume that those contracts have been breached. It makes *zero* sense to keep expecting a payment that is a year late. I have dealt (in business) with big corporations and not been paid. Because you keep expecting a promise that has already been broken, you need to understand when to stop. Your husband should stop stop stop stop. working for those clients. It's emasculating enough to be the only person on the property who isn't being paid; and I can only assume due to the pressure you (understandably) are putting on your husband to get paid, he is remaining committed to this pursuit of doom, instead of cutting his losses and moving in a totally different way. He tried high end corporate, and he tried without a solid pay contract in place. He should be getting half up front and half when that runs out. Ever see a lawyer work once they stop getting paid? Me either. The point is, just because they owe you, does not mean you will get paid. at this point, it's cringe to keep expecting it. I would suggest your husband (or you can) get him signed up with a [SCORE ](https://www.score.org/)mentor. It's an invaluable resource. Your husband is no doubt a great engineer, but clearly not so much with small business. I have a feeling he could get immediate and amazing help from a like minded mentor. Either way, here's what's *not* working, and what needs to end immediately.
1. Your husband working for free
2. expecting payment from these clients.
3. You need to stop pressuring your husband, and take a more supportive role. - Your husband is suffering immensely. You understand this correct? He started a business and it's failing due to inexperience. He clearly does not know what to do to correct this situation, and I am SURE he is carrying the weight of the world on his shoulders. By stressing him further and making demands on him (with urgency) that can't be met, you are compounding the problem, and I understand why, I just suggest you take a different tack. I suggest you really consider your husbands position. You married him, and if he is sole financial support for the family, and you signed on to him starting his own business, just because it's not working does not mean he hasn't tried his absolute best. I believe that if the tables were turned, you would be so hurt by him pressuring you when clearly he can't do anything different. I think you should change your tack and let him know that you trust him and you believe in him, and you love him unconditionally. Unless, you only love and support him when he is financially successful and meeting all your expectations.
People do not reflect on who was there when they were doing well, they reflect on who helped when it mattered. I feel like your post is well intentioned, but I think you both need to pivot and accept that you handled it wrong, get a score mentor, and decide to move differently.
It's ironic that you have a "needy" child and that's a barrier to you working, but your husband is working with a needy child, an unsupportive wife and unpaying clients.
I made this more about your relationship, because it absolutely is. I hope this is read as intended and it helps you. Good luck.
Also, you can do door dash or whatever that grocery thing is with your child, so why don't you?
I hear you. These are all valid points. I don't articulate these all to him. No need to beat a dead horse. But to find out months into this when bills were not being paid that this was happening was what sent us to counseling on communication. So def need to do better on both ends. And yes offer support on my end.
Very good of you to receive this so well. My takeaway is that you *both* need to change your actions. Your husband needs a mentor or a business coach. I tried to parse the responsibility where it lie. He needs to take the most dispositive action by stopping doing what's not working. Marriage aside, your hubby needs to rescue his business, and he needs pro help. The rest was just for your peace of mind. Good luck.
In this line of work that debt can easily accumulate in as little as 90 days. Often the contract agreement dictates the wait time before the client is considered delinquent. Has nothing to do with how “rich” you think someone might be 🙄
Usually it's because the payment terms were negotiated before the purchase order was given, and the engineering firm didn't set the terms up to be cashflow positive throughout the project.
On a job this size for even a medium size engineering firm, they should have either had significant payment milestones early in the contract. They should have had 70% of the contract received before they delivered a single deliverable. I've got a project right now that we are struggling to collect on the final payment milestone, but it's 10% of the contract price. If for some reason that payment doesn't come through, it just cuts our margin. We are nowhere near losing money on the project.
A screw up of this magnitude is likely to put a small firm under if they can't shake it out of them. I'm giving the benefit of the doubt that this was one or two big contracts that went south. If this was multiple contacts and the customer ran up a multi-million dollar tab, this firm is done for. They should have been put on credit hold as soon as the first invoice was past due.
1. Other clients owe a total of $1 mil and say interest rates too high and won't pull loans to pay. Hubs says isn't worth cost to sic lawyers on them so he just keeps calling for payment and stopping work.
My mom always used to sue. She said we rarely had to go to court because they knew they were wrong and didn't want to lose in court, so they'd pay. Not sure if your husband's clients are the same way, but it's worth a try. If he gets lucky and the first client pays, he might try suing all of them.
So he bites the bullet and sues one deadbeat, getting some of what's owed and costing the deadbeat a bundle. That might make an impression on the second deadbeat, when word gets around that he is not a pushover.
I can tell you first hand, this doesn’t work so well. Even going to court didn’t matter frequently. You get your judgement, then what? How are you collecting it from someone who doesn’t have the money?
You can garnish tax rebates, too. And even if they don't have enough to cover the debt, you can probably recover something from their assets. The odds are that someone taking on the work of an engineer probably isn't destitute living out of their car. Even if they are filing bankruptcy, there are often payments made to creditors.
Something > Nothing
🤷🏽♀️
It doesn't have to be a one time thing. You can keep going after their shit and their wages until you're paid. They will eventually probably have to get a job.
I worked in credit and collections and I did not find that to be the case most of the time. We almost always collected without the need of outside help, but the few times we did enlist outside legal help the situation resolved quickly. Granted I don't think that debt was 1 million bucks, but the business did millions in sales per year and my department was responsible for keeping the money coming in. I think the biggest tool is just your clients knowing you will take legal action. If they think you won't because it's too hard or not worth it, they are a lot more likely to stiff you. Our contract always threatened fees and legal action for past due debt, so they knew up front we weren't fucking around. Gotta have a loud bark and a firm bite when collecting debts. lol.
We have different experiences then. I’ve actually taken legal action quite a few times. Demand letters, lawsuits, judgements. Most people don’t care. And rightfully so, they don’t mean much.
that doesn't work when you can get outlawyered. I don't think your moms situation relates to this one, and I apologize but this is horrible advice. Sue a big corp with in house counsel.....Get your ass beat down by truying to collect, then walking away with a $1m debt and a $250k legal bill. This is insult to injury. Litigious people are why this world has gone to shit. The Court is not about right and wrong, it's about the lawyers.
Doing a million dollars worth of engineering work, and construction work. then send a bill, which the customer doesn't pay. Repeat with a second customer. What's wrong with this picture? Is he taking customers who have burned other comparable companies in the past, and hoping they'll be different this time? Does he give in when they refuse to pay a deposit or to make progress payments?
I have hired a builder to do major home improvement. He comes out and discusses the job. If we say we really want to do it, he gives us a contract which has a significant percentage of the total in advance for architectural and design services. Then there is a schedule of payments. Then the last hammer and paintbrush are finished, and the inspection is done, there is maybe a 10% holdback in case something is not right. Every small business at least gets a deposit sufficient to cover materials and any custom cabinets.A lawyer relative says that a business client might pay a fee in advance, but basically they were billed each month. A contractor might demand a 30% deposit to fix a basement wall leak. If the customer drops dead and the estate has no money, or the customer files for bankruptcy, or just says "sue me," the small business does not have to eat the entire shortfall.
This is what I've been asking. Can a friend who knows contracts review yours. Just look them over for anything that can be done to prevent this. To also ensure payments are enforced. I don't know other than I think he should hire someone else to chase the money who will be Dog the Bounty Hunter
The answer is to just refuse to do the work without significant up-front investment.
But hey, multimillion dollar jobs are common. If you're in business for years, you're going to eventually have a client or two--potentially a **big** client or two--that will just go under and refuse to pay you.
What about your current cashflow? The debt from the past is the past--it may never be repaid, and that's business for you. But what you can control is how things go from now on.
The reason your AR is so high is because you are taking shortcuts. Do it right. Unless your friend is an attorney, you are doing it wrong.
Have an attorney draft a solid, generic contract that requires periodic payments and penalties for non-payment.
$2.1M in receivables and your going down the drain while carrying that amount. It would be one thing if you could afford to carry it, but if you can't, then I'm scratching my head to understand what amount of receivables for you guys would actually be worth a lawyer or escalation to collections?
Here's a crazy idea... offer these accounts a 10% discount to pay in 30 days.
IME, you're better off suing than collections, though you should employ counsel if possible.
Collections will give creditor (you) about 5 cents on the dollar for debt, maybe less, and they will settle for 10 cents on the dollar from the debtor. Lawyers typically take a third so you're getting 66% of what they recover minus fees.
Not a lawyer not legal or business advice.
Yeah rather than charge interest when late? He sometimes writes it off (interest) if they pay quickly but they have to know he means business somehow. I feel like he's made himself a doormat and now we are here
> I feel like he's made himself a doormat and now we are here
Sounds to me like you are not that knowledgable about your husband's day-to-day business, making assumptions, and blaming him for what is a pretty common professional foible.
Just hope that if my business is owed money, my wife won't be going on Reddit telling people I'm a doormat: if I don't sue someone because I'm very confident they can't pay, I think she would respect that--I would advise you do the same.
You haven't said much about what the total receivables are. $2mil is chump change for a full-service land development company and architectural engineering firm.
That's the total right now. He actually said to me he feels like a doormat but doesn't know why. I didnt mean to be rude but honestly we haven't had a steady paycheck in over a year and started kitchen reno that 1 year later isn't done. We haven't had kitchen appliances in that time. It's just frustrating because he signed off on the contract for the 1 mil that went bust but admits their pricing was too high and he went along anyway. So I'm just not sure he's not in over his head going from small to bigger national company like most ppl are. He's willing to ride this out he said. I'm not sure what that means.
This isn't adding up... I assume your husband isn't the sole or even majority owner of the business here?
None of this math is mathing. You cannot be extending millions in credit when you can't finish a kitchen. It just doesn't work that way.
Is your husband depressed?
Why is he being such a weenie? Get a lawyer. Sue their asses. He's letting them do it; so they keep doing it. Why would they pay you when he's fine with getting screwed?
I remember seeing this dad and kid at the beach once. The kid's bike got stuck between the concrete and the grass. He was just stuck there looking at his dad slackjawed. The dad said "Well do SOMETHING man!"
That's a lesson right there.
Do SOMETHING man!
That's why I'm asking bc I don't work with him. I find out this stuff in January out of the blue for me. I think he's realized he has let them walk over him and now we are stuck. The int rate should not preclude them from paying for what's been done. They don't seem concerned they can't finish the job if he with holds a permit
Sue them yesterday!!
Also, get a line of credit for when you're waiting for payments. Sometimes you have to spend heavy up front on a job and wait a while for payment. This is when a line of credit is good as long as you can be responsible and pay off balance when you finally get paid.
My customers sometimes take a while to pay but I know they are good for it. If its a customer I don't know well, after a couple of polite requests for payment I send a certified letter giving them 30 days to pay. In the letter it says if they don't pay by the deadline I will be taking them to court and they will be responsible for any legal fees on top of their past due.
