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Just wondering how you guys deal with payment terms? I've always set-up my contracts in 3 payments. 1/3 down at contract signing, 1/3 at about the half-way point of the project and final 1/3 upon completion of all specified work.

Reason I ask, this past week there's been a few pieces on network TV, interviews with supposed experts on in the arena of homeowners dealing with contractors. The two I saw both were sitting there recommending to home-owners that they should never pay anything down until a substanstial portion of the project is completed.

In the years that I've been in business (and I'm still a babe in the woods compared to many of you) the only time I've gotten stiffed by a client was when I didn't follow my normal course of action.

I noticed on someone's site, think it was Minn Const that they have their terms right there on the website, called for 40% down. Anybody else have that kind of pricing info on their site?
 

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The past 4 years I was doing the 1/3, 1/3, 1/3 payments and found more and more homies were all too quick to not pay when everything was due and I'd have to fund projects out of my own pocket to completion and sometimes would go upto 3 months before ever seeing final money. They were happy, permits were signed off on, just plain bad business on some homies parts and that added up after awhile.

This year I'm trying something totally different. Decided to use the homeowners money to fund their project...new concept huh? LOL, I'll just use garages as an example. I now require money up front at time of siging before concrete is placed, money up front before I order ALL garage material and have it delivered, then half labor after structure is erected and water tight with building wrap and tar paper, then remaining balance after final inspection. I've been explaining to all my customers that ask about this how I've been burnt in the past and all have understood. As long as open communication with the homeowner is established I think that in itself stops alot of problems. When add-on's or change orders are implented we will note and initial on contract and I'll fund those until time of final payment, that way I'm not like the teenage kid always asking mom and dad for $20 for this or $50 for that.

Seems to be working good thus far and making life alot easier...hellava lot less overhead on my part since projects are now basically paid for as we go...less bill paying at end of month also. There will always be exceptions to the rule as with anything, but if this keeps working out this good I've found my new deal.
 

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Typically 1/3 down and final upon completion. If custom or non returnable items need to be ordered to complete the work then I make sure my downpayment AT LEAST coveres the cost of those items. If a job is a large job that takes longer than a full week, or I think the home owner is shady, then I require progress payments.
 

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Deck Designer/Builder
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I do 30% due at signing (work is scheduled then), 30% when all materials are delivered to site and the balance of 40% due when job is completed. This schedule works best for me and my customers.
 

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30% down and draws according to the scope of work.
 

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Depends on the type and size of work.
On a metal roof for example. reroof or tearoff. I get about 2/3 thirds of the material costs on signing. If it is a few monthes away, I hold onto the check paper clipped to the contract until I order the material, the other 1/3 on material delivery, with material waiver from manufacturer. Then the labor is split either 2 or 3 ways, begining with job start and ending with succesfull completion. There is a strong trust factor involved.
Now say if it is a asphalt shingle reroof, 1/2 and 1/2
 

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Mike Finley said:
It depends on the size of the project. $1500 and under I do 10%/90% or nothing at all. Larger projects I will tie the payments into a progression schedule with no more than 10% due upon final.
$1000 and under I usually don't ask for anything. There was a job I got awhile back when I first started my company and had no refrences. We were installing 4 windows and the customer was hesitant because I had no company refrences. I told her to hold payment until the job was done and we inspected it together. Sold!
 

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Projects up to 5k 50% upon starting and then balance, 5k to 20k I do thirds, 20k and up 10% deposite 10% retainer and break up payments in between.
 

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smartazz contractor
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commercial:
nothing down then monthly based on % work complete on the schedule of values


residential:
draws as we go nothing down


the worst at paying are property managers
 

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miketheparrothe said:
the worst at paying are property managers
AMEN BROTHA!!!!!

Only took me until the end of summer to reiceve my snow plowing money from a apratmemnt complex organization, the parent company is based out of Chicago so everything is done by fax/mail. Made it a point last fall to tell on iste manager I will not hesitate to plow shut every parkling lot if I do not reiceve my invoice payments within 31dys of billing. This year got paid within 30 days everytime as schudeuled:)
 

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I am just wondering:
we have all explored ideas of making payments as easy as possible
for our customers so we can differentiate our companies from the
competition. Credit cards, financing etc. come to mind.
When it comes to deposits, all this disappears and we all insist on
sizeable deposits (in the thousands mostly). At the same time most
consumers groups advise against it. Is it possible a some leads did not
become jobs because of our insistence on a large deposit? I agree
about cashflow but what if...
 

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I know a few companies that don't accept deposites. Keep in mind they are specialty trades dealing direct with customers and not GC's. The difference is typically the $$$ of the contract, being that a specialty trade might replace your roof for $5,000 and a gc build you a new home for $500,000.

I'd like to be financially stable enough one day to do work for little to no discount but that time is just not here. I just couldn't take the financial hit if a few customer didn't pay one month. This has never happend but I always plan for the worst and hope for the best.
 

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Grumpy said:
I know a few companies that don't accept deposites. Keep in mind they are specialty trades dealing direct with customers and not GC's. The difference is typically the $$$ of the contract, being that a specialty trade might replace your roof for $5,000 and a gc build you a new home for $500,000.

I'd like to be financially stable enough one day to do work for little to no discount but that time is just not here. I just couldn't take the financial hit if a few customer didn't pay one month. This has never happend but I always plan for the worst and hope for the best.
What about a "progress payment" when work starts, or after materials arrive.
It takes away the risk factor for the prospect and the only risk for the
contractor is not going through with the work after scheduling.
 

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"Buy Quality, Cry Once"
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George Z said:
I am just wondering:
we have all explored ideas of making payments as easy as possible
for our customers so we can differentiate our companies from the
competition. Credit cards, financing etc. come to mind.
When it comes to deposits, all this disappears and we all insist on
sizeable deposits (in the thousands mostly). At the same time most
consumers groups advise against it. Is it possible a some leads did not
become jobs because of our insistence on a large deposit? I agree
about cashflow but what if...
The 1% of contractors that take the money and run make the other 99% look bad. It's well meaning, but ill informed consumer advocates that sway public attitude on this issue. There are cash flow issues in the contracting business to consider. If your'e buying a home you need earnest money, a car a downpayment etc..

I require 1/3 down to scheadule and retain. Then generally the rest upon compleation. Unless the customer seems to likely be a PITA in which case a 1/3 draw at the half way point is required. All this is spelled out on my site and on the contract. Ofcourse I always point out that I'm also insured and incorporated.

But if a customer scoffs at the 1/3 down, I thank them for their time and move on.
 

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on large jobs we get 10%at signing and 20% at start. small jobs 30%at signing. special order material min 50% before order placed ;some custom items we require to be paid in full.
 

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From the cabinet making world re: deposits, "Thou shall never cuteth thine own wood. See ye the 50 % deposit".
I've found this to be be gospel, makes the customer 'committed'.
 

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I will go along with the 30-30-30 and or the 50-50, but to go into progressive payments is a nigthmare.

I have not tried it, but a buddy of mine did and he had a real tough time with getting full payments.

I dont know about you guys, but when someone is holding my money for a year or so I tend to get a little worried. Say he has some one over and they start to cretique our work, you know they should have done this or that.

Next thing you know, there holding back until you make repairs.

BJD
 
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