Fees and Payments
It is good practice for a lighting designer who is approached by an architect or builder with whom he or she is unfamiliar to conduct some basic research concerning that company’s financial profile. This is important to determine the viability of the company and the likelihood that the designer will get paid for his or her work. While it is relatively easy to research a U.S. company, it is nearly impossible to properly analyze the viability of small to mid-size foreign companies.
In addition to the difficulty of determining the asset profile of a particular foreign company, the ability to enforce a judgment against a foreign company is difficult at best. Issues concerning suing a foreign entity and the collection of judgments are discussed in greater detail later in this article.
Cultural differences also weigh heavy in international work. In some countries, it is not uncommon for the lighting designer’s last invoice to go unpaid. In fact, it is assumed in these countries that the final invoice is a formality and that all fees were covered by the initial retainer. Still, it is possible for a lighting designer to have a lucrative international practice so long as he or she understands how to collect money on international transactions. So, when analyzing the profitability of a foreign project, it is important for a lighting designer to understand his or her cash flow needs, the economic condition in that foreign country, any foreign tax implications, and the weights and currency adjustment factors.
Assuming that the designer has conducted such an analysis and has decided to proceed with the project, he or she must follow the golden rule of international business: Demand payment in advance. No matter what is promised to you, it should always be your policy when handling an international design project to demand payment up front, typically in an amount that would cover your costs. It is advisable to walk away from a foreign project if the architect or contractor refuses your request for an up-front or retainer payment. Also, any up-front payments should be provided to you via wire transfer and made payable in U.S. dollars. It is not uncommon for lighting designers engaging in foreign projects to request half of the total contract price up front, via direct wire transfer, prior to conducting any work on the project.
An alternative to the up-front or retainer payment is a letter of credit. In a typical version of this scenario, there are four participants: the lighting designer, the foreign company, the issuing bank, and the paying bank. The foreign company would receive a projected invoice from the lighting designer for the entire project, and then take that proposed invoice to its issuing bank who assumes all of the responsibility for payment on behalf of the company. The paying bank is a bank that makes the actual transfers of payment under the established credit.
There are two general types of letters of credit. The first type is an irrevocable letter of credit, which can only be modified with the consent of both parties. The paying bank would have to pay the designer even if the foreign company defaults on payments. This type should be confirmed by a bank in the U.S., and then the U.S. bank must pay the lighting designer even if the foreign bank defaults on payments. An irrevocable letter of credit, confirmed by a U.S. bank, is one of the most secure methods of payment outside of up-front or retainer payments.
The second type, a revocable letter of credit, should rarely be agreed to by a U.S. lighting designer engaged in a foreign project. This can be modified at the request of one party and does not require the consent of the other party. It also can be revised at any point during the contract or afterward. In this scenario, the foreign bank is under no obligation to pay if the architect or contractor defaults.
Staffing and Travel
Even with advances in technology, travel is inevitable when engaging in a foreign design project. Expenses which should be considered and negotiated as part of the contract include airfares, hotels, meals, Internet access, and ground transportation. If the foreign entity refuses to provide travel expenses to the designer, he or she must conduct a risk-to-benefit analysis of the potential expenses involved in traveling and determine whether the costs of travel will be covered by his or her profit.