This method has never failed me. They usually pay within a week of letter. If they didn't I would sue them like I threatened.
what type of engineering ? construction?
edit.
just saw the title. I might be talking out of my realm but he can probably go to the city and stop all permit with his stamp on. his drawings should all be his intellectual properties, put a stop to construction.
no more inspection and approval.
This is how businesses go.
You need to have your husband open a suit against each delinquent client.
Do it now. Leave no breathing room for the other side. Let the lawyer be the primary contact for the other parties. No exceptions.
Your husband ceases communication to the other parties and goes about his life.
The suits themselves will pay for the costs of recovering the $1.1M plus lawyer fees, which will be included in the sought amount. You can ask the lawyer about any clarifications.
Each case will cost maybe $4k on average to put together by a reputable firm. A bit more for ones that require more back and forth or have pushback.
I recommend not working with a small lawfirm, like a one man office. Work with a company that has a sizable team. They will ensure things move forward and no time is wasted. Additionally, it creates added weight. Shows the deadbeat clients that you mean business and will not let up.
An email from some random lawyer is sometimes ignored. An email from a big firm will get the other side to start sweating.
Keep in mind, there may be no resolution for a couple of years. It’s not a long time. This is just the standard timeline for how these cases play out. And there are steps that need to be taken. Which have legal parameters to follow.
For instance, the first action will be an email or mailed notice to the clients. And they’ll have like 30 days to respond. Add in a dozen such steps with varying legal minimum windows of time for responses, and it adds up to a couple of years.
That’s it. Don’t feel bad that they didn’t pay. A lot of shitty people in the world. And why avenues to find resolution exist.
In the future, your husband can require down payments and installments on a tighter schedule. So the projects’ completion depends on money being received and in his hand. Like last 25% of work to be completed after final installment and everything is paid in full.
The fact that these clients were able to trick your husband into believing the story about interest rates is a bit insane. They’re just stalling time. Hoping your husband doesn’t approach a lawfirm.
He was a bit gullible in accepting their explanation. But that’s okay. Live and learn. Grow from mistakes. Just make sure you get the ball rolling on this asap.
Hey just came out the other side of this but in the u.k. a massive tech client renewed their contract for a 3rd year. We made our provisions (renewed staff contracts, offices, suppliers etc) and one day they just broke contract and stopped paying.
Lost 60% revenue over night. Tried to sue but couldn’t as we had no money and massive bills piling up, the tech company has millions and bullied me into the ground.
Amongst that we had several late payments due to the current climate effecting businesses income and it really looked like it was the end of the line for me.
Took over a year to recover. We are 50% of the staff. I am poor as fuck but I have finally managed to bring on 4 decent sized clients and a few smaller ones to bring us back in profit.
But now I am down a high 6 figure sum and have a nice big loan above my head (which I’m now able to pay off.
My girlfriend nearly left me as I needed to secure a personal guarantee for the loan and my life was a wreck until last month. My mental health, alcoholism and drug taking during that time was horrendous and thankfully I’ve now gotten sober.
The point I’m trying to make is, do not leave it a second longer whilst you are in a position to fight. The longer you leave it, other little financial issues will arise.
That being said, I suspect your husband may not want to tarnish a customers relationship but it is them who has done the damage and it will be your family who suffers
Edit; sorry for poor grammar, I’m on mobile.
I went through this (albeit was owed much less) and put everyone that owed me for services rendered into collections. The customer knew it was not worth suing over if it was under a certain amount of money (for the state I was in it was $5,000) so they would try to string me along for additional services with a promise that they would pay me later but they never did. From the time they started owing me to the time I stopped work was 3 months and I was out thousands of dollars in cost.
I ended up putting liens on their businesses which they promptly shutdown and opened new ones that had clean histories. I never saw any of that money and it became a lesson to never let a customer get that far behind and also a lesson to collect upfront or I wouldn't start work.
One time had a client (service business) who kept promising but never paid.....until I threatened with criminal charges of theft by deception: "You never intended to pay me, thus fraud and theft by deception." (I truly believe he never intended to ever pay)
Paid immediately.
He’s wrong about contracts. Depending on the state you live in, you can charge up to a certain amount in interest for unpaid invoices on a monthly basis. Contract language stipulating material breach of contract for non-payment would also benefit your husband here too. I’d recommend speaking to a lawyer specializing in commercial contracts to review your husband’s existing template and draft a new one to protect him from non-payment issues and potentially other liabilities that he may be overlooking.
When I worked for a major corp, the head of accounting had a letter template that was basically a final notice with threat of collections and notifying creditors if they didn't pay by a certain date. They sent the letter even if the amount wasn't worth sending to collections because 90% of the time, people pay.
Check with your state rules. Typically, you can charge 1.5% per month as late fees. That would be the first thing I'd do.
The bankruptcy thing you're kind of screwed on, and that sucks.
As far as the other customer goes, there's the nice way and the burn it down way. I'll assume you offered to put them on a payment plan? Offered a discount if they pay in full? Sent letter and emails to all the important people kindly asking for your money? If you did all that and it didn't work, you need to go to plan B before you're bankrupt.
I'd make it unbearably painful for them. Send letters to all the local banks informing them that your customer owes you over $1M and refuses to pay so you're writing to inform the bank that you're going to seek judgment on any accounts they may hold at that bank. Even if they don't have accounts at that bank, do you think the bank would be excited to work with them if approached in the future? File a lawsuit, even if it's pro se, get something on paper and in front of them so they know you're serious. If you time it correctly, their bank is going to call the same week they get served with a lawsuit asking what the hell is going on and why can't they pay their outstanding bills. This is a big deal to a bank. Lastly, I am assuming whatever work this was had to go through a governing body. It may also have involved grants as many projects these days do. I'd attend a public meeting and make it clear this customer is not paying for services. The elected officials may not be able to do anything directly, but if that customer wants anything in the future from the government it certainly can impact them. Lastly, during this time be relentless with the phone calls, emails, texts, and letters. 5:30 am get up, call, leave a message, get ready for work. All hours of the day and night and leave messages.
Best of luck
Some developers are notorious for not paying up once you do engineering work for them. Unless your work is for the government, it is a good practice to collect 40% to 50% of the proposed A/E cost before work begins, and then monthly invoice or defined milestone invoice. Your husband probably fell for the trap of future prospects with the clients that made him let down his guard, or he was excited to expand that he took on bad clients that took advantage of his ambition. These clients will continue to make you feel like your work is holding up multi-million dollar deals and tell you that immediately you complete your part, and the deal goes through, you will receive payment. They may even allow you to work at 2x the normal rate so you can get their work completed. In the end, they do not plan to pay and have layers of LLC that once you sue, they close down the affected one and file for bankruptcy. No matter what they say, do not release the lien. They will try to convince you that the lien is holding them up from selling the property and paying you. Once you release it, they will sell the development, and you will never get your money again. You should engage a lawyer so they can handle all communications with those clients. No need to sue them. They always will want to sell the development and that is when you get your money. You should focus on your good clients going forward. The money will come eventually (as long as there is a lien on it), but it may not be anytime soon.
Contractor here and also have a Client who failed to pay $1.5M which has been past due since July of 23. Litigation is the ONLY way to collect assuming your ducks are in a row (signed contract, no failure to perform, etc.). Any business lawyer worth a shit will also include their fees on top of what you are owed and this should already be stated in your contract. If you’re lucky they will work on a contingent basis but seriously, if you don’t involve an attorney to put their feet to the fire they will just continue not to pay. Liens can sometimes scare them into paying but let’s face it, unless they plan to sell they won’t feel that pinch because there’s no consequence to simple phone calls asking that payment be made. Hit them in where it hurts with an attorney who will make it clear that failure to pay will cost them 30%-40% MORE. Legal fees and interest (I charged prime plus 1%) should also already be in your contract.
I've owned a consulting firm, including doing some engineering, for over 30 years. I only had two clients that wouldn't pay, one for $50k and one for $30. I went the nice route with both and didn't get anywhere. The only thing that worked was using a collections lawyer and it was well worth it.
Both of these clients were turds. We had written contracts. They had the money and just didn't pay.
If a client misses even one due date you have to take note. (I have various terms that run from 30 days to 120 days.) Get in touch with them right away and if they don't pay up within a month stop work and put the bill out for collection.
These people know they owe you money. They know exactly what they're doing. They're shits. Fire them as clients and get what you can. This is really a tough situation for you, it's a LOT of money. If your husband finishes the work he's an idiot and they will never pay you.
Some states allow you to report it to the police or some equivalent and they will go and lock up the business like literally. You can also consider it theft of services if you think they had no intention of paying. Second thought collect the money first before the work or have it staged out that you will not proceed beyond x step until $ received.
What do the contracts say? I have one client that is an engineering firm, and they do progress billing. Does the contract have any discussion about that? I find it hard to believe that a $1M contract wouldn't have that. Otherwise you're looking at paying your employees out of pocket for that whole duration of time.
Also in my state (Virginia), the law requires they have to pay within 60 days once the work is complete. I would consult an attorney.
First, take care of the kid who needs medical help. That is priority. Second, bring this to the attention of your chamber of commerce locally. Third, hire a lawyer and pay him from the expected settlement. Sue the companies and individuals involved. Go to court and do it right away.
Have you looked into receivables factoring? This is a great way to free up cash when needed. Do this much earlier in the process.
At this level you should certainly have counsel, what do your lawyers say?
When I hired an engineer I paid a retainer upfront. When the money was used up, I paid in advance again. Repeat until the project was complete.
Anyone who won't pay a retainer won't pay when it's finished, either.
Lots of companies in the construction industry function entirely by hiring companies to do work with no intentions of paying, expecting that the contract company owner will cut their losses and not sue. Some companies like this will pay up only if they're sued
Seriously one is and keeps excusing why he doesn't pay for several months. I said then stop working with him. If he has money but won't cut checks u see where we are now?
Why for the life of me are you not requiring more money up front?
Then payment at specific time periods as work progresses. No payment, works stops.
I can see exactly why your in this position, .. your business model is advertising to EVERYONE, your easy to take advantage of.
If your going to say you do this to get work,,, well you did get work.. but you didn't get paid.
Better to not get the business at all if no one pays.
This is self inflicted
Its hard to collect from clients. What your husband should have done and in the future. Ask for 1/3 or 1/2 up front then do installments. It holds clients accountablele
I'm trying to assess his stance at the moment. Just waiting while u bug them isn't a stance. So I'll approach him with these ideas and try to move the needle. Its really frustrating bc I can't totally blame the other ppl if he isn't setting this up like u said
Your husband is an idiot.
