# What is your payment schedule from the client?



## nelson.peter (Apr 7, 2013)

You just got your client to agree to your bid. I have 3 questions.

1. What payment schedule is written into your contract? 
2. Does that schedule change at all with the size of the project? 
3. And finally, does that schedule change between bid work and T&M?

For background, we are a property management company doing maintenance (T&M) as well as turnover, remodels, and rehabs (bid).

Thanks.


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## Driftweed (Nov 7, 2012)

ok...

How do you interpret this:

For questions regarding any invoices past our net 45 day processing window....

I have a client with 11 invoices totalling $6k. They are an acquisition company, and thusly cannot and will not sign a contract. They are 30 days out on payment....

Oh yeah, and they have been a PITA about "verbiage" on my insurance forms.

My invoices clearly state "Due on completion of work". Usually I am lenient for about a week.

The word "window" to me means before 45 days. It's a verbiage thing, and monday I begin charging $10/day late fee per invoice over 30 days. 

Am I right? BTW I am awaiting word from my lawyer.


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## Inner10 (Mar 12, 2009)

Depends on the job: 

If it's a residential automation project I take 25% down, 50% on equipment day and 25% at the end.

If it's a commercial CCDC contract they are invoiced as completed contract method in monthly draws invoiced at net 45.

If it's a small job for a repeat customer under 10K I collect a cheque upon completion.

If it's a small job for a new cutsomer I take 30% down and collect a cheque upon completion.

If it's a job I feel a little uncomfortable about I take a BIG downpayment. :laughing:


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## Inner10 (Mar 12, 2009)

Driftweed said:


> ok...
> 
> How do you interpret this:
> 
> ...


I'm confused, you invoice them as due on completion and you haven't received payment in 30 days so you charge 10$ a day?


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## Driftweed (Nov 7, 2012)

Yes, I charge late fees after 30 days on all outstanding invoices. Always have. I give clients plenty of time to pay. After all, I have 60 days after completion of work to sue, lien. If not paid, I send out progreesively more aggresive emails weekly leading up to lawsuit day.

Prior to work, I always get in writing payment terms. However, this client wanted no part of signing anything. Just invoice them. 

Now theyre crying net 45. Sorry, doesn't work that way.

Work began September 1, 2013. Friday I notified them that October 15 is their 45 day. October 16 I will be going downtown to begin the legal process of getting paid.

The guys have been hiding behind a company called Compliance Depot to dodge payment. Long story, new thread...

I have found that in my area payment terms are :

residential: immediately
commercial: net 30 days
Bank work: up to 90 day

But in all honesty, it boils down to size of work, length of job. Most of my work is finished same day/week.


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## K&K Carpentry (Aug 29, 2013)

I typically do mine in thirds. 
very rarely do I do T&M, but when I do I bill out thurs night with invoice due the next day.
Some jobs like drywall I charge in phases. (downpayement, hang, finish, paint, etc) They get a bill after every phase is completed and inspected. 
That all being said I am very flexable and work with client needs. Long as I get paid at somepoint i really dont care, all goes to the wife anyway! LOL


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## mikeswoods (Oct 11, 2008)

With homeowners--on a remodeling job--

I use dollar amounts,seldom percentages--

Payouts are based on progress, 

For example, $X000 deposit is required 5 days before the job begins--
$X000 after demolition and mechanical is complete
$X 000 when drywall is hung ---
and on it goes----number of payouts depends on---size of job---customers credit (based on my gut feeling)


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## ArtisanRemod (Dec 25, 2012)

mikeswoods said:


> With homeowners--on a remodeling job--
> 
> I use dollar amounts,seldom percentages--
> 
> ...


I do the same. Works well and keeps things even for all.


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## mikeswoods (Oct 11, 2008)

ArtisanRemod said:


> I do the same. Works well and keeps things even for all.


I find customers are very comfortable with this---the customer and I are always close on the money----neither one is at huge risk---

Be sure to bill change orders as soon as possible--you don't want to hand them a stack of bills at the end of the job---that is a good way to end up getting stiffed.


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## nelson.peter (Apr 7, 2013)

OK. Good stuff, all. Thank you.


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## southernyankee (Feb 21, 2011)

ArtisanRemod said:


> I do the same. Works well and keeps things even for all.


