Payment Schedules

andrew07

Hi all, was wondering what your payment schedules would be for a $40k remodel start to finish. Just trying to compare to see what would be the best for me. Really don't want to scare the new customer off before signing the contract with a 25% DP, but want to get at least that or more after I finish gutting, and before the plumber or electrician start.

Something like this:
25% Contract Signing
25% After rough in inspection
25% After drywall hanging
20% Upon substantial completion
5% After punch-list complete

or
10% Contract Signing
25% After demo
15% After rough in inspection
35% After drywall hanging
10% Upon substantial completion
5% After punch-list complete

HallisseyDesign

Andrew when you broke down your list if you get more in detail about it you will find it easier to get people to understand where there money is going. I do 10 percent down on the signing. Then for yours like demo, you break down the demo- you would like 25 percent of th remaining bill when the truck it loaded and off to the dump. Stuff like that and people will get a better understanding and you keep them a little informed. Hope that helps

Ohh I do the second basically for the company

RizzoMaryland

Your schedules are similar to mine. I would elaborate more as to when they are do. Like the previous poster, be more specific.

Also, foreshadow the cash flow concerning the project. When are you going to need money for materials, will the payment schedule coincide with paying ahead for special order items, and will the payment schedule coincide with what you need to give your subcontractors up front?

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tnt specialty

Our first billing/installment would be upon obtaining the applicable permits, which would also include our fees for plans, as well as any engineering,soils tests, etc.....

There would not be any billing prior to the permit.

The subsequnt billings are monthly accumulated progress billings.

That's it!.............. KISS!

xkv8r

Your first payment schedule is correct. That should help cover permits and inspections and the unexpected. Don't feel guilty about asking for money , you need to get paid whether it is know or later. I would rather have 5 % owed to me at the end then 75 %. Remember , running a business is a risk,even the best get burned.

nadonailer

I would do:
$1000 at contract signing (that's all that's allowed in CA)
$10000 at start of work
$10000 after rough inspection
$10000 after drywall finish
$9000 balance due at substantial completion (which I define in the contract as final inspection)

or

divide the job into your estimation of weeks it will take, and divide the amount by that. I.e. 8 week job = $5000 per week with final $5000 due upon completion (about 10% anyway). I have a lot of customers lately who like this approach, even on the big 6 figure jobs. It makes it easy for them, and I love it because no longer are payments delayed due to misunderstandings about what what actually entails completion of a certain stage. Or worse yet, held up due to the customer's screw-ups!

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rbsremodeling

I will tell you from experience. I require payments up front and at the start of all phases. Anyone with a problem with that fine don't hire or recommend me. I have never had a home owner give me major grief when I had deposits up front. I have had plenty jerk me around when trying to collect on the back end after the work was done.

Ps usually do large remodels and I do 10 draws sometimes more. I usually collect every draws 2-3 weeks on my draw schedule

I will give a story later about a the contractor who taught me to get deposits up front a real eye opener

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Jason Whipple

We take 50% down, break up the different jobs into tasks and then bill twice a month (1st and 15th) based on % of completion for each task. The customer holds 5% of the blance due of each job untill they sign off that each job is done, not each task.

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Historic House Restoration, Cincinnati, Ohio
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philner

I always try to schedule payments due when something starts as opposed to when something is done.For example "Insulation Started" as opposed to "Rough Framing Signed Off". Less possible disputes and you don't have homeowners trying to torpedo inspections.In that example if the inspector O.K.ed it but forgot to sign the card or signed it with a stipulation that fire blocking be added and verified at the insulation inspection,etc.. a payment could be justifiably called not yet due. Items like "Windows Installed" could be held up due to a back ordered window or torn screen. "Window Installation Started" is hard to dispute."Plastering Done" could be never acomplished, while "Interior trim started" is the same thing but harder to dispute.Just my 2 cents. Phil

marc

We build prefab sunrooms and here's how the payments would be.......


25% or $10,000 deposit at signing
25% or $10,000 at delivery of permit
25% or $10,000 at job start
$9,000 upon substatial completion
$1,000 due after any punch list items are complete

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TigerFan

Here's a sample of one of ours:

Attached Files

Payment Schedule Example.doc (30.0 KB, 55 views)

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Jason Whipple

Has that system ever caused you a problem because one of those tasks aren't done and everything else is? I like to bill on each task and percentage of completion so that if a sub falls behind, I'm not standing there with no money to pay the guys that did do some work.

My form is a little more complicated but for me I'm not in a position to finance work due to one player that might drop the ball. I will most likely simplify mine though when theres a cushion in the bank. (maybe)

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GSE

So you learned you are not a bank, try to get the glue sniffers to understand that.

TigerFan

Yes it has. And the irony of all this is that I started another thread about post-dated checks.

As usual, the problem lies with me.

I got some could feedback about changes to the payment schedule that might really help and I am putting in in my next bid.

But to answer the question - usually I would request a partial payment vs a draw for the parts that were done. For example, if the progress mark was plumbing 50%, electrical rough complete and HVAC ductwork run, and all was done except for the HVAC ductwork, then I would invoice for, say, 75% of the progress payment.

I'm realizing now that all that does is set up a constant negotiation scenario with the customer and puts the customer in a more empowered position and leads to "negotiation" on everything.

As usual, this place comes through with some great advice.

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J F

Hey Andrew

I'm with everybody else here. We get a 20% deposit at contract signing with progress payments prior to the start of each stage. We are always paid ahead of each stage so if anyone ever wanted to get funny about paying it doesn't hurt us.

Don't be a bank. (see attached portion of our contract).

J

Attached Files

Contract.pdf (15.8 KB, 38 views)

MIbeachbuilder

depending on the size of the contract we charge materials down (unless they want to provide them on their own) and 1/3 labor down, 1/3 middle, 1/3 end. (progress before work begins). it cuts down on paperwork and confusion...

If the materials are a lot we will phase it but we don't accept any payment plans unless the HO can provide a 'proof of funds up to' from their bank and we NEVER use our CC's to purchase materials. (except for little stuff like adhesive or something)

We have worked too hard to build our credit and we dont want to take a chance getting stuck with the HO's purchases should they not pay.

Marcus W

Is your punchlist your final inspection with the building department

excellencee

Don't forget change orders with payment along the way. Get payment then not at the end. All of those $100s and $1000s add up quicker that they can count on their fingers and toes. We've got it a few times because the HO ran out of money.

kevjob

change orders are to be paid at sigining of the change order before work is started.

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Basement Finishing Highlands Ranch Colorado
Littleton Colorado, Basement Remodeling
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