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Discussion Forum

Payment terms

10D | Posted in Business on June 3, 2004 04:37am

Hey everyone –  what are your payment terms for a job approximating $20,000?  How much down, what percentage at what point in the job, etc.  Would you have different terms if you are a small  vs. big company?

Thanks!

10D 

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Replies

  1. jackplane | Jun 03, 2004 05:15pm | #1

    Same as if it were a $2,000 job. One-third down, one-third midway and one-third upon completion. Poor cash flow, while unpleasant to a big company, can kill a small company. So accurate analysis of time in the bidding process is essential.

    1. User avater
      10D | Jun 03, 2004 06:55pm | #2

      Thank you.  I was wondering what's with this "50% down" I've been getting on bids. 

      1. jackplane | Jun 03, 2004 07:04pm | #3

        50%. It works for some contractors, but depending on the state you live in, it can be illegal for a contractor to take that much.

        1. User avater
          10D | Jun 03, 2004 08:23pm | #4

          You know, I never thought of checking on the legality of payment terms.  I live in Illinois where, it seems, everything that is illegal is legalized.

          Thanks again.

          1. User avater
            BossHog | Jun 14, 2004 05:37pm | #33

            Where in Illinois are you at?Obstacles are those frightful things you see when you take your eyes off your goal. [Henry Ford]

          2. User avater
            10D | Jun 14, 2004 07:34pm | #35

            Chicago area . . . are you around here? 

          3. User avater
            BossHog | Jun 14, 2004 08:10pm | #36

            I'm from southern Illinois.

            Of course - When you're from Chicago - Anything south of I-80 is southern Illinois. (-:

            .

            Seriously - I'm about an hour south of Springfield. Have lots of relatives up there in the Park Ridge area though. I make it up there once a year or so.

            There are at least a couple of folks here from up your way. One guy calls himself "Cork from Chicago". Can't remember the other name(s).If a man does his best, what else is there? [General George S. Patton]

          4. User avater
            10D | Jun 14, 2004 08:29pm | #37

            My inlaws have a home building business in Springfield.  They do phenomenal work.  I wish I could import you guys from "Southern" Illinois up here!  I'll nose around here for Cork - thanks for the heads up.

            10D

               

          5. User avater
            BossHog | Jun 14, 2004 08:51pm | #38

            What's the name of the business that your in-laws are in?

            I've been doing trusses for the Springfield market since 1990. The company I work for actually has a plant up there on the southwest side of town.I haven't been the same since that house fell on my sister.

  2. FastEddie1 | Jun 04, 2004 12:05am | #5

    Depends on the project, too.  Sometimes you will be asked to pay for the materials when they are delivered to the site, like when all the lumber for a deck is dropped.  Or if you are doing a kitchen remodel, maybe they will ask for 50% of the granite and cabinet cost when the orders are placed.  It's all negotiable, to an extent, so if it seems too high ask for clarification.  Or offer to cut deposit checks directly to the cabinet shop if you are uneasy about paying the gc up front.

    Whenever you are asked if you can do a job, tell'em "Certainly, I can!"  Then get busy and find out how to do it.  T. Roosevelt

    1. tenpenny | Jun 04, 2004 02:09am | #7

      Sometimes you will be asked to pay for the materials when they are delivered to the site, like when all the lumber for a deck is dropped.

      That makes me curious:  how many of you guys out there get net 30 day terms from youir suppliers?  As a homeowners who had to take over when our gc went bankrupt, we applied for an account with the local equivalent to hd (but they give excellent service), and everything was net 30 days......even all the kitchen....cabinetry, solid surface, etc etc.....even now, if I go pick up a fistful of 2x for a project, if I put it on my account, it's net 30....

      Do many of your suppliers want payment on delivery?

      1. FastEddie1 | Jun 04, 2004 03:36am | #10

        All of my commercial accounts allow for monthly payments, including Lowes.  I got a commercial account at Lowes because they offerd a 10% discount on the first purchase, and they had sometihing I wanted that made economic sense to buy.  I have not used it since.  Depending on my financial situation at the moment, I sometimes write a check for the purchase the next day and mail it in.