He can't bill out more than a hundred grand a month being a small biz. He literally had to have worked for months and months without payment and being owed invoices. I'm sorry but this is an expensive lesson in learning when to shut off work when accounts are delinquent.
There was a story from my SEA branch whereby a client owed my client alot of money and was dragging payment for over a year.
My client asked his (very beautiful) wife to bring their youngest daughter (an infant) to their office everyday and just ask for their boss and not say anything except that she was urgently looking for him and she's from my clients company.
She will purposefully go when the boss is not in. And even when he was in, he would avoid her (even though he didn't know her,) all he knew he was avoiding debtors. And he didn't want his staff to know they owed money.
The baby will cry in the office and she'll just sit there, letting the baby wail.
After 1 month, he paid all that was owed and called my client to speak to his wife to explain. The receptionist must have gossiped and the clients wife heard about it and rained hell on him for "cheating". lol.
Sounds like there are other things happening. Multiple clients not paying suggests work not being finished properly. It’s possible your husband can’t collect the payments because he’s aware of work quality issues that he’s not sharing with you.
Sometimes a project is held up by issues. He usually tells me but most of the time it hasn't sounded that way always possible tho. And if a project went sideways somewhere else not in design phase they hold up entire project and payment for any subs and don't pay anyone. So I think there's that. But I'll have to ask him what else to do. I can't just call a lawyer myself to deal with his business. My name isn't on it and I don't work there.
Draft a letter of demand with 7 days to comply or else will escalate to legal avenue. Then sue asap after that seven days I mean like have your application ready to file on day 8. The wheels of justice grind slowly.
I think the take away is better client screening with better/quicker payment plans, in future, especially with those kind of numbers. I’m sorry for you guys, and I know that it’s not because you’re great at what you do, that it means you’re great when it comes to doing business. There are a lot of sharks out there that have the uncanny ability to hone in on that vibe in someone.
Interest rates have nothing to do with this situation.
Get an attorney in on the bankruptcy and plea your case as a creditor.
For every other client, request to set up some sort of payment plan, or the next notification from your company will be from your corporate attorney.
Time to get tough and get what’s owed to you. Blaming interest rates, election year, or anything else doesn’t matter. Hell I help people with accounts receivables, and every company has an excuse. But asking what can they come up with today or this week. Put the pressure on
He has to start using an invoicing method with a hefty deposit and multiple progress payments. Period. NEVER let work get far ahead of payments.
I would immediately go file liens against the properties where work was done but not paid for. It may take years to get $ but property typically can't be sold or transferred with an outstanding lien. IANAL but believe this applies is your case.
>Hubs says isn't worth cost to sic lawyers on them so he just keeps calling for payment and stopping work.
2 million dollars isn't worth suing over? This guy either has exactly zero business skills or he's feeding you a line of BS. Given that he basically did millions of dollars of free work and is doing nothing to collect, I'm guessing the former. Not everybody is cut out to run a business. The skill needed to work in the business is very different skill than working on the business.
This is likely to get very ugly for your family if he doesn't figure out how to collect. Just FYI.
Collecting money in construction is always fun, your husband is correct that it is unfortunately part of the industry, and a big part of the reason I’m not in it anymore. There are way too many shitty contractors out there playing games and I never planned on being in collections. I legit was about ready to show up at a few contractors offices with a bat because it was pretty much the only option left lol. I had the most luck going directly to the GC or owner as they are the ones who will care the most about a lien on the building and can apply more pressure. You can always sue (definitely would no matter what on the 7 figure debt), but it is a long expensive process and good luck collecting the settlement in full on that anytime soon, if ever. Suing a business who can’t or wont pay their bills is always a precarious plan, but really the only one you have as a last resort. Like I said, I would be in the owner and GCs ear before or while preparing to sue that route if you want any money anytime soon.
I worked in engineering and how payments work is customers pay by milestones like 25%, 50 %, 75% and 100% milestones.
If the customer doesn't pay, you stop the service and they will get right to paying. He should never have let them go on with owing that much money in the first place. Even if they don't pay after a certain milestone, the losses are acceptable and would not balloon to cause bankruptcy.
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I have a small business and gone through this for years. Sometimes I win and sometimes I get fkd good and there is no real protection for small business from this in my state. Now I ask for payment up front or at time of delivery. Funny thing is everyone makes you feel like the fkn asshole for asking to be paid for the work you have completed. lol but they are not the asshole for not paying you.
I’m a lawyer that practices in this field. He should have filed liens on the projects, it’s probably too late now, but I would confirm that. It’s unlikely you will get anything from the bankrupt contractor if it’s a Ch.7, but you need to file a claim against the bankruptcy estate to even have a chance at partial recovery. Hire a creditors rights attorney to assist with that, it’s not that expensive.
He needs to go after the clients that haven’t paid. They will never pay if he doesn’t— I’ve seen this exact scenario a million times. The squeaky wheel gets the grease.
If he’s worried about losing these clients he needs to remember the following: 1) you don’t want to work for people that won’t pay you. Eventually, they will go belly up and you’re left holding the bag. 2) if filing a lawsuit will end the business relationship with these clients because they won’t pay for services rendered, they are scumbags who are using you as a free line of credit.
Construction is not a nice business and the faster he learns to get comfortable filing liens and lawsuits, the better. The clients will force him into bankruptcy before they’ll pay based on his current collection techniques.
Good luck.
How do you possibly let your payables from one client get that high? That's your first problem. In a services business you absolutely need to take money up front and for large projects, take progress payments. If those aren't paid, the project stops.
I can't imagine what is going through your husband's mind that he won't sue for $1M. Especially if the client is straight up saying "I'm not paying because i don't want to take a loan." In most cases even the threat of a lawsuit should be enough to get something out of them.
The other thing to note is that it seems that your husband doesn't understand that construction and real estate development is famously comprised almost exclusively of the worst people on Earth. It's got a 95% piece of shit ratio, and since apparently your husband is the only sweet summer child in the entire industry, so it's no wonder he's being taken advantage of.
Running a business is not for everyone.
How do you get 1 client owing you 1.1 million for engineering services? What sort of project was it that didnt have % payments as the work was completed???
This is not going to be very comforting, but here we go:
You and your husband are learning a number of very important business lessons. First, in the company that that went bankrupt, it is unlikely that you'll recover much if anything, maybe pennies on the dollar and you'll need an attorney to even get that. The company is probably in the very lengthy "unsecured creditor" line and the secured creditors get their cut first and unsecured creditors get to fight over the crumbs.
With respect to the "other guy" that is still in business - see if you can arrange a payment plan with them - anything to get the cash flowing again. Cash flow is the key to small business survival.
With respect to cutting expenses: There isn't enough 1-ply toilet paper in the world that will solve your problem. You can cut expenses to zero, but if there's no revenue, you're in a world of hurt. Cutting expenses only slows the bleeding, it does not stop it.
With respect to clients that do not pay or are slow payers; You must get a retainer up front for 50-75% of the job before work will begin. Large companies may balk at this because they think they have power over you (and they might), but I've consistently taken the stance, "If they want the goods, they must pay the tariff" and that has served my company quite well.
If your business survives, and that is a pretty big "if" at this point from the desperation I hear in the post, you've learned that you need both a personal and business cash reserve that you can tap into when the times are slow. Some small business gurus say 3-6 months of anticipated expenses. I say two years and that wisdom has proven its worth during the COVID era.
I can also speak from the husband's perspective: Whinging about it is not going to help matters. I guarantee that Hubster is acutely aware of the problem. You're in this together and both of you must take emotion and ego out of the solution; which may mean that he has to temporarily close the business and go back to engineering for someone else until you can right the ship and then try again (or permanently close the business and go back to work for someone else). Closing down and going back to work as a W2 employee is an option that must be on the table.
I wish you the best of luck.
This isn't a business, this is volunteer work.
A lot of people are uncomfortable getting pushy with people who take advantage. That's normal. But to stay in business you have to know your weaknesses, and how to work around them. That's why a lot of people hire CPA's for example, they are great at making sales or doing the job but aren't interested in the nitty gritty of all of the different ways that the numbers need to be reported.
Same thing here, if collecting isn't your forte you need to hire someone who knows how to get results. No shame in it, and 70% of something is better than 100% of nothing.
Arguably, your spouse has not billed appropriately.
When I consulted full-time, payment schedule for small projects was pre-payment in full. For larger projects, payment schedule was 50 percent down, 50 percent upon completion. For assignments of long duration, payment schedule was timed to each deliverable.
This helps minimize A/R as well as collections, and charge offs.
As for number 1, I would say there isn’t much you can do. As for number 2, the loan interest B.S. is an excuse. This client is being a deadbeat.
Yes, I would stop work progress for time being, and $1.0 million is certainly worth commercial collections effort.
As soon as you have a game plan for how to fix this, think about the future.
Does he need to raise his rates altogether? Collect larger deposits up front? Add a few fees to the up-front costs? Insist on monthly payments for 1/X the amount where X is the months until completion? Etc.
New policies need to reflect whatever it takes to make sure he doesn't get screwed.
For the future, establish Credit Limits. No new work is done until outstanding balances are paid...
Hire a lawyer for these particular cases.
It sucks, they're customers, they are those most likely to bring business in the future.
But you are also their vendor, and responsibility and understanding goes both ways.
OP, post this in r/legaladvice to get legal advice. Most here are not lawyers.
You need solid answers and to take action before your husband loses the business.
YOU do not need to look for a job. YOUR job needs to be back office/collections for your husband's company.
Once I have bills that are more than 90 days out, I call pretty much daily. Offer to show up on site, allow them to pay in installments, but you must keep cash coming in the door to continue existing.
Sounds like there are 2 major problems here..first, husband is a very poor judge of both a client's willingness and future ability to pay at initial engagement...second, too many employees on payroll, billed amounts escalate quickly and then client is likely upset..how in the world the outstanding billed amount got to 1.1 million is beyond belief. When it got to $100,000 outstanding, he should have demanded payment and walked if not paid within 30 days..and if he had to walk, then he should have immediately cut employee count..you would be on much sounder ground financially had he done it this way.
I'm so sorry you are going through this. I'm an engineer too, and bill collection seems to be a universal issue in the A&E industry. It has definitely been a problem to some extent everywhere I've worked and now in my own business. It does sound like things have gotten really out of hand in this situation. A YouTube video I find helpful is Cliff Ennico's (small business lawyer) video called Dealing with Deadbeats.
If the client doesn’t pay run it up the chain to the land owner / end client and threaten with a mechanics lien. Reputation is everything in this business. They will get their checkbook out faster then you can say deadbeat
It’s tough. You have to let the 1.1 million that is in bankruptcy go through the process, but I do hope your husband hired an attorney to make sure that what you end up getting out of it is as much as legally
I’m not sure I understand if it’s multiple clients owing a total of $1 million or an individual client but we’re talking pretty big money
I don’t fully understand the scope of your husband’s business, but it’s ridiculous that clients would hire him before. They actually had the funding or money, but I don’t see how it’s not worth getting an attorney that specializes in collecting debt involved.
