Have You Ever Considered Post-dated Checks For Progress Payments????

TigerFan

I'm getting fed up with the voicemails, out-of-towns, working lates, thought-the-progress-payment-also-included-this, excuses and BS I'm going through almost every time I send out an invoice.

My contracts are detailed, well laid out, and spell out exactly what the customer should expect to be done when we submit for a payment.

My jobs are typically $50k - $110k renovations. I get $2500.00 at signing which takes me through permitting, dumpsters, ****ters, site prep and demolition work. Then I have 4, 5 or 6 progress payments that are "big hitter" payments. Then 3% at substantial completion, 2% at final completion.

I also lay out a timeline - 60-120 days and the progress payments are due within that timeline.

Example: Stage 1 - Due on the 10th day (or sooner) when interior demolition, plumbing demolition and exterior bushwacking are complete.

I'm now at day 15 with with those things complete and no payment yet.

2 jobs exactly like this right now.

I'm about to start making customers give me post-dated checks that land, say, 3 days after the payment would be due. IE - the "10th day" payment would be dated on the date of the 13th day of the contract.

In other words, AT SIGNING, I would get all the checks except for the substantial and final completion checks.

Any of you ever tried or done that before??

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http://www.bayoucontracting.com

Tscarborough

You need to add one more clause to your contract dealing with work stoppage, remobilization costs and schedules, and make sure it lists the possible reasons for stoppage, like payments.

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It ain't Rocket Science unless you are building rockets.

TigerFan

Well, I kind of have that - at least as it deals with work stoppage and the schedules.

I just want people to read the paperwork they signed and do as it says without pulling teeth or writing novels about it.

I mean, they might "feel" like it's early to write the next check, but it's set up that way for a reason - to get the damn job done.

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MIbeachbuilder

I don't think using post dated checks is a bad idea as long as you make the client show proof of funds. (they only need to call the bank and the bank will fax it to you directly with an up to amount on the contract).

We have done that with some of our out of town clients....without any problems....

Double-A

We make it clear that once we've reached a milestone in the contract and payment is due, we don't continue until payment is made. If a check doesn't clear for some reason, then payment has not been made.

If payment is not made, we pull off the job, and have substantial redeployment costs. We go over this part of the contract with the client carefully so they understand when the payment will be due, how much it is, what its for, and what happens and why if they don't pay.

I guess this is the same thing that Tscarborough has said in so many words, but we do put it into practice on every job. We have yet to have a real problem with it.

One other option is to use an escrow account for progress payments. Funds are deposited to pay the contract and payments made from the escrow account once both parties agree on that milestone being reached. This adds costs and you might consider telling the folks that are jacking you around that unless they start being on-time and forthright with their payments, this will be the only option left to them to continue to do business before you seek to have them declared in breech of contract and sue for monies owed and damaged incurred.

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"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

GSE

There is your problem, your trying to be in the banking business, get back to contracting and have that money comming in every 2 weeks and the first time they miss a week back the trailer and make smoke, then get your attorney to demand third party escrow from his bank.

Please, Please, you can pay me whenever you want, I want your work so bad you don't have to respect me, do what you want and pay if you feel like it.

SethHoldren

I agree with GSE.

Get the money coming in regularly. Once a week works well (especially for smaller businesses) but every two weeks is good too. Any longer than that can cause you problems.

Another key: Set it in stone. Tuesday morning at 10 a.m. is invoice time, baby. Once you set a date that works for your client, make it unavoidable. You can even implement a "missed appointment" penalty.

Enforce it. Politely but firmly.

It works. It breaks the payments into smaller chunks which are easier for the client to stomach. It gives you an authoritative presence and weekly face time.

And your cash flow will be more consistent.

Mike Finley

I have to agree with all the above. We also try to give the customer a day or two advance notice of the upcoming payment. Pretty much works like:

"It's Monday, here is your invoice that will be due on Wednseday morning."

Very, very few customers fail to have the check waiting for you that morning it's due once we started doing this.

Should we have to do this type of babysitting and handholding of customers? Probably not, but it takes only a tiny bit of foresight and it seems to avoid a lot more hassles. In the past we would present the customer with the invoice due that morning on that day and then have to stand there and wait for them to find their check books or call the husband and make arrangements for him to bring it back since he accidently took it to work with him or.... etc... etc...

Teetorbilt

If you're in this situation, it's usually bad and may be illegal. Ck with your attny.

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Albert Einstein

Steve Unkie

I agree with the above posts. I usually set up weekly p-payments. One large job where the client was out of town, he wired in the payment every Fri.

The longest I'll go is 2 weeks. I learned the hard way, though.