        Whenever you are asked if you can do a job, tell'em "Certainly, I can!"  Then get busy and find out how to do it.  T. Roosevelt

        Edited 6/3/2004 8:38 pm ET by Ed Hilton

      2. SonnyLykos | Jun 04, 2004 03:37am | #11

        TenPenny, in most states, when any materials delivered to and on the property of the home owner, ownership of those materials is transferred form the contractor to the home owner. That's why if a fire or tornado occurs during the job, as occurred once on one of our jobs, the materials that were lost to the fire or destroyed by the tornado are covered by the owner's home owner insurance.

        So in effect, even though I have 30 days to pay my supplier for them, I'd be paying for materials that are legally owned by the home owner.

        If I have not yet received monies for that material - say a divorce or owner death occurs, I then have to initiate legal tactics (and $$$) to get paid.

      3. calvin | Jun 04, 2004 04:59am | #13

        Most want pmt at end of following month, some discount if pd by the 10th.  Some 30 days from delivery.  What good is an account if you have to pay on delivery?Remodeling Contractor just outside the Glass City.

        Quittin' Time

        1. JerraldHayes | Jun 04, 2004 05:28am | #14

          Hey Calvin where ya been? Haven't seen ya 'round here in a while. Ya must have missed my posts this past weekend. And hey who the leading overall vote getter in the All Star Balloting? Some ex-Yankee maybe?

          View Image

          ParadigmProjects.com | Paradigm-360.com | Mac4Construction.com

          1. calvin | Jun 04, 2004 12:54pm | #17

            Yessir, I must have missed that tirade.  Good to see you will follow your old lineup around the league.  You're not a fair weather fan.  By the way, a couple of leading vote getters have yet to play a game.  Proves the point about fan knowledge.

            You working on your horseshoe/bocce game?Remodeling Contractor just outside the Glass City.

            Quittin' Time

          2. bartmy | Jun 11, 2004 02:04am | #18

            I have no problem asking for a deposit and payments that also cover most of the labor in advance. I try to avoid any "financing" of a job as that is not the business I am in, and being small, cash flow can be a real issue at times. Inevitably, I'm a little out of pocket before the final payment, but I try to make that the only time. I usually go 10 to schedule, 25 to start, 30 after the first stage (like demo and framing) then 30/5. Doing it this way, I am always using the customers money for their job, not my money.

            Edited 6/10/2004 7:06 pm ET by Dancing Demon

          3. calvin | Jun 11, 2004 03:42am | #19

            I'm assuming your post wasn't directed at me, but here is my procedure for payments.  As I've said b/4, all my work is return customers or direct referrals.  Using this as a background, I require (ask) for no scheduling down pmt.  Nor do I get a sizable draw at rough in.  I do ask for a pmt upon a special order being placed.  If a return customer, no pmt until delivery.  Here's how it usually goes.  Demo completed, electric/plumbing roughin and cabs (kitchen) delivered- payment due for labor completed and cabinet cost.  Drywall finished and cabs set, another pmt.  Job complete/ final payment upon completion. 

            Only got burnt when a friend decided to not do his 175,000 reno job to an office bldg.  Left me with a large hole in my schedule.  Should have taken a deposit to start on that one.  So definitely not saying my way is the right way, but I likewise don't believe in getting a sizable percentage b/4 I show up either.Remodeling Contractor just outside the Glass City.

            Quittin' Time

          4. User avater
            10D | Jun 12, 2004 04:56pm | #20

            I am not sure where to find the Glass City (Crystal City o/s D.C.?) but I wish it was near my city! 

          5. calvin | Jun 13, 2004 01:43am | #23

            Ten............this glass city is Toledo, Oh.  And oddly enough, a town to the south of here was once called Crystal City.  We used that name for our underground newspaper in the late 60's/early 70's.  This is a nice area, stayed here after college because of the friends we made.  Now, it's home.  In spite of the area being tied to the auto industry, my business hasn't fluctuated much with car sales.  However, auto layoffs mean carpenters abound...........the "anyone with a pickup and a saw".......  I like it here.  Tomorrow, I take out some office walls for one of my first customers...............32 yrs later.  Must be doing something right.

            best of luck.Remodeling Contractor just outside the Glass City.

            Quittin' Time

          6. User avater
            10D | Jun 13, 2004 07:18am | #24

            Calvin-

            I can't believe it's Toledo!! My entire family, both sides, is from Toledo.  I spent many, many weekends and holidays in Toledo in the 60s and 70s as a kid visiting grandparents, great aunts and family friends.  No one is really left anymore . . .  thanks for the geography lesson.