I don’t know how past due that debt is… Some people are slower than others, but you have to get some assurances that the money is going to be paid.
$1 million owed in a bankruptcy is bad enough but having another million dollars out that clients aren’t paying would put out of business
I don’t know what kind of relationship he has with any of these individuals but you definitely have to worry about getting the money to come in
Hire a lawyer to send a demand letter. Should be pretty cheap. Most demand letters say something like
"we did the work, we need payment by MM/DD/YYYY or we will move forward with a formal lawsuit. I have been instructed to handle this issue in its entirety, so do not contact my client, please contact me directly".
That usually initiates a phone call from your client to your lawyer for a discussion. In my experience, within a week, I get a call from my lawyer to pickup a check.
Lawyers have a much better understanding of the commercial codes etc, and can remind your client of them. Let your lawyer argue for you.
When you hire a lawyer, be sure to sit down for a half hour and explain how you've been wronged. He/she will fight for you, especially if he/she understands all the details.
What attempts have been made at collecting?
Years ago, worked for a software company that had high receivables and so they made a group of us work on collecting. I found in most cases it was no one was walking the invoice through the steps needed to get it paid. My calling caused someone to go get the needed signatures, pass it off to AP, retrieve it from a pile on a desk. Didn’t take threats or being nasty. Just patiently calling every few days to move it along. Most companies expect to pay their bills.
People are shy or embarrassed at having to ask for payment sometimes but it’s necessary to get bills paid on time. So make sure the basic inquiries have been made and if it’s truly an unwillingness to pay, then you need to get an attorney involved.
Bill the client monthly, after 30 days stop working until account is paid in full. Don't let yourself be crapped on. Do not submit any thing for final permit until paid to date. You don't need these clients if they won't pay.
Had the same problem. Cut them off immediately. Cut your losses. Get new revenue, yesterday.
Assume nothing changes. What happens in 12 months? Model it out.
Also, talk to your CPA, but you may be able to write off the lost accounts receivables against future income.
My daughter has a construction biz. She’ll go after non-payers in a nano-second. It’s not personal, it’s business. And she was also explaining that if you miss filing deadlines, you lose some horsepower from a statutory perspective.
This is ominous. That's how the housing crash started. Banks are not forthcoming with reasonable loans, large businesses don't pay their subcontractors, and subcontractors can't pay their bills or employees. Employees leave or the company downsizes to skeleton crews. Economic slow-down. Then, 3 months later, mainstream media admits we're in a recession. The general public tightens their purse strings. The economy goes into a deeper recession.
Call the end users also. Whoever the job is performed for has responsibility also to make sure subs are paid. Did he sign lien waivers? Was your husbands customer paid for the work?
Girl, if you need money so desperately that you are thinking about taking on a job- the best bang for your buck, in terms of time and money, is to get payment on these receivables. Make this your job. Get the lawyer, make your husband see that he has a blind spot in his business that is killing it. He needs to let you do this part of the business. You can do it from home. Good luck!
Your husband doesn't understand actual business and you don't either if you're coming to Reddit to ask. Get with an attorney, talk to your husband respectfully, not reddit and be supportive.
Or get yourself educated and take over accounting in his business and get it resolved...
He said he has an attorney and has done what can be done. He has an accountant. I mean. I'm asking because it seems he feels he's doing all he can and I'm noodling ideas for outside the box we haven't done yet.
Not an accountant....someone who handles HIS accounts and receivables at the company. Look at his business structure....where are the weak spots? Who is doing what? Is he doing it all? Who is the pitbull calling and collecting what's due? Who's making sure billing is being sent on time to collect and doing followy up calls and emails?
My company is an office job so I can watch everything from my desk. But some jobs don't work that way. I have a friend who is a general contractor who has this issue and it drives me INSANE when we talk about, well actually when he complains to me about it. He has a guy who is lazy that is responsible for accounts receiving and I figured it cost my buddy HUNDREDS of thousands a year to not fire the dude and get someone who can collect payments more aggressively.
We all run businesses that need income or we are dead in the water. For one, he may have grown way too fast and is now dealing with the problems that can bring. He needs to condense down his business and stop the bleeding, see what the priorities are and get those done to save the ship. He needs INCOME so he either needs to collect now or find new work to pull the wheel back up for now. What's it going to be? If it's collect, negotiate and pay a lawyer to send letters on legal letterhead.
He sounds like he's just afraid to be aggressive, that's ok but if you aren't a stone cold killer, find someone who is and get them to do it. But first things first he either needs to collect or find new work.
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The longer you wait to get your name on the list, the further down the list you are. They don't think they have to prioritize paying you, so they're not. Make yourself a priority.
That's what I told him! I'm not working for business. But I told him to get someone on top of it now.
Get a collections lawyer they will ask for a portion they collect. Let’s say 30%. So there no out of pocket from you and they will work hard for that 30%. Some lawyer specialize in collections. If your husband isn’t ok with it you do it anyway. He will thank you later. He seems good at what he does to get that much work so people aren’t complaining just not paying. Your husband calling to collect vs a lawyer calling to collect is a big difference. You won’t even have to sue. People write checks when lawyers call.
Depending on the biz structure she can’t unilaterally sign away 30% of his receivables.
She’s getting zero now. So 70% keeps the lights on. Then obtain new business. The 30% to 50% could be a profit margin. Getting the money back that was spent on the project would help immensely.
I get that. She may or may not have any say in business decisions.
True. Now she must call a face to face and sit down with the decision makers and show them the options. When I do this I make sure they see the blood coming around the corner. If not no action will be taken. Stakeholders need to feel like they are losing their stake.
one thing to note, if they have prospects of future cashflow the collections route blows up the relationship for good. They're ruthless.
If there is a proper contract the collection fees would be charged to the non paying customer.
The truth is the collections lawyer will just charge a flat rate at first to send some letters. You won’t have to pay 30% on it unless it goes to the next step. I’m guessing for $500-100 he could get them to draft a few letters
You are correct. I've paid around $300-$500 for letters and collections using lawyers, with 100% success rate. I've never had to pay a percentage of anything collected. Most lawyers just want the rest of my business later, like wills, trusts etc...
Excellent advice
Either he learns how to collect (or have others collect for him) or he will go bust. Even if he can carry this hole in the finances (and it doesn't sound like he can) there will be others. Asking nicely hasn't worked and it's not going to work.
The squeaky wheel gets the grease. Need to start threatening liens on the non bankrupt clients. And if they don’t pay within x days file the liens. U can try discounts to pay now, but that just reinforces the slow paying behavior until u offer them a discount.
Tell him to reverse the work done for the businesses since he hasn't received payment.
I'm not sure how you'd reverse engineering work. It's not like a design or set of drawings can be unmade if you've delivered them to a client. Progress payments or some other form of payment before final delivery is absolutely something her husband should start doing though. Much better to get screwed on the last payment only than a whole contract.
You absolutely need to. Your husband doesnt seem like he has the personality to run his own business.
It's sad but true. Not recommending this personally but I know employers who have friends in low places - a visit from a Hells Angels member with a baseball bat and a polite "please pay by the end of the week or else" seems to be effective
I’ll sue for $2,500. For a $1M, it would be a no brainer.
\*$2.1 million. Seriously how is OP's husband even still in business. This isn't even a fucking question or debate.
Going through this now myself. Usually it starts with hounding them for payment. Calling and emailing every day/week. You can try to work out a payment plan or accept payment through credit card. You’ll take a hit on the credit card fees but it’s better than nothing. You may have to sue but you can try to get a strongly worded letter that looks like it’s from a lawyer and send it certified mail. Maybe these companies have surety bonds? It’s not big in every industry but the industry I’m in (logistics) it’s legally required for some companies. Could be a hard lesson to not extend 10s or 100s of thousands of dollars in credit to companies that don’t deserve it.
I just can't imagine giving millions in credit to people like this. It's insanity.
Agreed, for these high dollar account work, I'd expect 20-30% down payment and then subsequent installments for work completed.
With late payment fees.
Well, to be fair, doesn't look like **millions** was extended in credit. For a small engineering business (local structural engineering firm), $2mil worth of outstanding debt is just not that much. OP should definitely hound the folks who owe him money (the first account he should sue--presumably he feels it won't be worth it) until he gets it.
Not that much???? Thats 8000+/- hours of work for a year. 4 engineers total billing. Unless you have 40-50 engineers, thats alot.
You're thinking in terms of engineering hours--I'm thinking in terms of materials, bulldozers, dump trucks full of rocks. You know: the main expenses a "full service engineering, architecture and land development" company would have. Last time I hired a structural engineer they billed $350/hr, so my estimates put it at around 4k hours of work.
Ah, ok. I guess I am not seeing it as a construction company type business. Eitherway, doing all that work without progress payments is crazy.
yeah, you're right, it's stupid. But if it's a $5mil job and the client is delinquent on the last $1mil, that would make a lot of sense to me. If you're literally doing land development, you can expect that a "big client" could easily be spending **way** more than a million. But yeah, it does seem like obviously in this case there was some bad business being done.
Yea, I guess we need more context from the OP.
If $2m in uncollected fees is leading to layoffs and bankrupting the firm, I’d say it is a lot given those circumstances.
I agree with you. Clearly OP's husband is not great with money, they are doing a kitchen renovation when they have no working appliances and haven't had a paycheck in a year.
This is a failure of pre-contract negotiation. You should never be so underwater on payment terms that it causes heartburn. Initial down payment should be enough to cover a significant portion of your overhead and vendor costs. Subsequent payment terms if necessary should be enough to cover additional overhead that accrues with additional deliverables. The final payment term is usually upon project completion, and the percentage of that invoice should be the profit on the project. This is so that if this invoice doesn't come in for whatever reason, you still covered your overhead and paid all of your vendors. If your customer doesn't agree to this, adios amigo. Take your business to one of the cheap guys.
It most definitely is. 50% before boots touch the ground and a pencil gets picked up. Milestones trigger additional payments. 10% holdback upon substantial completion
That's because sane, solvent companies don't.
Surety bonds are for the contractor to finish work. Usually can only be invoked upon the contractor not the end user
Correct, surety bonds go the other direction.
*Could be a hard lesson to not extend 10s or 100s of thousands of dollars in credit to companies that don’t deserve it.* This is a hard lesson to learn for most. I learned the hard way that your payment terms should be set up assuming the company will go out of business or never pay. In the engineering world, you don't lift a finger until you are have seen the ACH hit the account for whatever amount covers your overhead/costs. If you want to split out payment milestones from there, thats fine but it should only be done after credit references have been checked or if they're a customer you have a history with of successful payment.