Steve.

Tom M

Its illegal to pass bad checks, so it may not be ideal but at least there is an agreement that by ------time----- this much is to be paid. Someone afraid to post date might not really have thier finances under wraps cause they already know they wont have the funds. Every customer has to be handled a little different but stopping a job in progress isnt too easy either. Thats a major hassle.

TigerFan

Well that's part of my issue too - stopping the job only means that we're still not paid.

I posted a typical pay schedule in another thread and got some good advice on modifications to it. I'm gonna go with "x amount due at the start of y" for my next few contracts.

For those interested here is the pay sched I had been using:

Payment Schedule:
The Owner hereby agrees to pay the Contractor, for the aforesaid materials and labor, the sum of $69,080.00 in the following manner:

$2,500.00 Earnest money at signing to Bayou Contracting

$20,724.00 on 7th day (or prior) due when:
- Electrical rough in is in progress.
- Plumbing Demolition has begun.
- Interior demolition complete

$17,270.00 on 18th day (or prior) due when:
- Plumbing rough in progress
- Electrical in progress
- Windows repaired / replaced.
- Drywall and Mud for job is onsite

$13,816.00 on 28th day (or prior) due when:
- Insulation installed.
- HVAC in progress
- Drywall hung, tape, float, finished
- Painting Begins

$11,316.00 on 40th day (or prior) due when:
- Painting complete with minor touch ups remaining.
- HVAC trim out complete
- Electrical finish work completed
- Base Trim Installed
- Flooring in progress
-
-

$2,073.00 Upon Substantial completion

$1,381.00 Upon Completion

Substantial Completion time Planned for 50 days, with final completion expected within 10 days subsequent.

IN WITNESS WHEREOF, the parties hereto set their hands and seals the day and year written above.

By: ______________________________ By: ________________________

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Tom M

LOOKS GOOD TO ME. As long as you or your client isn't not to far out of pocket and your keeping current with subs after rough-ins its great. I do the split final as well its good. Sometimes you finish with-in a day or so but when it dont work out its nice to have that planned.

excellencee

Check with your attorney. Somebody told me that you can't collect on a bad post dated check because you knew there was no money when you took the check. Once again this is hearsay. I'm NOT a lawyer so go see yours.

ConstSvcs

I hope that this doesn't come back to bite me but:

Years ago 95% of my work was by word of mouth and the client standing by their side of the disbursment plan sometimes involved lots of "handholding" the female half of the owner(s). Because, as one of my one of my past clients stated " happy wife.........happy life". This usually resulted in a perfect relationship with the client were payments went smoooooothly. Some time "tracking down" your payment was still required. You know as a GC what makes your clients happy........or not so happy.

In the recent years my work has moved to 95% work from local Architects. The advantage has been that most clients have been "screened" and have less sticker shock and a better understanding for the value of labor and quality. Usually resulting in expedited payments.

Never let them think that their payment is simply a deposit into you treasure chest. If they are business owners themselves they usually understand the importance of cash flow.

Your payment requests seem more than fair except that my retainage upon completion is usually 5% of the total.

Buckknekkid

We've been in business many years and usually our clients are referrals. STILL, its always a pain to collect.. We have deadbeat generals, dishonest salesmen, I dont like that shade of pink wife and the can you wait till we cash our savings bonds after the tax year,, want any more excuses?

mdcorreia

When you don't continue due to not receiving payment, who pays you to stay home (because you may not be able to start work which you did not schedule).
Also why waite 90 days? certain work completed = pay NOW!
Where did this 90 day deal come from? Are you imitating some mega co. ? are you that big?

mdcorreia

How about HOLD BACK for 40 days etc. - in case something is wrong with the work?

Double-A

I'm not sure where you're getting anything about "90 days" from my post, so I won't address that.

When we don't receive payment, we start proceeding as outlined in our contract. This process starts slowly and builds steam as it goes along. But, and this is important, we bill so that we're not the ones investing in the client's project, the client is. At any billing except the last one, we're collecting funds to proceed with, not to pay for what we have already completed.

As for staying at home, that is not an option, nor is it an option for our folks in the field.

We have a capital reserve account that is used to cover expenses due to not working/slow periods, so we continue to pay at our base salary rates. This account is part of the cost of doing business and is charged out as part of every billing we do. Once its fully funded, those monies are diverted to other less important accounts like capital improvements, equipment purchases, professional services, etc.

I hope that clears that up for you.

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Carport King

I do believe that post dating a check is Illegal and I do know it is not collectable in a court of law!

We do 10% up front and 10% on the back end and 1/3 draws x 3 in the middle. And we lien the property up front period!