In 2007, Marvin Meltzer, AIA (far right), a partner in an extremely successful New York City multifamily housing practice, began going through the sort of business transition that no one should ever face. David Mandl, his business partner and principal of their firm, Meltzer/Mandl Architects, for over a decade, was diagnosed with terminal cancer. When an engineering firm interested in buying the business began going over the books, Meltzer and David Carpenter, AIA (near right), who had been helping to run the business in Mandl’s absence, learned that they knew much less about their firm’s finances than they thought. “They kept asking us for reports, such as what was the value of work in progress, and we didn’t have them,” says Meltzer.
The situation went from bad to worse when they attempted to get an extension on their firm’s credit line to get a temporary loan. They found out that many of the firm’s receivables were so many months past due that the bank considered them uncollectable, and therefore they could not be used for collateral. That severely limited the amount they could borrow. “We also didn’t know that once some receivables for a client get over 90 days old, the newer receivables from that client don’t count either,” says Carpenter, who is now vice president of the firm and a partner. “It was a shock.”