In the current economic climate your cash flow should be a priority and you need to protect it for the benefit of you and your business.

Everyone seems to be holding onto their money for as long as possible and for creative SME’s who are often at the bottom of the food chain this can spell disaster especially as clients tend to be much larger businesses.

 

Here are a few tips for starters:

Prospective clients: Credit check them. Set credit limits and don’t increase them unless they have demonstrated that they are good payers.

Existing clients: If the time taken to pay has increased or if you have any other reasons to doubt their financial health, credit check your clients and act on the information. There are some classic signs of impending doom to look out for that you can monitor discretely.

Don’t be afraid to be as professional with collecting from clients as you are in your other dealings with them.

Understand your clients’ payment procedures and make sure you are in a strong position by having purchase orders, terms and conditions etc.

Sort out those who can’t pay from those who won’t pay and act accordingly – be realistic with the former and tough with the latter. Litigate if necessary – there are some very good debt recovery firms out there.

My view

I’m afraid many architectural practices are so afraid of offending clients that they will end up writing off fees because clients go bust…and then end up going bust themselves.

Are you going to let this happen to your firm?

Engage in the debate with financial management advisor John Toppin MA FCA and strategic advisor and business coach, James Cooke.

John Toppin is a specialist consultant finance director and ned for marketing,creative and professional firms.

You can check my credentials at http://www.linkedin.com/in/johntoppin

You can read my personal blog at http://finance-director.blogspot.com/

 John Toppin at www.nomizon.co.uk 

 James Cooke at www.jamescookecoaching.com 

 

 

 

 

 

 

 

5 Comments
  1. George

    May 6, 2009

    It is not just financially troubled clients that cause difficulties for architects, having contractors and suppliers go under when you are in the midst of a job causes no end of problems for us and the client. Obviously this is compounded if monies have been paid up front.

    Be really interested in understanding the classic signs that an apparently solvent company (whether a client or a supplier)is in financial difficulties.

  2. John Toppin

    May 6, 2009

    Some of the classic signs that clients or suppliers are in financial difficulty that you must watch for are set out below. If you see any of these then you must proceed very carefully and you must understand your rights.

    Equally, if your practice exhibits any of these same signs then you would be advised to seek professional help as soon as possible.

    1. Paying in round sum amounts on account.
    2. Using disputes to delay payment.
    3. Offering post dated cheques for payment.
    4. Only paying old bills on receipt of new services or goods.
    5. Late payment/non payment.
    6. Other businesses you know of experiencing difficulties with the subject company.
    7. The subject company frequently changing its suppliers.
    8. High turnover of key staff at the subject company.

    If you are worried about the impact on your practice of clients or suppliers going under and want to talk this through then please do contact me in confidence on 07834 380290.

  3. Maggie

    May 29, 2009

    I am a client. I’ve just had a very bad experience with someone who claimed to be an architect. I stupidly imagined that architects were professional, trustworthy and conscientious. To cut a long story short, after he’d done some drawings, and before I’d received planning permission, he sent me a bill for £3,000 which I paid by return of post. I now have no planning permission and am £3,000 out of pocket. I’d like to employ another architect but now that I know there are cowboy architects as well as cowboy builders I am reluctant to do so, especially when RIBA do not have a search facility where I can check the credentials of anyone who calls themselves an architect.

  4. Richard Brindley

    June 3, 2009

    In response to Maggie’s comment about “cowboy architects”, if you feel that your architect has been negligent or let you down, do contact the RIBA Information Centre (Tel: 0906-3020-400 or email: info@inst.riba.org). If your architect is a chartered member of the RIBA, the RIBA will investigate your claim and will take action on any professional conduct issues of its members. If your architect is not chartered, but only registered with the Architects Registration Board (ARB), the RIBA will refer your complaint to the ARB.

    The RIBA does has a search facility for all RIBA chartered members and chartered practices and the RIBA Information Centre can assist you with this.

    Architects can not (or should not!) guarantee obtaing planning approval for you, as this is outside of their direct control and is a decision of your local authority.

    Sorry that your experience of arhcitects has not (so far) been a happy one -but the RIBA is able to assist clients on these matters -do contact us!

    Richard Brindley
    Exec Director RIBA Professional Services

  5. Interesting to read Maggie’s post, maybe another brick on the wall spelling that either the public don’t know what the architects (have to) do or that architects fail to explain what they (have to) do to the public. There is obviously a gap there somewhere.

    I have been practising as a sole practioner for three years now and I have already had many clients coming to me after they had bad experiences with architects or “architects”; they could’t tell the difference and they didn’t actually care to know the difference. As far as my clients were concerned those design professionals were definitely architects. And it is often TV programmes like Grand Designs that become the reference point for what an architect is supposed to be doing; Grand Designs is not real life funnily enough, it is our responsibility ultimately to explain our services properly.

    And oh, great advice about how to deal with problem payers too; still valid after all those years. Timeless.

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