            10D

              

          7. calvin | Jun 13, 2004 01:31pm | #25

            go figure, small world. Remodeling Contractor just outside the Glass City.

            Quittin' Time

  3. JerraldHayes | Jun 04, 2004 01:54am | #6

    While maybe okay for small projects I find the problem with the One-third down|one-third midway|and one-third upon completion plan that it often doesn't relate to the actual cash requirements the project has or the value delivered to the client at the respective stages. And just who defines when a project has reached or passed the "midway" point. I just think that's way to vague.

    In other words there are jobs that are incredibly front loaded with costs just as there are also ones that are back loaded too (although there are more front loaded than back) but my point is the real project cash flow line is rarely ever literally 1/3|1/3|1/3.

    As for something like 50% up front in some states that's legal and in some (notably California) its not. In NY (or maybe it's local Westchester County law) your payments have to be tied in someway to actual performance milestones and can't be totally arbitrary. Although I think there is also an option where you could in theory get 100% up front but only if you then place that in an escrow account. I'll have to look that up to see what it is because its been a while since I looked at it and as you can see I don't even recall if it was state or local law.

    View ImageAs for how we handle payment schedules I'd point you to a JLC article that I liked and used as a guide in setting up our own policies and procedures and hopefully get your thoughts on it. In fact I designed a software module in my systems around it.

    While the JLC Plus or the JLC CD-ROM is an excellent resource to have at hand (in fact I would put it on a builders and remodelers essential list) it's actually one of the free articles on the JLC website. (October 1999 Getting the Final Payment "If you’ve ever had a problem collecting that last check, you’ll appreciate the value of this builder’s systematic approach to getting what he’s owed.") You can view it as a web page or download a PDF.

    One of the things in it that I really liked was how while he has a basic milestone based payment schedule he adds to it the language:

    "Although the sums set forth for each of the items are specific, the order of completion of such items is only a guide. An invoice for any work completed or substantially completed work shall be delivered to or faxed to Owner. Owner's fax number is 212/555-5555. Owner shall make all payments within seven days of receipt of invoice. Failure to make such payment shall be deemed a breach of this contract by Owner."

    That allows the contractor some scheduling flexibility so that the contractor can make decisions as to what to work on as project conditions dictate rather than being bound to a hard ordered payment schedule that force you to work on the rood in the rain and snow to reach the next payment in some kind of absolute hard order.


    View Image

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    1. User avater
      10D | Jun 04, 2004 03:20am | #8

      Great 411.  Thanks!!!

      10D

      1. Frankie | Jun 12, 2004 09:11pm | #21

        As a small contractor, I do not finance client's projects. It is my understanding that companies who do finance their clients' jobs charge a fee - maybe not as a line item, but it's in the budget. After all, if banks charge for you to use their money why shouldn't contractors?

        With all customers the initial payment varies. If it's to get you in the schedule it's between $500 and $1000 and is non-refundable. If it's the first "big" payment it is dictated by the material cost of the scope of work, including P&O, deposits required by subs and some labor. Contrary to Sonny, if I am not paid in advance for labor then I am financing the project. Checks take time to clear, clients are sometimes late paying but my weekly obligations remain constant. My guys expect to be paid every Thursday and I don't ever want to be late paying my subs.

        The balance of payment for first time customers is then spread equally over the duration of the job - every week, every two weeks, etc. This assumes that we show up to the site every day. If the project takes longer than expected (double the time) the payments are adjusted. If it's only a week or two, well then I am going without a check for that time. 5% of each payment is saved for the Substantial completion payment where 10% of that, or $1,000, whichever is less, is retained by client. This is paid upon total completion.

        Clients hate writing large checks, regardless of the value they purchase. With the above payment schedule the check amounts are smaller, more manageable and don't instill separation anxiety. Clients also feel they have more control over the project.

        I have never had a dispute with this schedule and I now always get my money. The contract is no longer "renegotiated" once the project is nearing substatial completion. This is what works for me.

        Hope this helps,

        F

        1. davidmeiland | Jun 12, 2004 10:12pm | #22

          "if I am not paid in advance for labor then I am financing the project. Checks take time to clear, clients are sometimes late paying but my weekly obligations remain constant. My guys expect to be paid every Thursday and I don't ever want to be late paying my subs."