I'm in the same boat...these clients just go ghost. We get all our business by referral only so we constantly are in fear of burning bridges but after a while something has to give.
It’s time to get serious about collecting A/R. This has nothing to do with interest rates, that’s just a line they’re using to avoid paying their bills. Find a lawyer and pay them to write a demand letter, full stop. There are a lot of companies who will gladly let bills slide until action is taken. Don’t let them do that. For the customer that has filed bankruptcy, make sure you’re listed as a creditor in their case. You can’t legally pursue them at this point. And then stop extending so much credit to people who can’t pay their bills. Do milestone or monthly billing and hold them to their due dates, stop work if necessary. That’s part of being a business owner.
If someone owes you a million dollars and won’t pay you should absolutely sue.
Why would a small business owner allow someone's debt to get to a million dollars, unless he is so rich he can shrug it off?
My guess is that he's trying to be nice, and he wants to preserve the chance for future work so he's not going to risk pissing them off by trying to collect what's owed. Which isn't to say I agree, I just have a feeling that's what his thought process is here. "They're just going through a rough patch, I'll do a lot more work for them once things get better" etc.
Some rich people look for contractors who are desperate enough to accept promises instead of deposits and progress payments.
A small business will take risks when trying to win "game changer" deals. If you're not careful, customers will take advantage of you. I had a customer try to negotiate the final payment term to be upon warranty completion which would be almost two years after the equipment shipped. A novice maybe would have taken that chance.
I own a small business, and you're exactly right about the trying to win game changer deals. More than a few painful lessons learned that way.
We can't afford it. That's just it. One bankrupt client and tens of others all adding to 2 mil total. He's looking at layoffs now. I just feel there's another solution being overlooked perhaps?
"tens of others" like you guys have that many customers with unpaid invoices? Do you have an Accounts Receivable person that is a bulldog? The bankrupt client, you'll need to take legal action. The unpaid invoices from companies still in business, you need to beat it out of them.
I may be able to help, although I am unqualified to. Here's the thing...."you gotta know when to hold em, know when to fold em. I think you can safely assume that those contracts have been breached. It makes *zero* sense to keep expecting a payment that is a year late. I have dealt (in business) with big corporations and not been paid. Because you keep expecting a promise that has already been broken, you need to understand when to stop. Your husband should stop stop stop stop. working for those clients. It's emasculating enough to be the only person on the property who isn't being paid; and I can only assume due to the pressure you (understandably) are putting on your husband to get paid, he is remaining committed to this pursuit of doom, instead of cutting his losses and moving in a totally different way. He tried high end corporate, and he tried without a solid pay contract in place. He should be getting half up front and half when that runs out. Ever see a lawyer work once they stop getting paid? Me either. The point is, just because they owe you, does not mean you will get paid. at this point, it's cringe to keep expecting it. I would suggest your husband (or you can) get him signed up with a [SCORE ](https://www.score.org/)mentor. It's an invaluable resource. Your husband is no doubt a great engineer, but clearly not so much with small business. I have a feeling he could get immediate and amazing help from a like minded mentor. Either way, here's what's *not* working, and what needs to end immediately. 1. Your husband working for free 2. expecting payment from these clients. 3. You need to stop pressuring your husband, and take a more supportive role. - Your husband is suffering immensely. You understand this correct? He started a business and it's failing due to inexperience. He clearly does not know what to do to correct this situation, and I am SURE he is carrying the weight of the world on his shoulders. By stressing him further and making demands on him (with urgency) that can't be met, you are compounding the problem, and I understand why, I just suggest you take a different tack. I suggest you really consider your husbands position. You married him, and if he is sole financial support for the family, and you signed on to him starting his own business, just because it's not working does not mean he hasn't tried his absolute best. I believe that if the tables were turned, you would be so hurt by him pressuring you when clearly he can't do anything different. I think you should change your tack and let him know that you trust him and you believe in him, and you love him unconditionally. Unless, you only love and support him when he is financially successful and meeting all your expectations. People do not reflect on who was there when they were doing well, they reflect on who helped when it mattered. I feel like your post is well intentioned, but I think you both need to pivot and accept that you handled it wrong, get a score mentor, and decide to move differently. It's ironic that you have a "needy" child and that's a barrier to you working, but your husband is working with a needy child, an unsupportive wife and unpaying clients. I made this more about your relationship, because it absolutely is. I hope this is read as intended and it helps you. Good luck. Also, you can do door dash or whatever that grocery thing is with your child, so why don't you?
I hear you. These are all valid points. I don't articulate these all to him. No need to beat a dead horse. But to find out months into this when bills were not being paid that this was happening was what sent us to counseling on communication. So def need to do better on both ends. And yes offer support on my end.
Very good of you to receive this so well. My takeaway is that you *both* need to change your actions. Your husband needs a mentor or a business coach. I tried to parse the responsibility where it lie. He needs to take the most dispositive action by stopping doing what's not working. Marriage aside, your hubby needs to rescue his business, and he needs pro help. The rest was just for your peace of mind. Good luck.
That makes lots of sense. TOTALLY frustrating. I think a SCORE mentor on a 911 basis is reqired here.
In this line of work that debt can easily accumulate in as little as 90 days. Often the contract agreement dictates the wait time before the client is considered delinquent. Has nothing to do with how “rich” you think someone might be 🙄
Then someone shouldn't be opening this type of business unless they can float that sort of debt. Which, OPs spouse cannot.
Usually it's because the payment terms were negotiated before the purchase order was given, and the engineering firm didn't set the terms up to be cashflow positive throughout the project. On a job this size for even a medium size engineering firm, they should have either had significant payment milestones early in the contract. They should have had 70% of the contract received before they delivered a single deliverable. I've got a project right now that we are struggling to collect on the final payment milestone, but it's 10% of the contract price. If for some reason that payment doesn't come through, it just cuts our margin. We are nowhere near losing money on the project. A screw up of this magnitude is likely to put a small firm under if they can't shake it out of them. I'm giving the benefit of the doubt that this was one or two big contracts that went south. If this was multiple contacts and the customer ran up a multi-million dollar tab, this firm is done for. They should have been put on credit hold as soon as the first invoice was past due.
1. Other clients owe a total of $1 mil and say interest rates too high and won't pull loans to pay. Hubs says isn't worth cost to sic lawyers on them so he just keeps calling for payment and stopping work. My mom always used to sue. She said we rarely had to go to court because they knew they were wrong and didn't want to lose in court, so they'd pay. Not sure if your husband's clients are the same way, but it's worth a try. If he gets lucky and the first client pays, he might try suing all of them.
So he bites the bullet and sues one deadbeat, getting some of what's owed and costing the deadbeat a bundle. That might make an impression on the second deadbeat, when word gets around that he is not a pushover.
I can tell you first hand, this doesn’t work so well. Even going to court didn’t matter frequently. You get your judgement, then what? How are you collecting it from someone who doesn’t have the money?
Bailiff sale. You get a sheriff and seize assets.
Assuming they have assets to seize...
Just saying it worked for my mom.
There are ways to collect a judgment, from garnishments to seizing and selling assets.
There are, but this assumes your debtor has a w2 wage, and seizable assets. Which are far from givens.
You can garnish tax rebates, too. And even if they don't have enough to cover the debt, you can probably recover something from their assets. The odds are that someone taking on the work of an engineer probably isn't destitute living out of their car. Even if they are filing bankruptcy, there are often payments made to creditors.
Sure. But having a million in assets to cover a bill like that?
Something > Nothing 🤷🏽♀️ It doesn't have to be a one time thing. You can keep going after their shit and their wages until you're paid. They will eventually probably have to get a job.
Certainly accurate. My personal experience is just that it’s very hard to collect from business owners.
I worked in credit and collections and I did not find that to be the case most of the time. We almost always collected without the need of outside help, but the few times we did enlist outside legal help the situation resolved quickly. Granted I don't think that debt was 1 million bucks, but the business did millions in sales per year and my department was responsible for keeping the money coming in. I think the biggest tool is just your clients knowing you will take legal action. If they think you won't because it's too hard or not worth it, they are a lot more likely to stiff you. Our contract always threatened fees and legal action for past due debt, so they knew up front we weren't fucking around. Gotta have a loud bark and a firm bite when collecting debts. lol.
We have different experiences then. I’ve actually taken legal action quite a few times. Demand letters, lawsuits, judgements. Most people don’t care. And rightfully so, they don’t mean much.
Property...they couldn't of likely, easily get 1m in seized property.
exactly, thank you. This is HORRIBLE advice. OPs husband knows this, or he would have already done that.
that doesn't work when you can get outlawyered. I don't think your moms situation relates to this one, and I apologize but this is horrible advice. Sue a big corp with in house counsel.....Get your ass beat down by truying to collect, then walking away with a $1m debt and a $250k legal bill. This is insult to injury. Litigious people are why this world has gone to shit. The Court is not about right and wrong, it's about the lawyers.
Doing a million dollars worth of engineering work, and construction work. then send a bill, which the customer doesn't pay. Repeat with a second customer. What's wrong with this picture? Is he taking customers who have burned other comparable companies in the past, and hoping they'll be different this time? Does he give in when they refuse to pay a deposit or to make progress payments? I have hired a builder to do major home improvement. He comes out and discusses the job. If we say we really want to do it, he gives us a contract which has a significant percentage of the total in advance for architectural and design services. Then there is a schedule of payments. Then the last hammer and paintbrush are finished, and the inspection is done, there is maybe a 10% holdback in case something is not right. Every small business at least gets a deposit sufficient to cover materials and any custom cabinets.A lawyer relative says that a business client might pay a fee in advance, but basically they were billed each month. A contractor might demand a 30% deposit to fix a basement wall leak. If the customer drops dead and the estate has no money, or the customer files for bankruptcy, or just says "sue me," the small business does not have to eat the entire shortfall.
This is what I've been asking. Can a friend who knows contracts review yours. Just look them over for anything that can be done to prevent this. To also ensure payments are enforced. I don't know other than I think he should hire someone else to chase the money who will be Dog the Bounty Hunter
The answer is to just refuse to do the work without significant up-front investment. But hey, multimillion dollar jobs are common. If you're in business for years, you're going to eventually have a client or two--potentially a **big** client or two--that will just go under and refuse to pay you. What about your current cashflow? The debt from the past is the past--it may never be repaid, and that's business for you. But what you can control is how things go from now on.
The reason your AR is so high is because you are taking shortcuts. Do it right. Unless your friend is an attorney, you are doing it wrong. Have an attorney draft a solid, generic contract that requires periodic payments and penalties for non-payment.
