Architect E&O Liability: Clarifying Billing

In our last blog, we discussed how to improve architect and client communications. As there are so many moving parts to designing and building a structure, constant communication can minimize exposures for these professionals. In this installment, we’re going to cover some billing basics to prevent architects from landing in hot water and facing liability claims. As a trusted agent, you know that sharing the most critical information with your clients can prevent claims, so pass this information along. Most importantly, stress the significance for your clients to carry Architect Professional Liability Insurance.

Get to the root of the issue.

It’s probably no surprise to your architect clients that billing issues seem to come up regularly. Whether the client is very specific or known to be a stickler on materials and price, there are so many different scenarios in which the battle resorts back to billing. However, sometimes when things go awry, billing becomes the focus. What is the real root of the problem? Was the client unhappy? Were there decisions made without their consent? Did it go over budget? Did the project exceed the original timeline?

Often, billing comes into play when more than one aspect has gone awry, so it’s important to find the root cause of the issue and resolve it.

Establish a billing culture.

Collecting fees and payments are how the firm makes money, so there’s no reason to shy away from requesting payment. With that in mind, your architect clients can heed the following advice from seasoned architect and consultant Michael Bernard.

“You have to create a culture of billing. You need to create a structure which will allow you to collect fees. You don’t have to be shy about it. It’s what keeps your business moving forward. Be rigorous in billing every month. Some firms delay up to three months, but they’re losing money by doing that.” It really takes commitment from the principals rather than just hiring a bookkeeper and putting the problem in someone else’s hands, he explains to The Architects’ Take.

Explain how the work that the employees do contributes to financial health of the firm. From time clocks to budgeting and payment processing, there are a lot of factors that they’re liable for. Establishing a clear billing culture ensures that everyone understands their obligations and there are no snags.

Write a solid contract.

As it turns out, fee disputes are often the first symptom of weaknesses in the architect-client relationship that had gone undetected, and one of the biggest weaknesses is not clarifying relationships and expectations at the very beginning. The early stages of engagement are a delicate time and many architects tread lightly to avoid frightening off a potential client.

Clients who are weary of signing a contract should raise a red flag. The contract is the best way to mitigate potential lawsuits and prove innocence in a court. Contracts should be taken very seriously, especially when it comes to billing. Once drafted, a lawyer who specializes in the architectural field should evaluate it for comprehensiveness and accuracy.

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