Pay Schedule - Contractor Talk - Professional Construction and Remodeling Forum

john3 · 10-19-2009, 06:28 PM

Hi everyone.

I'm kind of new here, please be gentle with me.

I was wondering how most of you make pay schedule for TI or house remodeling project.

Do you normally ask for payment before each work schedule starts or
after each work is done?

Thanks in advance.

Framer53 · 10-19-2009, 06:39 PM

Quote:

Originally Posted by john3

Hi everyone.

I'm kind of new here, please be gentle with me.

I was wondering how most of you make pay schedule for TI or house remodeling project.

Do you normally ask for payment before each work schedule starts or
after each work is done?

Thanks in advance.

I like to be paid in advance, myself. i don't know about anyone else!

AmeliaP · 10-19-2009, 06:49 PM

In advance.....amount depends on the laws of the state your in.

**Leo G** · 10-19-2009, 06:51 PM

As far as I am concerned the customer pays for everything. Why should you bank roll anybodies project?

Framer53 · 10-19-2009, 06:59 PM

Quote:

Originally Posted by Leo G

As far as I am concerned the customer pays for everything. Why should you bank roll anybodies project?

I like the way you think!

Meetre · 10-19-2009, 07:00 PM

I am a contractor, not a bank. If I'm bankrolling the work, there is a charge for that.

mikeswoods · 10-19-2009, 07:34 PM

Same here ,in advance,Before framing begins-before mechanical-before drywall-trim-you get the idea.

TxElectrician · 10-19-2009, 09:31 PM

Around here you would starve if you required everyone to pay up front.

Depending on the value of the project and how many times I have worked with the customer I sometimes require a deposit, then bill out on a payment schedule.

I wish I were able to get paid in advance, it's just not the way things are done here.

I am curious about the GCs on this forumn that require payment upon contract signing. Do you pay your subs in advance as well? If so what percentage do you think is fair? If not, why?

Celtic · 10-19-2009, 09:42 PM

Quote:

Originally Posted by john3

Do you normally ask for payment before each work schedule starts or
after each work is done?

Both

In my line [electrician] I have determined that the rough portion of my work comes to typically 66.82% of the job total, with the finish at 33.18%.

What I will typically ask for [and receive] are these terms:
50% Deposit at signing/start of job
25% Progress Payment prior to my calling for rough inspection
10% Progress Payment Prior to Trim Out
10% Progress Payment prior to my calling for a final inspection
5% Final payment due after passing final inspection
[NJ law dictates final payment after final inspection - but not the $ or % value]

Of course, these percentage values can change based on the exact $ize of the job, level of detail and PITA factor.

In any case, I do not finance the job.

fairfaxgc · 10-20-2009, 06:34 AM

I agree, stay ahead of the cash flow.

On large renovation jobs we take 20 - 30 % upfront and then put a draw schedule in our contracts that allows us to be cash flow positve on a week to week/ month to month basis. We leave 5 - 10% for the last draw subject to completion of the agreed punch list.

If you are "financing" the job by collecting after the work is complete you subject yourself to cash shortages. If/ when you run into delays in payment for work you have already completed (whether your fault or the HOs) you put yourself in a bad spot quickly, especially if you run multiple jobs at the same time. There are few things more fun than a unhappy HO who wan't write a check, another job delayed because materials are late, thus no check and then you need to give a sub a deposit to start the next job and you have $0 cash flow.

RizzoMaryland · 10-20-2009, 07:52 AM

Quote:

Originally Posted by Celtic

Both

In my line [electrician] I have determined that the rough portion of my work comes to typically 66.82% of the job total, with the finish at 33.18%.

What I will typically ask for [and receive] are these terms:
50% Deposit at signing/start of job
25% Progress Payment prior to my calling for rough inspection
10% Progress Payment Prior to Trim Out
10% Progress Payment prior to my calling for a final inspection
5% Final payment due after passing final inspection
[NJ law dictates final payment after final inspection - but not the $ or % value]

Although I agree that progress payments be made, I would not agree to all of this "paper work". 5 separate checks???

I think 3 would suffice, especially if all your materials and some labor are covered (as you state) after the 2nd installment.

Assuming these are not enormous projects how about 50%, 40%, 10%??

Celtic · 10-20-2009, 05:12 PM

Quote:

Originally Posted by RizzoMaryland

Although I agree that progress payments be made, I would not agree to all of this "paper work". 5 separate checks???

I think 3 would suffice, especially if all your materials and some labor are covered (as you state) after the 2nd installment.

Assuming these are not enormous projects how about 50%, 40%, 10%??

If things go south, and there is parting of parties, the difference between the value of what is installed and what is owed is minimal.

I see it as a CYA for BOTH party's.