          This is a point well taken. There is never a time when the client pays you at the exact moment you disperse money to employees, subs, and suppliers. Either you are using your working capital to cover those payments, or the client has money on deposit with you that covers them. Certainly it's sound business practice to keep cash on hand in your checking account to cover this float, but the fact remains that you're loaning the customer that money. If they stop paying, or decide to go out of town and forget to write your check, then all of a sudden the cost of that loan becomes very apparent.

        2. SonnyLykos | Jun 14, 2004 01:26am | #26

          Frankie, as I stated earlier, I never get labor in advance, but remember that I stated I do get a deposit on material and that material is marked up.

          My current job is about $19K. The material including appliances is about $5700, but my requested deposit was $8200. To payouts of $5000 and a balance of $800.

          The difference of $2500 between my marked up material and actual cost of material includes overhead, and part of overhead is “float of money.” Overhead continues to be expended even before the starting date of any project, and part of it is for the impending project.

          In addition, I don’t have to pay for the appliances until they’re delivered and that will happen “after” the first payout of $5000.

          So I guess we both do the same, but in a different manner.

          For those who think they should finance a customers project, even for only a few days, than why in the world would anyone as myself and other contractors use an “investment” account such as a money market account, to get interest on a daily basis, and a separate “operating” account from which to pay bills? (Money gets transferred weekly when needed) It doesn’t make sense. Time, even one day, is money. Ask any day trader, which I occasional do.

          It’s a domino reality. Break that domino process and you’re screwed:

          1. You must charge enough to make money.

          2. You must “sell” as opposed to “buy” their price to charge enough to make money.

          3. You must have money too make more.

          4. Money makes money.

          5. You must “retain” some of that money (cash flow) to make more money.

          One does (shouldn’t) work for a paycheck, but for profit beyond that paycheck. Otherwise, one lives from project to project, no different from having a regular job and spending every dime you make.

          1. Frankie | Jun 14, 2004 02:50am | #27

            I like the way you think. I strive to have your discretion and discipline. Much of it has to do with following unversal truths while still charting your own course. Hence the different explanaitions for the same conclusions.

            Thank you for the further insight. Dominos, hmmmm...

            F.

          2. SonnyLykos | Jun 14, 2004 03:20am | #28

            Funny to hear you say: "I strive to have your discretion and discipline."

            As I was typing my post I thought about trying to maintain the discipline needed to keep my on track. Even with creating good habits, it's still hard with all of the other things on our mind daily.

            I guess we should use the term "policies" or procedures" needed in avery business that are never, or at the very least, rarely, compromised. Seems like even we go against our gut feelings as well, we get bit - evey single time.

            I do have to compliment you. Having been a "poster" on this and two other contractor forums for many years, you are one of the few, very few, who has his "business professional" act together. Good for you!

  4. SonnyLykos | Jun 04, 2004 03:30am | #9

    Personally I think it flat wrong to ask for a deposit that in part includes labor that has not yet been provided.

    I ask for a deposit that includes materials and my material markup. On a $20K project, and depending on the scope of work, I'd get one payment after the deposit, probably at about 1/2 done, and a final upon completion. I'm assuming this is probably about a 2 week project.

    The draw back with a large final payment is that there are as many unscrupulous member of the public as their are contractors. For example, a few decades ago I had a final payment due of about $3500. Unfortunately a special order interior lockset was on back order and the owner was going back to Chicago from this summer home in Mich - about 125 miles away. Said he’s be back in 2 weeks. Being more than fair, I suggested he hold back $125 - triple the cost of the lock, and pay me $3375, but he pointed to my contract that stated “upon completion.”

    Sleazy! I waited the two weeks and installed the lock upon his return and got my $3500 check.

    About 18 months later he called me to build a deck for him. I simply told he did not deserve the caliber of a contractor as I considered myself to be. He should call one that is of the same ethical standards as himself.

    Soon after that I developed the attitude to treat all customers like family but make my contracts as though they might all try to get cute me - again.

    Now the “next to” final payment says it’s due upon a “Declaration of Substantial Completion” leaving only about 5% or less for the “final payment” which is called a Declaration of Completion.”