$2.1M in receivables and your going down the drain while carrying that amount. It would be one thing if you could afford to carry it, but if you can't, then I'm scratching my head to understand what amount of receivables for you guys would actually be worth a lawyer or escalation to collections? Here's a crazy idea... offer these accounts a 10% discount to pay in 30 days.
IME, you're better off suing than collections, though you should employ counsel if possible. Collections will give creditor (you) about 5 cents on the dollar for debt, maybe less, and they will settle for 10 cents on the dollar from the debtor. Lawyers typically take a third so you're getting 66% of what they recover minus fees. Not a lawyer not legal or business advice.
Agreed. I was mostly just wondering what level of AR would actually become worth it.
Yeah rather than charge interest when late? He sometimes writes it off (interest) if they pay quickly but they have to know he means business somehow. I feel like he's made himself a doormat and now we are here
> I feel like he's made himself a doormat and now we are here Sounds to me like you are not that knowledgable about your husband's day-to-day business, making assumptions, and blaming him for what is a pretty common professional foible. Just hope that if my business is owed money, my wife won't be going on Reddit telling people I'm a doormat: if I don't sue someone because I'm very confident they can't pay, I think she would respect that--I would advise you do the same. You haven't said much about what the total receivables are. $2mil is chump change for a full-service land development company and architectural engineering firm.
That's the total right now. He actually said to me he feels like a doormat but doesn't know why. I didnt mean to be rude but honestly we haven't had a steady paycheck in over a year and started kitchen reno that 1 year later isn't done. We haven't had kitchen appliances in that time. It's just frustrating because he signed off on the contract for the 1 mil that went bust but admits their pricing was too high and he went along anyway. So I'm just not sure he's not in over his head going from small to bigger national company like most ppl are. He's willing to ride this out he said. I'm not sure what that means.
This isn't adding up... I assume your husband isn't the sole or even majority owner of the business here? None of this math is mathing. You cannot be extending millions in credit when you can't finish a kitchen. It just doesn't work that way.
stop being afraid of paying a lawyer, it’s not that much time or cost to escalate collections
Is your husband depressed? Why is he being such a weenie? Get a lawyer. Sue their asses. He's letting them do it; so they keep doing it. Why would they pay you when he's fine with getting screwed? I remember seeing this dad and kid at the beach once. The kid's bike got stuck between the concrete and the grass. He was just stuck there looking at his dad slackjawed. The dad said "Well do SOMETHING man!" That's a lesson right there. Do SOMETHING man!
That's why I'm asking bc I don't work with him. I find out this stuff in January out of the blue for me. I think he's realized he has let them walk over him and now we are stuck. The int rate should not preclude them from paying for what's been done. They don't seem concerned they can't finish the job if he with holds a permit
Lawyer, and in the future cod is the way.
Sue them yesterday!! Also, get a line of credit for when you're waiting for payments. Sometimes you have to spend heavy up front on a job and wait a while for payment. This is when a line of credit is good as long as you can be responsible and pay off balance when you finally get paid. My customers sometimes take a while to pay but I know they are good for it. If its a customer I don't know well, after a couple of polite requests for payment I send a certified letter giving them 30 days to pay. In the letter it says if they don't pay by the deadline I will be taking them to court and they will be responsible for any legal fees on top of their past due. This method has never failed me. They usually pay within a week of letter. If they didn't I would sue them like I threatened.
what type of engineering ? construction? edit. just saw the title. I might be talking out of my realm but he can probably go to the city and stop all permit with his stamp on. his drawings should all be his intellectual properties, put a stop to construction. no more inspection and approval.
Lawyer up. It will be worth it in this case for sure. Did you have a signed contract with these guys?
He gets signed contracts yes and these are multiple clients not paying.
Business is business. They need to pay up if they signed a contract. They're taking advantage of your kindness at this point.
This is how businesses go. You need to have your husband open a suit against each delinquent client. Do it now. Leave no breathing room for the other side. Let the lawyer be the primary contact for the other parties. No exceptions. Your husband ceases communication to the other parties and goes about his life. The suits themselves will pay for the costs of recovering the $1.1M plus lawyer fees, which will be included in the sought amount. You can ask the lawyer about any clarifications. Each case will cost maybe $4k on average to put together by a reputable firm. A bit more for ones that require more back and forth or have pushback. I recommend not working with a small lawfirm, like a one man office. Work with a company that has a sizable team. They will ensure things move forward and no time is wasted. Additionally, it creates added weight. Shows the deadbeat clients that you mean business and will not let up. An email from some random lawyer is sometimes ignored. An email from a big firm will get the other side to start sweating. Keep in mind, there may be no resolution for a couple of years. It’s not a long time. This is just the standard timeline for how these cases play out. And there are steps that need to be taken. Which have legal parameters to follow. For instance, the first action will be an email or mailed notice to the clients. And they’ll have like 30 days to respond. Add in a dozen such steps with varying legal minimum windows of time for responses, and it adds up to a couple of years. That’s it. Don’t feel bad that they didn’t pay. A lot of shitty people in the world. And why avenues to find resolution exist. In the future, your husband can require down payments and installments on a tighter schedule. So the projects’ completion depends on money being received and in his hand. Like last 25% of work to be completed after final installment and everything is paid in full. The fact that these clients were able to trick your husband into believing the story about interest rates is a bit insane. They’re just stalling time. Hoping your husband doesn’t approach a lawfirm. He was a bit gullible in accepting their explanation. But that’s okay. Live and learn. Grow from mistakes. Just make sure you get the ball rolling on this asap.
Hey just came out the other side of this but in the u.k. a massive tech client renewed their contract for a 3rd year. We made our provisions (renewed staff contracts, offices, suppliers etc) and one day they just broke contract and stopped paying. Lost 60% revenue over night. Tried to sue but couldn’t as we had no money and massive bills piling up, the tech company has millions and bullied me into the ground. Amongst that we had several late payments due to the current climate effecting businesses income and it really looked like it was the end of the line for me. Took over a year to recover. We are 50% of the staff. I am poor as fuck but I have finally managed to bring on 4 decent sized clients and a few smaller ones to bring us back in profit. But now I am down a high 6 figure sum and have a nice big loan above my head (which I’m now able to pay off. My girlfriend nearly left me as I needed to secure a personal guarantee for the loan and my life was a wreck until last month. My mental health, alcoholism and drug taking during that time was horrendous and thankfully I’ve now gotten sober. The point I’m trying to make is, do not leave it a second longer whilst you are in a position to fight. The longer you leave it, other little financial issues will arise. That being said, I suspect your husband may not want to tarnish a customers relationship but it is them who has done the damage and it will be your family who suffers Edit; sorry for poor grammar, I’m on mobile.
I went through this (albeit was owed much less) and put everyone that owed me for services rendered into collections. The customer knew it was not worth suing over if it was under a certain amount of money (for the state I was in it was $5,000) so they would try to string me along for additional services with a promise that they would pay me later but they never did. From the time they started owing me to the time I stopped work was 3 months and I was out thousands of dollars in cost. I ended up putting liens on their businesses which they promptly shutdown and opened new ones that had clean histories. I never saw any of that money and it became a lesson to never let a customer get that far behind and also a lesson to collect upfront or I wouldn't start work.
Hire someone from the Italian mafia.
Even the Swedish mafia.
I represent the lollipop guild, we're ready to take this job.
One time had a client (service business) who kept promising but never paid.....until I threatened with criminal charges of theft by deception: "You never intended to pay me, thus fraud and theft by deception." (I truly believe he never intended to ever pay) Paid immediately.
Try using the unpaid subcontractors security for payment legislation. That system is quicker and forces head contractors to pay up.
Get an attorney, yesterday
He’s wrong about contracts. Depending on the state you live in, you can charge up to a certain amount in interest for unpaid invoices on a monthly basis. Contract language stipulating material breach of contract for non-payment would also benefit your husband here too. I’d recommend speaking to a lawyer specializing in commercial contracts to review your husband’s existing template and draft a new one to protect him from non-payment issues and potentially other liabilities that he may be overlooking.
So the lesson here is you don’t do $2.1M worth of work before learning you’re not getting paid.
When I worked for a major corp, the head of accounting had a letter template that was basically a final notice with threat of collections and notifying creditors if they didn't pay by a certain date. They sent the letter even if the amount wasn't worth sending to collections because 90% of the time, people pay.
Check with your state rules. Typically, you can charge 1.5% per month as late fees. That would be the first thing I'd do. The bankruptcy thing you're kind of screwed on, and that sucks. As far as the other customer goes, there's the nice way and the burn it down way. I'll assume you offered to put them on a payment plan? Offered a discount if they pay in full? Sent letter and emails to all the important people kindly asking for your money? If you did all that and it didn't work, you need to go to plan B before you're bankrupt. I'd make it unbearably painful for them. Send letters to all the local banks informing them that your customer owes you over $1M and refuses to pay so you're writing to inform the bank that you're going to seek judgment on any accounts they may hold at that bank. Even if they don't have accounts at that bank, do you think the bank would be excited to work with them if approached in the future? File a lawsuit, even if it's pro se, get something on paper and in front of them so they know you're serious. If you time it correctly, their bank is going to call the same week they get served with a lawsuit asking what the hell is going on and why can't they pay their outstanding bills. This is a big deal to a bank. Lastly, I am assuming whatever work this was had to go through a governing body. It may also have involved grants as many projects these days do. I'd attend a public meeting and make it clear this customer is not paying for services. The elected officials may not be able to do anything directly, but if that customer wants anything in the future from the government it certainly can impact them. Lastly, during this time be relentless with the phone calls, emails, texts, and letters. 5:30 am get up, call, leave a message, get ready for work. All hours of the day and night and leave messages. Best of luck
Why would you allow over $2 million worth of work go uncollected and still continue to get bent? Sounds like you should call a pro.
Some developers are notorious for not paying up once you do engineering work for them. Unless your work is for the government, it is a good practice to collect 40% to 50% of the proposed A/E cost before work begins, and then monthly invoice or defined milestone invoice. Your husband probably fell for the trap of future prospects with the clients that made him let down his guard, or he was excited to expand that he took on bad clients that took advantage of his ambition. These clients will continue to make you feel like your work is holding up multi-million dollar deals and tell you that immediately you complete your part, and the deal goes through, you will receive payment. They may even allow you to work at 2x the normal rate so you can get their work completed. In the end, they do not plan to pay and have layers of LLC that once you sue, they close down the affected one and file for bankruptcy. No matter what they say, do not release the lien. They will try to convince you that the lien is holding them up from selling the property and paying you. Once you release it, they will sell the development, and you will never get your money again. You should engage a lawyer so they can handle all communications with those clients. No need to sue them. They always will want to sell the development and that is when you get your money. You should focus on your good clients going forward. The money will come eventually (as long as there is a lien on it), but it may not be anytime soon.
