Project Managers have much discretion over the amount of time and effort that goes into getting paid for services performed. Pressures of performing project technical work often result in setting aside contract management work, including promptly initiating invoicing, obtaining approvals and funding for extra work and pursuing clients with overdue accounts.

Many managers find payment a difficult topic to discuss with clients. There is an expectation that people will do the right thing, but lack of training and convenient processes often undermine effective payment recovery. While the focus is on recovering payment, several preventive measures can also be implemented to avoid late and non-payment situations.

Implementing a successful payment recovery program requires a systems approach with disciplined processes to minimize the ability of individuals to delay payment activities. The key is to stress the importance of relationships to improve both profits and client relationships.

Payment Recovery Program
Four project phases are identified below for recovery of payment opportunities: marketing and proposals, contract formation, contract management and payment collection.

Marketing and Proposal - At the earliest possible phase evaluate the customer's ability and willingness to pay. Identify bad risks before you commit to proposal expenses or contract performance. Identify the source of project funding and any possible payment guarantors. Implement proposal techniques to improve payment recovery.

Contract Formation - Address changed conditions and non-payment in your contract. Use best practice clauses and include available statutory protections-recovery of interest, the right to suspend or terminate services for non-payment and recovery for the cost of collections. Utilize change orders for any changes or delays.

For high-risk clients or projects, just saying NO to standard client terms is a frequently overlooked option. Advance payments, Letter of Credit and other payment guarantees are other methods to reduce the risk of non-payment for the highest risk clients or projects.

Contract Management - The best contract terms are of little value if the contract is not properly managed. Careful monitoring and utilization of change and delay management programs are essential to receive extra costs.

Suspension or reduction of services, engineer's liens, copyright of work project or withholding permission to copy documents are effective methods of mitigating non-payment problems. Ensure project managers are getting information about payments not made in the manner stated in the contract and are encouraged to implement contractually appropriate response for late or non-payment, such as suspension of services or withholding of work product.

Payment Collection - Project completion or failed projects are typically where formal collection attempts begin. This is generally too late, as by this time many non-payment mitigation techniques are lost to you. Formal collection proceedings by a design professional will usually result in a professional liability counterclaim.

Establish and enforce a prompt payment policy that works with your system for monitoring receivables. Create a timetable to take action and prompt referral to next staff level. A predictable system and clear staff expectations regarding a payment recovery is the best foundation for improving payment collections.

Payment recovery programs result in fewer client claims, improved project profitability, reduced borrowing costs and improved client relations if properly designed and implemented.