    In legal terms the DOSC mains that the project, for all intensive purposes, can be used by the owner(s) as intended, while acknowledging the fact that some minor things might still need to be completed, like punch out work. The DOC means exactly what it says. Both are legal construction terms.

    This way, if the customer is going to play games, it will not include several thousands of dollars, but in most cases, a few hundred bucks. That 5% is maleable. In other words, for a $100,000 project, it might only be 2%, or $2000. This has worked out fine for me for almost 30 years.

    1. User avater
      10D | Jun 04, 2004 06:17am | #15

      Sonny - I used your "Substantial Completion" and "Declaration of Completion" ideas in my contract (thank again!) but we were still back and forth about the percentages, so I put it out to the forum (again) for a consensus.  We finally settled on 35/35/20/10.  I agree with you - I did not want to front labor not yet performed. 

      That guy in Michigan was a Total Jerk.  Your response to his inquiry about building a deck really put him in his place!

      10D  

  5. Jemcon | Jun 04, 2004 03:47am | #12

    I take a deposit that covers the first stage of the project like framing,for materials and labor. Thats what I tell them is the deposit. In the conract, I state there is certain amount due at the end of each stage like after framing. That covers the electric and plumbing. I find many homeowners prefer not to lay out alot of money without seeing any work done. This way they see work being and I don't lay any money out of my pocket.

    1. User avater
      10D | Jun 04, 2004 06:22am | #16

      Breaking it up into stages of work makes perfect sense to me.  This project is carpentry, wood stripping and painting.  I ended up setting it up by project stages, just like you said, with the final 10% upon "customer's satisfaction with completion." 

      Thanks!

  6. User avater
    JSCONST | Jun 14, 2004 04:02am | #29

    My pmt schedule for jobs over $10,000 is usually 10.40.40.10. 

    The first 10% is a deposit and simply secures a start date on my schedule.  The first 40% is collected 2 to 4 weeks before the start date.  This covers materials that need to be ordered or just delivered.  The second 40% is collected at the start of a phase of the project.  This way the customer can't argue if a phase is fully completed or not.  The final 10% is collected after the work is completed and the customer is happy.   My projects generally don't last more than 4 weeks, so I'm never out of pocket during the project. 

    JS

    1. JerraldHayes | Jun 14, 2004 04:53am | #30

      I don't know JS I think I could find lot of ways to argue with that plan. I'm a client and I've ginven you 10% but nothing has happened. Okay now I'm giving you another 40% and I still have to wait. Now you're finally ready to start and and you want another 40%! You're asking me to pay you for 90% of the project before you've even started doing any thing I can see. I wouldn't sign your contract.

      I guess for arguments sake I've just gotta ask this. Here's a sample project that comes in at $9536. Not quite over $10,000 but it illustrates my point and position I guess. According to this estimate the raw materials for this small project run $5395 which is 56% of the total Job Price. Something like what JS is doing (if it was applied to this small project) is okay for this particular project in that contractor is essentially getting at least 50% of the projects Price to help pay for materials. Just 6% short of the real Materials Cost. But we've done projects where the Materials Cost comes to around %5 of the whole Project's Price. And we've done a few projects where the Materials came to 69%. On a project with a Price of $60,000 to $100,000 that a huge hunk of change.

      My point is an arbitrary policy of 10%-40%-40%-10% applied absolutely just doesn't doesn't make sense. Either for the contractor or the client. I just see the method I referred to in the JLC article Getting the Final Payment and infinitely better policy both from a contractors cash flow view point and from a Customer Relationship Management viewpoint too.

      As a customer to a contractor I would want a payment plan that is tied to the value of the work I received and not just something arbitrary out of the blue. The idea (for the contractor) is to build trusting relationship with the Client. As a Client if I heard 10%-40%-40%-10% I would think that you the contractor really don't know what your cash requirements really are and that might lead me to thinking that you really don't know what your Costs really are too and maybe your is negotiable. I happen to know of a GC who thinks just that way too and sees that as a hint that he can get a better price from his subs. I know so because he told me just that.

      Going back to the $9536 Project which Price is more negotiable: $9600, $9540, or $9536? I think the same way about arbitrary payment schedules. Something like 8%-11%-14%-21%-16%-12%-10%-8% is pretty clearly not negotiable. 10%-40%-40%-10% is open for discussion.

