Payment Scheduals

mvwallyworld

New here and thanks for the help. Is there a standard for payment scheduals in room addition type work? I would appreciate any input you may have.
Thanks,
Randy

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magnum

Keep in mind that your payment schedule should be 1 step ahead of your progress schedule.

plumguy

Great Advice! If a customer does'nt like a pay schedule that coincides with progress of work then that should set off a red flag! I've seen too many people get burnt on the 1/3, 1/3 and 1/3 schedule, which I think was developed by lawyers (go figure). You have 100% of the work done and only 66% of you're money. And forget about small claims court that is the biggest JOKE!!

Grumpy

That's hard to do when your job is only a few day project. Typically I get a downpayment of no less than 33%, often times more depending on circumstances.

For new customers, especially GC's, I insist on a deposite equal to the value of the materials to be paid on the day or before the materials are delivered. That means if I gotta be put in your payout schedule now to be paid in 15 days when I have the materials delivered, you better put me on that schedule... and if the contractor agrees to the material payout, but then balks when it comes time to pay; I would rather take the restocking fee as a hit than install a whole roof and take that loss as a hit. After all this is just a way of learning upfront if they are realiable with their payouts or not.

I have found most reasonable GC's really don't mind the material payout, and on special orders I demand the payout BEFORE I even place the material order, or I tell them to buy the special order materials for me.

Grumpy

Ok so if you are getting prepaid on everything that means the customer is writing the final check before you finish the project?

Personally as stated above I get the material deposit after that if the job will last more than 5 business days I require weekly payouts (paid on friday regardless of the start date) but usually I just require balance upon completion. In my line of work doing it any other way just is too much paper work for myself and the customer.

plumguy

No, in my line of work let's say I plum a new house. When I'm done with the rough 85% of my work is done. So, 66% is unacceptable. Sometimes it can be months before the finish is ready.And that can add up to thousands of dollars that I've already earned.

On smaller jobs and for customers that I don't know. It is 50% upon acceptance of contract and then breaks down depending on time and inspections. But, I don't make check writing or paperwork a hassle for the customer or me.But, I will if I'm not in a comfort zone with them for whatever reason.

As stated above I think that is great advice to keep you're money up with you're work.

Mike Finley

Grumpy - so you are working for GCs again?

Mike Finley

Randy I would tie it into the major chunks of work such digging the foundation, framing, elec, plumb, sheathing, roofing ect...

Just sit down and write out the major sections of each job you do and tie the payments in that way.

For remodeling I have tied the 1st payment into the completion of the demo work, usually 30-40% of the entire project cost. Say for a kitchen remodel I will tie in a payment after the installation of cabinets and another at installation of counters.

Just taylor it to your way of working and keep the cash flowing!

magnum

Grumpy I agree that on small jobs you cant always do this. I was speaking of jobs over $20K. My current large job is over $200K, in this case I ask for 10% deposit, 20% upon starting, 20% upon completion of framing, 20% upon completion of mechanicels and so on, with 10% upon customers punch list completion. This is fair to me and the customer. I control the flow of payments based on the progress of the job and the customer is happy paying for the progress.

jproffer

I haven't had any HUGE jobs just yet, but I get 1/3 plus 100% of materials down, 1/3 half way through, and remainder after inspection/punch out