Project doesn't get on the schedule until we receive a signed copy of the proposal and deposit check.

The day the permit is onsite another payment is due. Then a draw after each inspection passes.

The final payment, due after the final inspection passes,is usually under $1k.

Change order payment are due when the CO is signed and before the work is started.

Never had a problem getting payments.


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## ohiohomedoctor (Dec 26, 2010)

I generally break mine down into 6-8 payments based on completion markers. The amount of the payment is generated by having the client pre pay for the next phase of construction. The first payment is enough to cover ALL expenses to get to the next phase, and so on.

Like yankee the last payment is usually the smallest being that by that point all the work has been completed and typically covers my costs to close the job out in our books...


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## Shellbuilder (May 14, 2006)

Make all payments when you start a phase, not finish a phase.


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## mike gunderson (May 23, 2010)

I do mostly time and material remodel jobs, on a handshake. {i live in a small community}. I bill every two weeks on Monday morning and get a check midweek. I've been doing it this way for 20 years and have never had a problem. This way the client can remember what I've done in the last two weeks, reminded by my itemized bill. If there is a problem they can fire me or I'm only out two weeks labor. Never has happened though.


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## Doctor Handyman (Mar 13, 2012)

Shellbuilder said:


> Make all payments when you start a phase, not finish a phase.


I agree. Please contact the California CSLB and explain this to them.


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## mikeharold (Nov 1, 2013)

Line itemized estimate and contract. Usually no down payment cuase line item 1 is demo and at the end of the week all items completed are billed and invoice handed to the owner. Keep working, keep billing. That's how you make $. Never really understood the deposit and percentage process. Itemizing takes the mystery out of it and the owner can see exactly what they are paying for.


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## ESSaustin (Mar 27, 2010)

We are a subcontractor, Peter, so this may not apply but we do 30% frame start, 30% sheetrock start, 30% exterior completion, 10% final completion.


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## ESSaustin (Mar 27, 2010)

By the way, Peter, I know who you really are!


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## Dougfir (Mar 8, 2014)

I personally don't like to carry material cost so it's material cost due at delivery and balance upon completion....I saw a contract from a plumbing company where they retained ownerships of all materials (fittings pipe everything) so basically if u didn't pay they had a right to re-po the materials


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## mikeswoods (Oct 11, 2008)

Dougfir said:


> I personally don't like to carry material cost so it's material cost due at delivery and balance upon completion....I saw a contract from a plumbing company where they retained ownerships of all materials (fittings pipe everything) so basically if u didn't pay they had a right to re-po the materials


Oh, if repossessing installed materials was only legal----sadly,in my country,once an item is installed it is part of the property and can not be removed for non payment--only the property can be liened--


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## Calidecks (Nov 19, 2011)

In this state its illegal to take any money before material is delivered or work is done, except 10% or 1000 dollars which ever is less. So if you do a job that's $50,000,000 dollars you can only take 1000 dollars for a deposit. It's illegal to frontload a job in Cali. There is an exception and that is if you post a payment bond with the state board then you can frontload the amount of the payment bond.


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## Calidecks (Nov 19, 2011)

Cash reserve is my bank account. It's enough to take care of business. I have a trust for my assets.


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## EricBrancard (Jun 8, 2012)

I used to do less draws with bigger amounts. Last year I tired something a little different on a job. I broke into smaller draws so that there was a payment being made on almost a weekly basis and only $600 left remaining for completion of minor punch list items. I was very happy with the way that was structured. 

Now, instead of using percentages that have no real correlation to the work and materials outstanding, I am basing the draws directly on labor and materials with o&p amortized across it. Meaning that if the draw was for framing, rough plumbing and rough electrical, it would be based in the cost of those items and a percentage of job profit as opposed to a fixed 25% or 15% of overall job cost.


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## Golden view (Feb 16, 2012)

EricBrancard said:


> I used to do less draws with bigger amounts. Last year I tired something a little different on a job. I broke into smaller draws so that there was a payment being made on almost a weekly basis and only $600 left remaining for completion of minor punch list items. I was very happy with the way that was structured.
> 
> Now, instead of using percentages that have no real correlation to the work and materials outstanding, I am basing the draws directly on labor and materials with o&p amortized across it. Meaning that if the draw was for framing, rough plumbing and rough electrical, it would be based in the cost of those items and a percentage of job profit as opposed to a fixed 25% or 15% of overall job cost.


