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Head Light Bulb Changer
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Discussion Starter · #1 ·
Hey guys. I've got a client I've been working for almost a year. She has a few houses that I do repairs to. I always write up estimates and contracts for each job, unless it's small stuff so that's T+M. We have a verbal agreement (I know, I know) that she pays me 1-2K a month on the outstanding monies. It's been working fine so far, checks are ALWAYS on the 1st of the month at the latest. She owes me 5K at the moment, and wants another 5K of work done with the same payment plan. My problem is the material cost is 3K+, so I told her I need 3K plus her usual payment this week. She didn't like that. I can afford to float the cash, but I'm just afraid of her getting too far behind. I don't want to eat 5-10K if something goes south. The reason there is no set payment amount is some months I get $500 and some I get $3000. I've been averaging $1700 a month over 11 months. My questions are - Should I set an amount that she can't go over for money owed? Set a strict payment plan, like a percentage owed per month(I DON'T want to do that)? She's a great client to work for and I do add in some money to the job for me 'financing' her. Any suggestions/ideas?
 

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Capra Aegagrus
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None of my trusted customers ever expect me to float more than a couple hundred for materials. Some of them even argue with me about that. I'd never front $3k for a non-commercial job.

Is she really upset over needing to advance the money, or about you requesting with such short notice?
 

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You need to talk to her---It sounds like you both trust each other--just explain that you don't have the funds to shell out for material on such a large project.

See what she has to say---You've made doing business easy for her--I doubt if she is going to dump you--talk to her.--Mike--
 

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You need to identify if she is financially solvent and if she is also a willing debtor. Get her credit rating, talk to her banker, check out the leins/mortages on the properties, does the significant other work? car payments, addictions? teenagers, or worse college kids? edit on the down low...
Let her know the rolling credit isn't free, peel it out in all your bills/ job orders, charge at least 1%/month and processing fees, have all the boiler plate printed on the backs of your new invioces and job orders, and make sure she's read them once.

Let her think your bank/CPA is worried about the unsecured loan and its tax implications--State and federal income taxes on the gift "loans". Send a her a 1099...

Or get a 1st lein/note on one of the properties for 5k $ or more to secure your future labor/materials.EDIt-- With her advice and consent...

If she is a rainy day, or fill in customer for slow moments, that changes the math a little, keeping the workers busy, and the calender full is worth a little give and take...

Final thought, she is sucking liquidity out of your business, lowering your credit rating and cash reserves/ growth funds... what if she died tomorrow?

Why is your labor costs any less worthy of prompt payment than material? In Iowa labor is ALWAYS paid ahead of materials/material sellars when the debtor is liquidated.
 
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You need to talk to her---It sounds like you both trust each other--just explain that you don't have the funds to shell out for material on such a large project.

See what she has to say---You've made doing business easy for her--I doubt if she is going to dump you--talk to her.--Mike--
I agree. Don't make it a matter of trust; it's just something that you can't do, either because of actual limitation or because of the rules you've set for yourself about how you do business.
 

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Don't get spread out too far. It's a bad idea for you and for her.
I would just tell her you need the money to buy materials.
There is also another thing to think about. If a customer knows you can afford to buy all your materials for a job, sometimes they start thinking they are paying too much. Or they put off payments because they think you don't need the money. If possible make sure they know you are operating on credit.
Not always the case, just throwing it out there.
 

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Simply tell her that up to this point the way things have been working has been fine and you appreciate the business, but on this project, the materials alone cost $3K, that's before you make any money to FEED YOUR FAMILY and PAY YOUR BILLS...

Tell her on this one, the arrangement doesn't work with just smaller payments as you would have to cover just the materials, which would require you to take money from another job to do so....

Your gut is telling you the right thing to do... don't get over-extended... even for a "good" client...
 

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Simply tell her that up to this point the way things have been working has been fine and you appreciate the business, but on this project, the materials alone cost $3K, that's before you make any money to FEED YOUR FAMILY and PAY YOUR BILLS...

Tell her on this one, the arrangement doesn't work with just smaller payments as you would have to cover just the materials, which would require you to take money from another job to do so....

Your gut is telling you the right thing to do... don't get over-extended... even for a "good" client...
I agree, except that I wouldn't mention feeding your family, paying your bills, etc. Money is such an emotional issue for residential customers, small ones especially, that they need us contractors not to contribute to that. And they prefer not to know or think that paying the bills this month depends on their payment.

If you describe your situation in reasonable terms, and she keeps pushing, I'd consider it to be a red flag.

Edit: As much as I think FouthGeneration's approach would be an over-escalation, one of his final questions - what if she died tomorrow? - is always relevant. Maybe she doesn't die, but stuff happens, and you don't want to be left holding the bag on $10K-13K of improvements.

Edit again: Looking back on your original post - She current owes you $5K and this would bring you up to $10K, and she's paying $1K-2K per month? Is it lobsters or frogs, who don't know they're being boiled alive if you warm the water up slowly? You might consider getting things on a more formal basis.
 

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Head Light Bulb Changer
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Discussion Starter · #10 ·
Thanks for all the thoughts and ideas. Good point about the possibility of her dying tomorrow. Sounds morbid, but it's a fact of life. I think I'm just going to tell her I can't go over 5K owed when I meet with her Friday.
 