      From a contractors perspective I want cash flow regularity. So the realistically applied 8%-11%-14%-21%-16%-12%-10%-8% is a better plan to in that regard.

      View Image

      ParadigmProjects.com | Paradigm-360.com | Mac4Construction.com

      1. skipj | Jun 16, 2004 04:51am | #41

        Jerrald,

        You need to print this out to show to your wife.

        Having read with interest your many informative posts. I can only say: where were you when I was 20? I read every business book, especially about construction, that I could get, and still made years of mistakes. Buying work, dealing under the table, etc., etc..

        I would encourage any young man looking to make his way in construction to avail himself of your services and pay strict attention. After 25 years in the business, I mostly find myself nodding yes when I read your posts, yet still learn new things from time to time.

        Best,

        skipj

        1. JerraldHayes | Jun 16, 2004 05:25am | #42

          skipj "Jerrald,

          You need to print this out to show to your wife." Show my wife? Can't do that, never been married. I'll show it to my cat (and if I get a new dog this week I show it him or her too). My quadruped family members always like my stuff. But thanks anyway. I've always been too wrapped up in doing stuff and doing projects in several different but sort of related careers and industries and other interests so it's probably a good thing I stayed single.

          As for "where were you when I was 20?" geez ya should have seen me when I was twenty. I was burning up and burning out on both ends so don't feel bad about where you were when you were twenty. It took me quite a while and I'm still learning (my lesson) even today. Seriously no joke, I learned another lesson today, or should I say I relearned a lesson I had conveniently forgotten about or ignored that was already supposed to be a part of my present body of knowledge and expertise and I'm now 48. No real harm done surrounding today's lesson. Just a bit of wasted effort on my part hustling to get stuff prepared for a presentation meeting that got canceled for a second time. No harm done in that I can use the work I did (it was FileMaker programming) later on for some other client or clients so it will payoff further down the line but still I picked up another little bit of wisdom even today.

          View Image

          ParadigmProjects.com | Paradigm-360.com | Mac4Construction.com

          1. skipj | Jun 16, 2004 05:49am | #43

            Jerrald,

            Well my motto is: "Live and usually fail to learn". Second cancellation...hmmm.

            When I was still doing 100 or more quotes a year, I would periodically find myself standing on a porch, having rung the doorbell, cell phone at my ear, listening to the phone inside ring and ring. Or, a 6 pm appointment, when contacted on their cell phone, had decided to go to dinner, but would be glad if I could come at 8 pm. These are all 'confirmed' appointments. I'm sure that these folks enjoy swapping stories about unreliable contractors.

            When you're of a mind to, I would be interested in your opinion on the free quote debate. Obviously, not a complete plan take-off, but say, replace 15 interior doors. Charge for quote, build it in? So many clients ask "Do you give free estimates?"; the honest answer is "Sure. But I'll get it out of you in the long run." Thoughts?

            skipj

      2. User avater
        JSCONST | Jun 16, 2004 06:03am | #44

        Now you're finally ready to start and and you want another 40%! You're asking me to pay you for 90% of the project before you've even started doing any thing I can see.

        Thanks for the pointers.  You misunderstood the second 40% pmt-  I don't get that until I get some work done.  On a garage, for example, I would do the site work, foundation, and flatwork before I get the next 40% pmt.  I just word it in the contract as "pmt due at start of stud walls."  That way I don't have to worry about stripping all the forms from the flatwork before getting the next payment after I start the walls.

        As I said, my jobs are generally not more than 4 weeks long, so I don't need to schedule a lot of payments.  I get the first 40% before the project begins so I can get materials at the best price and know I have the cash to pay for it all.  I prefer to work out of my client's pocket and not my own.

        When I get more time and bigger jobs, I'm sure I will have to come up with a more scientific way to schedule payments and tie them into the work.

        1. JerraldHayes | Jun 16, 2004 06:37am | #45

          JS I thing the point of my post was probably to get a little clarification (for the benefit of everybody) since I really didn't think you meant to collect 90% before any work was started but that was the way the literal intrepretation sounded.

          You make a real good point however regarding the use of the phrase "pmt due at start of ...". Using the term "pmt due on completion of..." can hang you up over some trivial little things.

