Been in this business for 15 years and still struggling with clients who drag their feet on payments after we deliver savings. My LOAs are solid - clear payment terms, specific deliverables, contingency percentages spelled out. But I've got three Entergy Louisiana clients right now who are 60+ days past due on contingency payments totaling almost $45K. Anyone have good strategies for enforcement beyond the usual collection letters?
Enforcing payment terms - what's your success rate?
Gary, I feel your pain. Had a similar issue with Avista a few years back. What finally worked was threatening to reverse the corrections I'd filed. Most utilities will accept a reversal request from the auditor if there's a payment dispute. Client paid within 48 hours when they realized their rates would go back up. Make sure your LOA includes language allowing you to reverse corrections for non-payment.
Warren, that's brilliant! I never thought about reversal rights. Duke Energy Ohio definitely accepts reversal requests. Gary, you might also consider factoring. I know a company that buys utility audit receivables at about 80 cents on the dollar. Sometimes it's better to take the haircut and get cash flow than chase deadbeat clients for months.
I've started requiring larger retainers upfront - usually 50% of estimated contingency fees. Helps with cash flow and weeds out clients who aren't serious. CenterPoint Energy territory has some good corporate clients who pay promptly, but the smaller commercial accounts can be problematic. Also using DocuSign now for all agreements to eliminate any signature disputes.
Vivian, I like the higher retainer approach. These three clients all paid minimal retainers ($500-1000) but the contingency fees are $12K, $18K, and $15K respectively. Should have required more skin in the game upfront. Warren, I'm definitely adding reversal language to future LOAs. For these current deadbeats, I may need to go the collection route.
Gary, before you go to collections, try one more tactic. Send a formal notice that you'll be filing a mechanics lien on their property for unpaid professional services. Most business owners panic when they hear "lien" because it affects their credit and ability to refinance. Works about 70% of the time in my experience with Ameren Missouri clients.
Elmer's lien strategy is solid. Just make sure you understand your state's mechanics lien laws first. Kentucky allows liens for professional services but the filing requirements are strict. Miss a deadline and you lose your rights. Also consider adding mandatory arbitration clauses to your LOAs - faster and cheaper than court if you do end up in a dispute.
I've had good luck with payment plans for larger amounts. Had a client in TVA territory who owed $22K but was cash-strapped. Set up 6 monthly payments with interest. Got paid in full and maintained the relationship. Sometimes it's better to be flexible than to destroy the client relationship over payment timing.
Update on my collection issues: The lien threat worked on two of the three clients! Got $30K in payments within a week. The third client is claiming they need to "verify" the savings before paying, which is BS since they've been receiving the lower bills for 8 months. May need to go the reversal route on that one.
Gary, glad the lien strategy worked! For that third client claiming they need to verify savings, send them a detailed calculation showing monthly bill reductions since your corrections took effect. PG&E territory has great online account tools that make it easy to document savings. Sometimes clients genuinely forget how much they're saving.
Marc's right about documentation. I always provide a 6-month savings summary with my final invoice. Shows the cumulative impact and makes it harder for clients to claim there are no savings. Avista's online portal makes this easy - just export the usage and cost data before and after corrections.