I am finally learning how to do the business part of my renovation business, and even hace a business coach developing plans I can actually use.
The question came up about billing large jobs to customers, specifically, what would be an apropriate down payment, ( a retainer sasy of 10 %, or a figure covering the cost of materials) or if the job is billed in phases, would the down payment cover costs of materials for that phase…
Then, since there is a 10 % hold back by the client, is that 10 % applied to the payment at completion of each phase, or only on the final amount….
Please feel free to offer comments on any parts of this subject.
Thanks,
stemreno
Replies
Friend,
As you are aware this is a very sensitive area of your bussiness.
Break the payments down depending of completion of certain tasks.. i.e. Demo completion or Job staging. Floor framing, wall framing, insulation, drywall, etc. Best bet would be to bill frequently to ensure cash flow. There are also restrictions on down payment in different states. CA $1,000 or 10% depending which one is less. Check yours.
I try to set all my jobs up on a weekly payment schedule, its been working for about a year now. I thought it would be a hard sell, but found it relatively easy. As always, if there's ever a tough payment to collect, it will be that last one! Because, after all, the work is finished at that point. I make exceptions for certain repeat customers, but most first-timers have to pay weekly. Because my bills come in every week.
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Read the threads in this business section. Click on the blue business header at left column frame and you will see nothing but business section threads. This subject has been discussed nine days a week sometimes.
I fail to see any reason for the client to hold back 10%. The idea of advance payment / deposit and of hold backs are in conflict with one another.
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As you peruse through the business threads take note that there's often a difference between new construction and remodels.
Personally I require no scheduling down payment (though have had one backout that cost me money by screwing up a planned schedule) but would give it some thought.
Material down payment is often more important in renovation. You may find yourself deep in the hole on custom orders like windows, doors, cabinets.
Each of my jobs is unique to itself and thus the draw schedule is customized. Above all, remain solvent throughout the process. Being short on your labor money is one thing. Not being able to cover material or subcontractors is an entirely different matter.A Great Place for Information, Comraderie, and a Sucker Punch.
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A hold back is pretty common in these parts on mainly commercial and some bigger residential jobs.
The sub does not get the hold back until all warranty requirements have been satisfied (and even then it is questionable if the sub is dealing with a shady GC).
Yes common on commercial, but a commercial job has no front end deposit either.
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Around here, you can't collect that last 10% until final inspections are made.
Which can suck if you're not invloved with the painting, carpet, etc.
Fortunately, my customers usually don't have a problem paying when I'M done.
I understand holdback as 10% on each draw thru the whole thing. Would still equal same amt.
Whatever a deal ois, I wnt to know ahead of time so I can structure my bid and pay schedule to accomadate ME
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Then, since there is a 10 % hold back by the client, is that 10 % applied to the payment at completion of each phase, or only on the final amount....
A1A contract? If not eliminate the 10% holdback.
I always go with the weekly payment, giving my client the bill at the end of the day Thursday. Receiveing my check(s) on Friday. Even if it's just a mental thing, we ALL like smaller bills. If there is a problem with anything it can be dealt with as it comes up, not a month down the road and the issue is vague.
Do you base your billing on accounts payable, lumber, subs, etc., or do you bill based on job progress? John
Depending on the scope of the work, my billing for the week covers the expenses incurred. Any large material outlays have been taken care of in advance, ie. lumber, cabinets, appliances etc. A wiser person than I told me years ago, if someone is going to beat you let it be for labor only, NEVER both. Being in the business world for many years I find one of my greatest assets is judgeing someone's character. Alot of life has to be based on trust, people trust me.
In commercial renovation and "small" new work, no deposits or "seed" money, we invoice for percent complete once a month and deduct 10% retainage or "hold-back money" from all progress invoices. The retainage is invoiced once a Certificate of Occupancy is issued and all written punchlist items have been completed.
Basically, for work we do in, lets say the month of Feb, we don't get to invoice until the end of Feb and we can generally expect to wait 15- 30 days for payment. Our subcontractors have these same terms.
I need to get back into this residential gig, money up front, payments once a week......just thinking how much more sleep I would get.
Grass always seems to be greener.....
Accounts receiveable can bury anyone. Always looking for the check is in the mail, and those dreaded words Sorry but................