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    2. User avater
      10D | Jun 14, 2004 06:20am | #31

      JS - Do your clients consistently agree give you 50% of the total cost prior to the start of any work? As a client, I would not agree to that.  I think I'm with JH (next message) on this one.   I  appreciate your input, though  - it shows that a certain percentage of contractors do expect that kind of payment schedule, and maybe it would be appropriate for certain kinds of jobs.

      10D

      1. gdavis62 | Jun 14, 2004 05:13pm | #32

        I can see 10 percent to "hold a schedule."  But I would not agree to any more until I saw materials on site.

        As a contractor, do you pay in advance for your materials?  In my business, I pay 25 to 50 percent in advance of delivery for cabinets and stone countertops, but everything else is on account, with terms.

        1. Frankie | Jun 14, 2004 06:24pm | #34

          1. It doesn't matter what terms I have to pay for my/ the client's materials. Once I sign for them they no longer belong to the supplier. I am liable for them. I want to be sure, at the very least, I am not on the hook for them.

          2. My credit is NOT the client's credit. If the client wants me to extend credit, be up front about it and let's discuss it. You can be assured though there will be a cost for the float. As I stated earlier I am not in the credit biz. I build. My clients finance. How they finance is their issue. Cash dispersments remain according to my Co.'s terms and therefore the financer must agree to them. If they don't, I am not the contractor they need. No harm, no foul.

          If I have the material delivered to a client's site/ house and then the job doesn't proceed, I need the client's permission to pick up the material. What if he/ she doesn't give it? Now I have more hoops to jump through which cost me time I have already assigned to other tasks. If the client paid for the material in advance we part on cleaner terms. Less hoops.

          F.

          Edited 6/14/2004 2:00 pm ET by Frankie

          1. gdavis62 | Jun 15, 2004 03:12am | #39

            I see you live in NYC.  I did some work there a while ago.  New windows in coops up in the east side, and some for the Trump folks on Central Park South.  300 to 600 windows per job.  Rip out the old ones, scrap them, prep the openings, and put in the new ones, including panning and trim.  I'll call up that firm I used to work for, Traco, and tell them about your terms, see if they can get that from Trump on the next job.

            On a serious note, your terms must be working for you, and I think that's great.  Is it remodeling work you do, with most of your customers first timers with you, i.e., you never did work for them before?  I can understand your situation if it is that.

            But I am in new construction, single family high end homes, and I have relationships with suppliers and subs I have developed.  I pay promptly for delivered materials and completed work, but nothing in advance, except for some specialty materials like I mentioned in an earlier post.

            I spent some time long ago in commercial and industrial contracting, and in that biz, absolutely nothing gets paid for in advance. 

          2. Frankie | Jun 15, 2004 08:55am | #40

            Until recently I only did residential renovations in NYC. 90% of if it was high-end. Recently though, I am trying to make the switch to remodeling homes upstate. I have found the pricing to be relatively the same but w/out the hoops to jump through. You can pull your vehicle right up to the house and unload. No parking meters, tickets elevators, traffic, supers, etc.

            Strange thing is debris removal is like double the cost of NYC! Go figure.

            The framing is different. Stud walls are wood, not metal, and actually support the floor above. The floor structure is wood, not concrete. I love it. Reminds me of growing up and framing during the summers. I feel like a kid on the jungle gym again. Not as fleixble or resilient as I once was but still having fun.

            Have to find a new work force base. UGH.

            My clients are all referals - by previous/ current clients, architects and subs. I have clients with me for 10 years and others are one hit wonders. I approach each project as though I am going to build their kids homes in the future. Maybe not the best approach. I am in the process of reevaluating.

            I try, again try, to maintain the same rules for repeat customers as new customers. Consistancy is key. Otherwise everyone thinks everything is renegotiable whenever. Consistancy implies standards. Everyone's role and responsibility is defined so there are less foulups. Also, clients talk to each other and compare notes. The less variation there is for job to job, client to client, sub to sub, the less competitive they get with one another with me being the hacky sack.

            Eventually, 2-3 yrs I would like to be doing high-end new construction. Design/ build. I have a pretty good understanding of what sells and how to package the project. I just got to grow more and develope better focus, balance and discipline.

            F.

      2. User avater
        JSCONST | Jun 16, 2004 06:52am | #46

        I haven't had a bid turned down yet because of the payment schedule. 

        JS

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