RizzoMaryland · 10-21-2009, 08:43 AM

I agree with the CYA aspect. However:

You're requesting 10% prior to trim and 10% prior to calling in final inspection?

Isn't it very likely that these payments occur the same day?

marketingmaven · 10-21-2009, 10:11 AM

Years ago, one of the remodeling gurus (and I'm sorry that I can't remember which one) said to key draws to the start of work instead of the completion. So instead of a draw being due after drywall was hung, it could be due at the start of taping. There can be some differences of opinion as to when a phase is complete but not when it is started. We have found this to be very effective.

Regards,
Annette

Osito · 10-21-2009, 10:45 AM

I get 50% with a signed contract with progress payments based on the work I am doing. I do not bank roll anyone. CASH IS KING!!

TigerFan · 10-21-2009, 10:52 AM

Quote:

Originally Posted by marketingmaven

Years ago, one of the remodeling gurus (and I'm sorry that I can't remember which one) said to key draws to the start of work instead of the completion. So instead of a draw being due after drywall was hung, it could be due at the start of taping. There can be some differences of opinion as to when a phase is complete but not when it is started. We have found this to be very effective.

Regards,
Annette

I was having lots of trouble with 'completion' based draws. I downloaded a copy of that guys contract (it's in the files directory) and updated my contracts to show payments due "Prior to the start of ___________". It made a world of difference.

I have since updated my contract again, now I break everything into small pieces. I could conceivable get 45-50 checks per whole-house remodel, although in practice we end up bundling several items and getting few checks.

However, like the guy in the last message said, this method keeps me from ever being accused of having too much $$ paid by a homeowner who doesn't know our business.

I'll attach a pay schedule from one of my jobs. It is a customer I changed pay schedules on in mid-stream because of some issues. So you'll see my old 'prior to' and my new 'prior to' pay schedules.

I strictly use the new one now.

This one, for me, has worked wonders... of course, my situation is a little different because EVERYONE in my market has been trained to expect to be screwed by your contractor.

Joe@CBP · 10-21-2009, 06:04 PM

Quote:

Originally Posted by Celtic

Both

In my line [electrician] I have determined that the rough portion of my work comes to typically 66.82% of the job total, with the finish at 33.18%.

What I will typically ask for [and receive] are these terms:
50% Deposit at signing/start of job
25% Progress Payment prior to my calling for rough inspection
10% Progress Payment Prior to Trim Out
10% Progress Payment prior to my calling for a final inspection
5% Final payment due after passing final inspection
[NJ law dictates final payment after final inspection - but not the $ or % value]

Of course, these percentage values can change based on the exact $ize of the job, level of detail and PITA factor.

In any case, I do not finance the job.

Hey Celtic,
Almost 100%, however, there are contractors in your area that will have an oppurtunity to present a more ideal way for the home owner to feel comfortable with the payment terms.
When I owned my HVAC Business, we ran across many competitors who did a similiar payment policy. We tried to use it to our advantage.
I am fairly certain your familiar with your cut throat market area, however, every advantage is a bonus.
It isnt hard to do and can be another selling tool when trying to acquire work from a G.C., building owner or homeowner.
Shoot me and email and Ill forward the info.

Celtic · 10-21-2009, 10:10 PM

Quote:

Originally Posted by RizzoMaryland

I agree with the CYA aspect. However:

You're requesting 10% prior to trim and 10% prior to calling in final inspection?

Isn't it very likely that these payments occur the same day?

No likely at all.

When trim work begins....there is usually a flurry of activity ~ my contract states no trim until after paint ~ but that does not stop counter tops, grout, carpets, furniture, the whole dam family tree from stopping by, etc. ....basically, people in the way.

I will not even call for a final until I am 100% trimmed out - including finding the buried boxes [did I mention I am electrician]...and the Building Dept. requires 24 hr notice.

So no....not much chance of that at all for me.

Celtic · 10-21-2009, 10:19 PM

Quote:

Originally Posted by Joe@CBP

Hey Celtic,
Almost 100%, however, there are contractors in your area that will have an oppurtunity to present a more ideal way for the home owner to feel comfortable with the payment terms.
When I owned my HVAC Business, we ran across many competitors who did a similiar payment policy. We tried to use it to our advantage.
I am fairly certain your familiar with your cut throat market area, however, every advantage is a bonus.
It isnt hard to do and can be another selling tool when trying to acquire work from a G.C., building owner or homeowner.
Shoot me and email and Ill forward the info.

I'd happily PM you....but I don't think it will happen with the low post count you possess [no offense].....also, I do not think you can even provide a link [again, low post count].
The forum software limits new users in posting links and using the PM system [among other functions and areas] until there post count reaches a certain benchmark.