I price all jobs by a chronological spreadsheet and I just find the row that corresponds with the percentage I want for that draw. So the completion stage is different for every contract.


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## Jaws (Dec 20, 2010)

EricBrancard said:


> Now, instead of using percentages that have no real correlation to the work and materials outstanding, I am basing the draws directly on labor and materials with o&p amortized across it. Meaning that if the draw was for framing, rough plumbing and rough electrical, it would be based in the cost of those items and a percentage of job profit as opposed to a fixed 25% or 15% of overall job cost.


We do that on Cost Plus. Its a good method. We do about 50/50 fixed and Cost Plus.


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## Jaws (Dec 20, 2010)

Golden view said:


> I price all jobs by a chronological spreadsheet and I just find the row that corresponds with the percentage I want for that draw. So the completion stage is different for every contract.


We do the same thing. We have a coded spread sheet we use to write the scope, we use the scope to set draws in the contract. We also use the scope to an extent to process a CPM schedule on Project.


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## Golden view (Feb 16, 2012)

Jaws said:


> Are your scopes very detailed, or pretty simple? Just curious.


John, it depends. In general, as simple as possible while detailing the things that show quality that other bids might not match. I try to leave workmanship expectations entirely up to my reputation and references. So when the contract says "painted," I can do touch up later, or completely repaint it if a sub really messed up.

This is all an important discussion for me. I'm a first gen contractor, learning as I go. The draw schedule I posted is for a very simple job, there's not really much punch list stuff that can happen. It's very likely I'll add a 5% final draw to some future contracts.


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## Calidecks (Nov 19, 2011)

There are those questionable customers where my payment schedule will reflect the uncertainty. If they are too questionable I won't do the job, however there are those that don't seem bad but you just don't have figured out.


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## Jaws (Dec 20, 2010)

Golden view said:


> John, it depends. In general, as simple as possible while detailing the things that show quality that other bids might not match. I try to leave workmanship expectations entirely up to my reputation and references. So when the contract says "painted," I can do touch up later, or completely repaint it if a sub really messed up.
> 
> This is all an important discussion for me. I'm a first gen contractor, learning as I go. The draw schedule I posted is for a very simple job, there's not really much punch list stuff that can happen. It's very likely I'll add a 5% final draw to some future contracts.


Simple is better. I need to simplify our scopes, but it always ends up pretty detailed as far as products, specific model numbers and brands. It clarifys to the point we dont have to expain ourselves ever. Its detailed in the scope , if its not in the scope its not included. 

The reason we use detail is to differentiate between our cost and our competitors. It is very labor intensive and tedious though. 

Not saying its the way to do it, just how we do it. I am interested to hear others approaches as well.


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## Jaws (Dec 20, 2010)

We primarily do remodels and additions, so its important to include what is NOT included.


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## Golden view (Feb 16, 2012)

I feel like I spend a HUGE amount of time detailing stuff out and communicating with clients, even potential clients, before the job starts. It works because no one likes surprises, but sometimes I wish I could just say, "trust me" and I build away and give them a bill at the end and they pay.


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## Jaws (Dec 20, 2010)

Golden view said:


> I feel like I spend a HUGE amount of time detailing stuff out and communicating with clients, even potential clients, before the job starts. It works because no one likes surprises, but sometimes I wish I could just say, "trust me" and I build away and give them a bill at the end and they pay.


Its nice to work for repeat clients for just that reason. Do the work and bill me. They trust you until you screw it up. 

We were a little less detailed when it was me on the site all day. We run several projects at once. My brother and I are running 7 projects right now. The scope helps the lead on site. The schedule keeps me sane :laughing:

I realize a lot of guys run a great deal more work, but we dont have that model, and I have never done it.


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## Calidecks (Nov 19, 2011)

Jaws said:


> We primarily do remodels and additions, so its important to include what is NOT included.


Hell yes, I give a list of exclusions on every contract.


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## TNTRenovate (Aug 19, 2010)

WBailey1041 said:


> I'm new here and you are a seasoned contributor so I'm not trying to rock the boat. With that said, I build trusting relationships with customers and get a big deposit up front. Last year, I got screwed out of $338 total. Truth be told I do define every screw and quart of paint for certain type of Indian.


