# Effective draw schedule experience for those getting stuck or worrying about payment



## MikeGC (Dec 6, 2008)

Over 20 years ago when I started my company, I got jerked around on two of my first ten contracts when the final draw of 25% was due. I collected but the experience was valuable while it also sucked groveling for pay I was due.

From that point forward I changed my standard draw schedule to 50% down to get on schedule, 35% at half way and 15% on complete for any project under $10K. 

Over $10K I go to 

50,35,10,5 $20k
50,25,15,7,3 $30k
25,25,25,15,7,3 $40k
25,25,25,10,10,5 $50K

Or whatever. You get the idea. I tell the customer "the way I do business is ... " and I explain the draw schedule. 

I am ALWAYS ahead until the LAST DRAW. I have NEVER lost a sale because of my draw scedule. I have another post on here somewhere with very similar convictions. I dont like getting jerked around about money and I do not like worrying about getting paid by someone that makes my crazy meter go off. With my draw schedule I NEVER worry about it. 

We all have enough to worry about already. 

I did a few installations back in the day for a local supply house building sunrooms and decks and windows and such. They got 100% down for the job. Called me to schedule three to six weeks out. The supply house supplied all materials and I supplied the labor. We got paid on completion. The point is the supply collected 100% on the sale date and did the job 6 weeks later with no complaints from the customers. It can be done. Think it over very carefully. 

I refuse to finance someone elses project with my money. Its U-N-N-E-C-E-S-S-A-R-Y. I proved it over 20 years. You are permanantly attaching highly valuable goods onto private property with expensive labor and you can be ordered to leave at any time. NO WAY I am going to tie up my money on that arrangement. INSANE. 

I have seen contractor websites that brag about not requiring a deposit or not needing a deposit or whatever. I dont NEED a deposit. I REQUIRE a deposit because its good business. Bragging about not asking for a deposit strikes me as ignorant bravado and unnecessary business risk. 

Some lawyers ask for retainers to be worked off from and others do not. I ask for project funds to be worked off and others do not. Each to his own but there seems to be plenty of questions on here about how to get paid by a customer that went nuts along the way. There are too many situations where contractors are asking themselves if they should "cut their losses" To hell with that. Run your business. Dont let it run you. Control your customer and your project management. 

Its so easy to collect a tiny final payment and nerve racking to collect a big one at least a percentage of the time because of human nature and fear at the end.

With more checks and cash flow along the way, there are more chances to answer any concerns. At the end, the pressure is off everyone and the last draw is a pleasant breeze to collect. 

I have seen contractors that get stiffed by a customer and they go out of business. Do you really want to put the fate of your company in a customers hands. Too often, you get to know the "real" person behind the curtain after its too late. Dont go there. Adjust your draw schedule so you control the project and the cash flow. Run your business so the dog wags the tail, not the other way around.

IMO,


----------



## Framer53 (Feb 23, 2008)

There is no problem with your draw schedule. I don't do it and never have. 

I just like to old 50-50 schedule. More steps the larger the contract, say over 15,ooo. I don't like being the different contractor as most use the 50-50 schedule. The key is to have the money or credit to not have to depend on the profit from one job to run another.

One other thing, I see you are in NY. Do you put the money in escrow as you are supposed to? Do you bond so you don't have to?


----------



## Mike's Plumbing (Jul 19, 2010)

Framer53 said:


> The key is to have the money or credit to not have to depend on the profit from one job to run another.


Well said, that right there is the big one. I pay for everything with my own money and never extend myself. My wholesaler gets paid within 3 days no matter what and it's a great feeling to never owe any money to anybody.

I built my company around the idea of "cash on hand" and your right, many companies live check to check, that's a bad business model. Companies should be profitable and a percentage of the profit needs to go back into the business as "cash". Once this happens business becomes a lot less stressfull also.

Mike


----------



## CookeCarpentry (Feb 26, 2009)

30% down on signing, 30% down on day 1, and depending on how long or expensive the job, progress payments after that.

Pennsylvania won't let me collect more than 1/3 down for a deposit - with the exception of special order materials.

For special order, I get the entire amount up front before I place an order - no exceptions.


----------



## Rcon (Nov 19, 2009)

I don't take "deposits", but i'll collect 1/3 total price on the day the project starts. I then collect another 1/3 total price upon successful completion of a 'benchmark' amount of work. Final 1/3 is paid on completion. 

If the project is big enough, i'll break that into 4 25% pieces, or whatever else seems appropriate for the particular job. 

I really only have 1 rule though; stay ahead. The final payment is all profit - the draws cover all labor, material and overhead costs.


----------



## RH-Electric (Jan 16, 2010)

In California it's unlawful to take a down payment from a homeowner in excess of 10% or $1000 (which ever is less) and it's also unlawful to construct a payment schedule that results in you getting paid for work not completed. 

The laws here suck but the women are all beautiful, so it's a good trade off.


----------