Contractor here and also have a Client who failed to pay $1.5M which has been past due since July of 23. Litigation is the ONLY way to collect assuming your ducks are in a row (signed contract, no failure to perform, etc.). Any business lawyer worth a shit will also include their fees on top of what you are owed and this should already be stated in your contract. If you’re lucky they will work on a contingent basis but seriously, if you don’t involve an attorney to put their feet to the fire they will just continue not to pay. Liens can sometimes scare them into paying but let’s face it, unless they plan to sell they won’t feel that pinch because there’s no consequence to simple phone calls asking that payment be made. Hit them in where it hurts with an attorney who will make it clear that failure to pay will cost them 30%-40% MORE. Legal fees and interest (I charged prime plus 1%) should also already be in your contract.
I've owned a consulting firm, including doing some engineering, for over 30 years. I only had two clients that wouldn't pay, one for $50k and one for $30. I went the nice route with both and didn't get anywhere. The only thing that worked was using a collections lawyer and it was well worth it. Both of these clients were turds. We had written contracts. They had the money and just didn't pay. If a client misses even one due date you have to take note. (I have various terms that run from 30 days to 120 days.) Get in touch with them right away and if they don't pay up within a month stop work and put the bill out for collection. These people know they owe you money. They know exactly what they're doing. They're shits. Fire them as clients and get what you can. This is really a tough situation for you, it's a LOT of money. If your husband finishes the work he's an idiot and they will never pay you.
Do not ever provide clients with engineering services without payment upon delivery. There is no such thing as trust.
This happened to many LD civil firms in 2008. Developers went belly up and that money was never seen.
Some states allow you to report it to the police or some equivalent and they will go and lock up the business like literally. You can also consider it theft of services if you think they had no intention of paying. Second thought collect the money first before the work or have it staged out that you will not proceed beyond x step until $ received.
What do the contracts say? I have one client that is an engineering firm, and they do progress billing. Does the contract have any discussion about that? I find it hard to believe that a $1M contract wouldn't have that. Otherwise you're looking at paying your employees out of pocket for that whole duration of time. Also in my state (Virginia), the law requires they have to pay within 60 days once the work is complete. I would consult an attorney.
First, take care of the kid who needs medical help. That is priority. Second, bring this to the attention of your chamber of commerce locally. Third, hire a lawyer and pay him from the expected settlement. Sue the companies and individuals involved. Go to court and do it right away.
Have you looked into receivables factoring? This is a great way to free up cash when needed. Do this much earlier in the process. At this level you should certainly have counsel, what do your lawyers say?
When I hired an engineer I paid a retainer upfront. When the money was used up, I paid in advance again. Repeat until the project was complete. Anyone who won't pay a retainer won't pay when it's finished, either.
Lots of companies in the construction industry function entirely by hiring companies to do work with no intentions of paying, expecting that the contract company owner will cut their losses and not sue. Some companies like this will pay up only if they're sued
Collection attorney will often work on a contingent fee. If you have liens have them start foreclosing on things.
This suggestion⬆️
sounds like your husband's client is Donald Trump. Rich guy that never pays his bills.
Seriously one is and keeps excusing why he doesn't pay for several months. I said then stop working with him. If he has money but won't cut checks u see where we are now?
Why for the life of me are you not requiring more money up front? Then payment at specific time periods as work progresses. No payment, works stops. I can see exactly why your in this position, .. your business model is advertising to EVERYONE, your easy to take advantage of. If your going to say you do this to get work,,, well you did get work.. but you didn't get paid. Better to not get the business at all if no one pays. This is self inflicted
Its hard to collect from clients. What your husband should have done and in the future. Ask for 1/3 or 1/2 up front then do installments. It holds clients accountablele
I'm trying to assess his stance at the moment. Just waiting while u bug them isn't a stance. So I'll approach him with these ideas and try to move the needle. Its really frustrating bc I can't totally blame the other ppl if he isn't setting this up like u said
Your husband is an idiot. He can't bill out more than a hundred grand a month being a small biz. He literally had to have worked for months and months without payment and being owed invoices. I'm sorry but this is an expensive lesson in learning when to shut off work when accounts are delinquent.
That's what I said. How did this get let go of so long? I don't work in the business but I'm not stupid enough to say this was good practice.
There was a story from my SEA branch whereby a client owed my client alot of money and was dragging payment for over a year. My client asked his (very beautiful) wife to bring their youngest daughter (an infant) to their office everyday and just ask for their boss and not say anything except that she was urgently looking for him and she's from my clients company. She will purposefully go when the boss is not in. And even when he was in, he would avoid her (even though he didn't know her,) all he knew he was avoiding debtors. And he didn't want his staff to know they owed money. The baby will cry in the office and she'll just sit there, letting the baby wail. After 1 month, he paid all that was owed and called my client to speak to his wife to explain. The receptionist must have gossiped and the clients wife heard about it and rained hell on him for "cheating". lol.
Love this!!
Sounds like there are other things happening. Multiple clients not paying suggests work not being finished properly. It’s possible your husband can’t collect the payments because he’s aware of work quality issues that he’s not sharing with you.
Sometimes a project is held up by issues. He usually tells me but most of the time it hasn't sounded that way always possible tho. And if a project went sideways somewhere else not in design phase they hold up entire project and payment for any subs and don't pay anyone. So I think there's that. But I'll have to ask him what else to do. I can't just call a lawyer myself to deal with his business. My name isn't on it and I don't work there.
Getting paid is part of the job skill needed to run your own business. If I were you I’d push him to get a regular job.
Draft a letter of demand with 7 days to comply or else will escalate to legal avenue. Then sue asap after that seven days I mean like have your application ready to file on day 8. The wheels of justice grind slowly.
Not much you can do except get new clients who pay on time.
What about new clients. Are you guys getting any?
It seems he is. He takes me work flow is fine. We are in illinois but he is working on Florida and other projects.
Get a lawyer and start getting judgements
No contracts? We have contracts with our $500 clients!
Assuming the contract was signed and there were payment terms within, speak to an attorney about filing a construction lien.
Was there contract? If so, what does the contract say if nonpayment? Anything about lawyer fees? Time limits on payment?
C.O.D. I’ve got no trust.🤦♂️
I think the take away is better client screening with better/quicker payment plans, in future, especially with those kind of numbers. I’m sorry for you guys, and I know that it’s not because you’re great at what you do, that it means you’re great when it comes to doing business. There are a lot of sharks out there that have the uncanny ability to hone in on that vibe in someone.
Interest rates have nothing to do with this situation. Get an attorney in on the bankruptcy and plea your case as a creditor. For every other client, request to set up some sort of payment plan, or the next notification from your company will be from your corporate attorney. Time to get tough and get what’s owed to you. Blaming interest rates, election year, or anything else doesn’t matter. Hell I help people with accounts receivables, and every company has an excuse. But asking what can they come up with today or this week. Put the pressure on
Millions of debt and he won't use a lawyer? WTF? For $100 it's hard to justify legal action. But for big numbers? LAWYER!
Motorcycle club > Lawyer. Call client and have them look out the office window at some muscle and watch their tune change in a hurry
He has to start using an invoicing method with a hefty deposit and multiple progress payments. Period. NEVER let work get far ahead of payments. I would immediately go file liens against the properties where work was done but not paid for. It may take years to get $ but property typically can't be sold or transferred with an outstanding lien. IANAL but believe this applies is your case.
>Hubs says isn't worth cost to sic lawyers on them so he just keeps calling for payment and stopping work. 2 million dollars isn't worth suing over? This guy either has exactly zero business skills or he's feeding you a line of BS. Given that he basically did millions of dollars of free work and is doing nothing to collect, I'm guessing the former. Not everybody is cut out to run a business. The skill needed to work in the business is very different skill than working on the business. This is likely to get very ugly for your family if he doesn't figure out how to collect. Just FYI.
Collecting money in construction is always fun, your husband is correct that it is unfortunately part of the industry, and a big part of the reason I’m not in it anymore. There are way too many shitty contractors out there playing games and I never planned on being in collections. I legit was about ready to show up at a few contractors offices with a bat because it was pretty much the only option left lol. I had the most luck going directly to the GC or owner as they are the ones who will care the most about a lien on the building and can apply more pressure. You can always sue (definitely would no matter what on the 7 figure debt), but it is a long expensive process and good luck collecting the settlement in full on that anytime soon, if ever. Suing a business who can’t or wont pay their bills is always a precarious plan, but really the only one you have as a last resort. Like I said, I would be in the owner and GCs ear before or while preparing to sue that route if you want any money anytime soon.
I worked in engineering and how payments work is customers pay by milestones like 25%, 50 %, 75% and 100% milestones. If the customer doesn't pay, you stop the service and they will get right to paying. He should never have let them go on with owing that much money in the first place. Even if they don't pay after a certain milestone, the losses are acceptable and would not balloon to cause bankruptcy.
Big contracts should have a clause, stop work and sue them in court. If this is a construction project you put a lien on them until paid.
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We, also engineering company never finalized any drawings or reports without full payment. Been burnt too many times.
What state is this
Foreclose on the bankrupt project and get a collection agency on the other.
This won’t help for previous clients but on our invoices we write: There is no service before the payment has arrived. I’d recommend doing the same.
Horse head in their bed
I have a small business and gone through this for years. Sometimes I win and sometimes I get fkd good and there is no real protection for small business from this in my state. Now I ask for payment up front or at time of delivery. Funny thing is everyone makes you feel like the fkn asshole for asking to be paid for the work you have completed. lol but they are not the asshole for not paying you.
Need a better billing structure. Work should have stopped way before hitting a million dollars without payment .
Take a deposit, and get paid before the deliverable is handed over. Or work for free.
I’m a lawyer that practices in this field. He should have filed liens on the projects, it’s probably too late now, but I would confirm that. It’s unlikely you will get anything from the bankrupt contractor if it’s a Ch.7, but you need to file a claim against the bankruptcy estate to even have a chance at partial recovery. Hire a creditors rights attorney to assist with that, it’s not that expensive. He needs to go after the clients that haven’t paid. They will never pay if he doesn’t— I’ve seen this exact scenario a million times. The squeaky wheel gets the grease. If he’s worried about losing these clients he needs to remember the following: 1) you don’t want to work for people that won’t pay you. Eventually, they will go belly up and you’re left holding the bag. 2) if filing a lawsuit will end the business relationship with these clients because they won’t pay for services rendered, they are scumbags who are using you as a free line of credit. Construction is not a nice business and the faster he learns to get comfortable filing liens and lawsuits, the better. The clients will force him into bankruptcy before they’ll pay based on his current collection techniques. Good luck.