Rock away. I'm nothing special. Just means I have an addiction to CT.

I have never been screwed, but that doesn't mean that one way is better than another. And I am not saying your system doesn't work, just that, as you describe it, I wouldn't be comfortable.

Most of my clients are neighbors, referrals from: neighbors, friends, past customers or family, or fellow church members. I say all of that to say that most of my clients and I have trusting relationships, but business is business.


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## Calidecks (Nov 19, 2011)

The only time I've ever been screwed is by another contractor. I don't ever sub anymore. I might for a buddy who needs a home framed, but that's it. Getting screwed out of money is just one reason. I get contractors all the time call me and tell me there in the process of bidding on a job and would like me to give them a price on the deck. I know right away they are just lazy and want me to crunch their numbers for them. I never here from them again. So again I only enter into prime contracts.


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## Stoneyard (Mar 30, 2014)

After the contract is signed.
50% Down to start the job.
25% due upon 50% completion
Remaining balance due immediately upon completion.
And whatever is due from the original bid I state as: Final payment to be no less than $$$$ Just in case there were extras added.

Unless its someone I know and trust.


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## brunothedog (Sep 8, 2013)

I'll bite, 
Labor only if I Know you... 50% completion works After inspection(the day I finish), the rest 30 days billed. on bigger labor only jobs... 90% end of month, the rest 30 or 60 days billed.

If I dont know you... 10% the day i start, then bi-weekly


Bidding jobs... the law says 20% down When signing, (sometimes I need only 10%, depends on the scope of work), Then 80-90% of completed jobs monthly, the rest 60-90 days billed

Government jobs, these are strange animals, under 200k, 90% upon completion works, the rest 18 months billed,
over 200 K, staged payments 6 months after billing.

Small jobs usually when finished if only labor,
Or I'll ask 150% material costs up front, 
IT ALL DEPENDS ON HOW I READ YOU WHEN DISCUSSING SAID WORKS

I've been burned a few times, but its normal for our line of work.

mostly its when I work for GC's that the problems arise, 
But its normal in the rest of the world,
Many GC's dont know how to bid and end up stiffing themselfs, so for them to make a buck, they stif everyone down the line.

On the signing of the contract 99 times out of a hundred we raise the glasses with clients.

Its hard to say no when you just signed a 350 k job for them.

I know that in the States you does it differently, And dont get me wrong, that I wish it was like that in the rest of the world.


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## nelson.peter (Apr 7, 2013)

We follow the process described in Michael Stone's book Markup & Profit. On the smaller jobs we'll do the 50/50 (50% down to schedule and 50% down upon completion). 

But for anything over about $3,000 we follow the advice of Markup & Profit. We break the project up into phases and get payment at the _beginning _of each phase. Works great because then we have capital to complete the project and we are not starved for cash. We also have our profit built in for each phase so if something ever does happen mid-project (knock on wood), we can still walk away with our shorts still on.


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## onmywayup (Aug 18, 2012)

This is an excellent thread. Very interesting to hear the diversity in methods. 

I always had a moral hangup with taking (or paying, which is really the source of it) 50% down before a finger is lifted. It just seems like too big of a risk for a homeowner. 

So for anything over a grand, we take 10% non refundable to get on the schedule, then have homeowners pay directly for materials (which we order, then have them call to pay), then grab the rest in two or three draws depending on job size. 10% is enough to keep them on the calendar in my experience, and I'm never on the hook for potentially thousands of dollars of materials. 

And we NEVER EVER Ever let someone owe more than we can sue them for in small claims court in their jurisdiction , just in case. Our jobs aren't 100k size projects, so that's easier to accomplish than some of you other guys' structures.


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## Stoneyard (Mar 30, 2014)

At 50% down on say a 6k job, approx. 1200 will go towards material and overhead, plus our labor immediately goes into play. So the way I see it the initial down payment is instantly reduced to 1500 or so. Its a good faith measure on both sides. The customer should know that we are bonded which covers their worries and prevents us from getting screwed if the customer changes their mind. I would rather be ahead of them then let them be ahead of me. Looks like we arrive at the same place but we are just taking different roads. Why do you let the customer order the materials? You are loosing out on your material markup.


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