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Shelby..... From the limited info we have on her, I could not agree with you more as above, and maybe work on pulling in that seemingly and possible "perpetual" loan.

The facts as preesented, without any sound financial explanation and exit strategy/plan, shows she has a likely deteriorating financial circumstance, and you definately do.

She may be great to work for, but that is true of most partyies that are being financed and may not be able to eventually pay you.
 

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Sometimes - talk - too much talk - as in your current relationship is the problem.

Give her a proposal for the current work - with the material cost included. Total due at completion --- or in 10 days.

She accepts or doesn't......
 

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Don't get trapped into being on the hook for material cost. Had this happen to me before I fronted several thousand dollars for a job then the customer started trying to do everything possible to delay the finishing of the job. So I took my materials and told them I will be back once they pay for the materials in full plus work completed.

You lose almost all bargaining chips if you are paying for everything.
 

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Persons that aren't broke don't have to be nice all the time......
Madoff and Obama are really "nice" folks, one stole Billions, the other wasted Trillions...
 

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Head Light Bulb Changer
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Discussion Starter · #15 ·
My financial condition is not deteriorating. It's hard to explain why I do this for her, but I'll try -

The state of Georgia privatized the care of people with severe disabilities (mostly mental) a few years ago. Took them out of 'institutions' and put them in small group homes. Typically 3-4 people per home. The state pays per person, per month.

Background on her - She got into this because her sister is severely mentally disabled. Now she runs a non-profit corporation that cares for about 20 people. She's a great person who really cares about the guys/girls in her care. I've gotten a couple of referral's to other home operators who frankly don't give a chit about the guys, only the money. She loves to take the guys on trips/excursions that sometime eats into the monthly repair/maint monies budgeted, due to things like 'Well, we're here, so let's stop by the amusement park'. So there goes a couple grand in a blink of an eye. There is a board of directors for the non-profit, and they're aware of all money owed me. They get a report every month, so I think my butt is covered in that respect. I also do it because I add to my bill knowing I'm 'financing' it, and an extra couple hundred a month is great. I can't get that kind of a return from my financial guy :no:.

I've decided I'm going to set a 'credit limit' of 5K with her when we meet Friday and see what happens. Re-reading this post, I know this all sounds really screwy, but it's a unique situation that's really hard to explain. Sorry for the novel :laughing:
 

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What kind of work is it? Want or need? That would be my determining factor. I've financed people who needed a roof twice, they paid for materials on their credit card, and we set up a 12 month payment plan. Both people I did it with paid on time, with no issues, but it's got to be a special kind of person
 

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Good on her, and you,:thumbsup:

I'd see if what you're doing for the not for profit is tax deductible-Win, not lose so much.

Maybe suggest some remedial budgeting for the do-gooder, so she can do gooder, better?

Maybe enlist some donations on the material side to match your discounted labor bills?

Remember if you're broke, you can't help anyone...
 
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My financial condition is not deteriorating. It's hard to explain why I do this for her, but I'll try -

The state of Georgia privatized the care of people with severe disabilities (mostly mental) a few years ago. Took them out of 'institutions' and put them in small group homes. Typically 3-4 people per home. The state pays per person, per month.

Background on her - She got into this because her sister is severely mentally disabled. Now she runs a non-profit corporation that cares for about 20 people. She's a great person who really cares about the guys/girls in her care. I've gotten a couple of referral's to other home operators who frankly don't give a chit about the guys, only the money. She loves to take the guys on trips/excursions that sometime eats into the monthly repair/maint monies budgeted, due to things like 'Well, we're here, so let's stop by the amusement park'. So there goes a couple grand in a blink of an eye. There is a board of directors for the non-profit, and they're aware of all money owed me. They get a report every month, so I think my butt is covered in that respect. I also do it because I add to my bill knowing I'm 'financing' it, and an extra couple hundred a month is great. I can't get that kind of a return from my financial guy :no:.

I've decided I'm going to set a 'credit limit' of 5K with her when we meet Friday and see what happens. Re-reading this post, I know this all sounds really screwy, but it's a unique situation that's really hard to explain. Sorry for the novel :laughing:
Shelby.... That is kinda of an important enlightenment of the facts involved.

I'm not sure how (to what degree) your capital is protected under those circumstances, but your considerations and her circumstances completely recolors the situation.

If you care to make a charitable contribution interms of risking your capital..... nothing at all wrong or inadvisable about that......

In fact, my hat is off to you sir.

Best

Peter
 

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I agree. Don't make it a matter of trust; it's just something that you can't do, either because of actual limitation or because of the rules you've set for yourself about how you do business.
^^ this is solid advice and I find that almost all of CarpenterSFO's posts are actually well thought out. I will also add that sometimes a customer will respect you more and treat you differently if you have rigid rules in place concerning you holding bills for later payment.

Try this, let her know you have no problem waiting on your labor and small amounts of material for various little projects. Let her know that you don't have to make payments on your labor each month like you would on $3k in materials. Offer to let her pay directly for the materials ( credit card or something to supplier) and owe the labor going forward.

Part of staying in business is developing relationships with our customers that are part friendship-business-sounding board-advice etc and you have to make it work whatever way it does for yourself. I just would not extend myself for that much without an expedited payment for the materials up front or for her to manage the materials on her own credit somehow.
Good luck.
 
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