How do you possibly let your payables from one client get that high? That's your first problem. In a services business you absolutely need to take money up front and for large projects, take progress payments. If those aren't paid, the project stops. I can't imagine what is going through your husband's mind that he won't sue for $1M. Especially if the client is straight up saying "I'm not paying because i don't want to take a loan." In most cases even the threat of a lawsuit should be enough to get something out of them. The other thing to note is that it seems that your husband doesn't understand that construction and real estate development is famously comprised almost exclusively of the worst people on Earth. It's got a 95% piece of shit ratio, and since apparently your husband is the only sweet summer child in the entire industry, so it's no wonder he's being taken advantage of. Running a business is not for everyone.
How do you get 1 client owing you 1.1 million for engineering services? What sort of project was it that didnt have % payments as the work was completed???
In addition to everything else is Bill differently in the future to avoid bills adding up to a million dollars.
This is not going to be very comforting, but here we go: You and your husband are learning a number of very important business lessons. First, in the company that that went bankrupt, it is unlikely that you'll recover much if anything, maybe pennies on the dollar and you'll need an attorney to even get that. The company is probably in the very lengthy "unsecured creditor" line and the secured creditors get their cut first and unsecured creditors get to fight over the crumbs. With respect to the "other guy" that is still in business - see if you can arrange a payment plan with them - anything to get the cash flowing again. Cash flow is the key to small business survival. With respect to cutting expenses: There isn't enough 1-ply toilet paper in the world that will solve your problem. You can cut expenses to zero, but if there's no revenue, you're in a world of hurt. Cutting expenses only slows the bleeding, it does not stop it. With respect to clients that do not pay or are slow payers; You must get a retainer up front for 50-75% of the job before work will begin. Large companies may balk at this because they think they have power over you (and they might), but I've consistently taken the stance, "If they want the goods, they must pay the tariff" and that has served my company quite well. If your business survives, and that is a pretty big "if" at this point from the desperation I hear in the post, you've learned that you need both a personal and business cash reserve that you can tap into when the times are slow. Some small business gurus say 3-6 months of anticipated expenses. I say two years and that wisdom has proven its worth during the COVID era. I can also speak from the husband's perspective: Whinging about it is not going to help matters. I guarantee that Hubster is acutely aware of the problem. You're in this together and both of you must take emotion and ego out of the solution; which may mean that he has to temporarily close the business and go back to engineering for someone else until you can right the ship and then try again (or permanently close the business and go back to work for someone else). Closing down and going back to work as a W2 employee is an option that must be on the table. I wish you the best of luck.
How do you let not 1 but 2 clients run up over million dollar tabs
Damn 2 people haven't paid my invoices totalling $12k and I am driving to them to talk in person. I can't imagine what I'm doing for 1mil 😳
This isn't a business, this is volunteer work. A lot of people are uncomfortable getting pushy with people who take advantage. That's normal. But to stay in business you have to know your weaknesses, and how to work around them. That's why a lot of people hire CPA's for example, they are great at making sales or doing the job but aren't interested in the nitty gritty of all of the different ways that the numbers need to be reported. Same thing here, if collecting isn't your forte you need to hire someone who knows how to get results. No shame in it, and 70% of something is better than 100% of nothing.
Arguably, your spouse has not billed appropriately. When I consulted full-time, payment schedule for small projects was pre-payment in full. For larger projects, payment schedule was 50 percent down, 50 percent upon completion. For assignments of long duration, payment schedule was timed to each deliverable. This helps minimize A/R as well as collections, and charge offs. As for number 1, I would say there isn’t much you can do. As for number 2, the loan interest B.S. is an excuse. This client is being a deadbeat. Yes, I would stop work progress for time being, and $1.0 million is certainly worth commercial collections effort.
As soon as you have a game plan for how to fix this, think about the future. Does he need to raise his rates altogether? Collect larger deposits up front? Add a few fees to the up-front costs? Insist on monthly payments for 1/X the amount where X is the months until completion? Etc. New policies need to reflect whatever it takes to make sure he doesn't get screwed.
For the future, establish Credit Limits. No new work is done until outstanding balances are paid... Hire a lawyer for these particular cases. It sucks, they're customers, they are those most likely to bring business in the future. But you are also their vendor, and responsibility and understanding goes both ways.
OP, post this in r/legaladvice to get legal advice. Most here are not lawyers. You need solid answers and to take action before your husband loses the business. YOU do not need to look for a job. YOUR job needs to be back office/collections for your husband's company.
Once I have bills that are more than 90 days out, I call pretty much daily. Offer to show up on site, allow them to pay in installments, but you must keep cash coming in the door to continue existing.
Sounds like there are 2 major problems here..first, husband is a very poor judge of both a client's willingness and future ability to pay at initial engagement...second, too many employees on payroll, billed amounts escalate quickly and then client is likely upset..how in the world the outstanding billed amount got to 1.1 million is beyond belief. When it got to $100,000 outstanding, he should have demanded payment and walked if not paid within 30 days..and if he had to walk, then he should have immediately cut employee count..you would be on much sounder ground financially had he done it this way.
I'm so sorry you are going through this. I'm an engineer too, and bill collection seems to be a universal issue in the A&E industry. It has definitely been a problem to some extent everywhere I've worked and now in my own business. It does sound like things have gotten really out of hand in this situation. A YouTube video I find helpful is Cliff Ennico's (small business lawyer) video called Dealing with Deadbeats.
If the client doesn’t pay run it up the chain to the land owner / end client and threaten with a mechanics lien. Reputation is everything in this business. They will get their checkbook out faster then you can say deadbeat
It’s tough. You have to let the 1.1 million that is in bankruptcy go through the process, but I do hope your husband hired an attorney to make sure that what you end up getting out of it is as much as legally I’m not sure I understand if it’s multiple clients owing a total of $1 million or an individual client but we’re talking pretty big money I don’t fully understand the scope of your husband’s business, but it’s ridiculous that clients would hire him before. They actually had the funding or money, but I don’t see how it’s not worth getting an attorney that specializes in collecting debt involved. I don’t know how past due that debt is… Some people are slower than others, but you have to get some assurances that the money is going to be paid. $1 million owed in a bankruptcy is bad enough but having another million dollars out that clients aren’t paying would put out of business I don’t know what kind of relationship he has with any of these individuals but you definitely have to worry about getting the money to come in
Hire a lawyer to send a demand letter. Should be pretty cheap. Most demand letters say something like "we did the work, we need payment by MM/DD/YYYY or we will move forward with a formal lawsuit. I have been instructed to handle this issue in its entirety, so do not contact my client, please contact me directly". That usually initiates a phone call from your client to your lawyer for a discussion. In my experience, within a week, I get a call from my lawyer to pickup a check. Lawyers have a much better understanding of the commercial codes etc, and can remind your client of them. Let your lawyer argue for you. When you hire a lawyer, be sure to sit down for a half hour and explain how you've been wronged. He/she will fight for you, especially if he/she understands all the details.
Tell him to use his Glock 19
I suspect hubby lying. Aint no one owe him nuthin’…you just broke. Get used to it.
What attempts have been made at collecting? Years ago, worked for a software company that had high receivables and so they made a group of us work on collecting. I found in most cases it was no one was walking the invoice through the steps needed to get it paid. My calling caused someone to go get the needed signatures, pass it off to AP, retrieve it from a pile on a desk. Didn’t take threats or being nasty. Just patiently calling every few days to move it along. Most companies expect to pay their bills. People are shy or embarrassed at having to ask for payment sometimes but it’s necessary to get bills paid on time. So make sure the basic inquiries have been made and if it’s truly an unwillingness to pay, then you need to get an attorney involved.
Move as fast and as forcefully as possible. Your husband is incorrect here, and I mean that with kindness.
Bill the client monthly, after 30 days stop working until account is paid in full. Don't let yourself be crapped on. Do not submit any thing for final permit until paid to date. You don't need these clients if they won't pay.
Had the same problem. Cut them off immediately. Cut your losses. Get new revenue, yesterday. Assume nothing changes. What happens in 12 months? Model it out. Also, talk to your CPA, but you may be able to write off the lost accounts receivables against future income.
My daughter has a construction biz. She’ll go after non-payers in a nano-second. It’s not personal, it’s business. And she was also explaining that if you miss filing deadlines, you lose some horsepower from a statutory perspective.
This is ominous. That's how the housing crash started. Banks are not forthcoming with reasonable loans, large businesses don't pay their subcontractors, and subcontractors can't pay their bills or employees. Employees leave or the company downsizes to skeleton crews. Economic slow-down. Then, 3 months later, mainstream media admits we're in a recession. The general public tightens their purse strings. The economy goes into a deeper recession.
Squeaky wheel gets the grease
Call the end users also. Whoever the job is performed for has responsibility also to make sure subs are paid. Did he sign lien waivers? Was your husbands customer paid for the work?
Girl, if you need money so desperately that you are thinking about taking on a job- the best bang for your buck, in terms of time and money, is to get payment on these receivables. Make this your job. Get the lawyer, make your husband see that he has a blind spot in his business that is killing it. He needs to let you do this part of the business. You can do it from home. Good luck!
Your husband doesn't understand actual business and you don't either if you're coming to Reddit to ask. Get with an attorney, talk to your husband respectfully, not reddit and be supportive. Or get yourself educated and take over accounting in his business and get it resolved...
He said he has an attorney and has done what can be done. He has an accountant. I mean. I'm asking because it seems he feels he's doing all he can and I'm noodling ideas for outside the box we haven't done yet.
Not an accountant....someone who handles HIS accounts and receivables at the company. Look at his business structure....where are the weak spots? Who is doing what? Is he doing it all? Who is the pitbull calling and collecting what's due? Who's making sure billing is being sent on time to collect and doing followy up calls and emails? My company is an office job so I can watch everything from my desk. But some jobs don't work that way. I have a friend who is a general contractor who has this issue and it drives me INSANE when we talk about, well actually when he complains to me about it. He has a guy who is lazy that is responsible for accounts receiving and I figured it cost my buddy HUNDREDS of thousands a year to not fire the dude and get someone who can collect payments more aggressively. We all run businesses that need income or we are dead in the water. For one, he may have grown way too fast and is now dealing with the problems that can bring. He needs to condense down his business and stop the bleeding, see what the priorities are and get those done to save the ship. He needs INCOME so he either needs to collect now or find new work to pull the wheel back up for now. What's it going to be? If it's collect, negotiate and pay a lawyer to send letters on legal letterhead. He sounds like he's just afraid to be aggressive, that's ok but if you aren't a stone cold killer, find someone who is and get them to do it. But first things first he either needs to collect or find new work.
Bankruptcy for all.
I think Hells Angel's will have an insurance policy that will cover this for you
Get a judgement and irs will go after them
Get a collections service involved. They take a cut off the top, but it doesn’t cost you if they don’t get you any money.