Collections. It might as well be a 4-letter word in the AEC industry. I know many firms are chasing accounts receivables that are often as old as 90-120 days. I also know, as a Principal, you would sleep better at night if you could keep the average collection period closer to 45-60 days.
So, how can you improve your average?
1. Require daily time entry of your employees. Real time access to data will help you issue invoices faster. Make sure your employees know how their time sheets affect your access to working capital.
2. Produce clear, simple, and accurate invoices so that your clients will have less room to question or delay payment.
3. Breakout fixed fees, hourly, and reimbursable components on your invoice so that if there are discrepancies, you can easily ask for partial payment.
4. Involve Project Managers in the invoicing process – from time sheet review, to invoice draft review, to collections.
5. Keep an integrated client contact database so that you can track your collection efforts. Use your system to track your interactions to stay on top of the situation.