Down Payments?

[JW]

Hi All,
Our contracts state that we will receive a 50% down payment upon signing
with the balance billed after completion. Today, a new customer (who already
signed the contract and sent a large downpayment since it's a big job)
called very upset about the practice. He said no other vendors require it
and that it smacks of being a fly-by-nighter. I think it smacks of sound
money-management... but of course it made me wonder what the norm is in the
industry so thought I'd ask for some feedback.

Thanks for sharing!

 

[Stanley Barthfarkle]

Sounds like someone who is running short on cash after an expensive project
and is squeezing his contractors to see if he can save a few bux up front.

What exactly is he objecting to? Being asked for 50% down, or the balance on
completion? On larger projects, I've seen and done 1/3 down, 1/3 halfway , &
1/3 on completion, but only over about $10k. I have had people who wanted to
make "payments", but I always asked the question "would your auto mechanic
service your car and then take 'payments'?" or "does your plumber accept
payments?" the answer was always 'no'.

We get paid when we perform the service. Ongoing service contracts are
another story, but full payment is a must if you want to avoid writing off
large projects, especially if you haven't lined things up to pursue a
mechanic's lein on the property if they default.

When I was in Com'l sales for a large company, whose name rhymes with
'BabyTeeth', we had to write off most of a $120k project for an internet
backbone provider that went belly up before they even got off the ground
back in '01. They spent like drunken sailors on cutting edge access control,
networked cameras, and a pretty spiffy partitioned security/fire system that
integrated with the access and cameras for a multi-story building with
remote site administration from a location out of state. The landlord of the
building siezed their UPS and computer equipment (to the tune of over a
million $) since they defaulted on a multi-year lease worth several million
bucks, and tried to fight us for ownership of the equipment we hadn't gotten
paid for. (and which they didn't own, of course) The landlord ended up
settling with us for pennies on the dollar, and we lost our ass. In fact, at
one point in 2001, our local SSO (about 15,000 customers) was owed 17
million in uncollected recurring and installation revenue for a 12 month
period- that's when they began to lose patience with non-pays and started
actively pursuing everyone who owed them money from Fortune 500 companies
down to Grandma Smith.

 

[Crash Gordon]

50 on contract 50 upon completion...if it's a new project...completion is
when I install all the equipment...not when they finally get a CO. I've had
projects where I've been finished and the house wasn't ready to fire up for
another month. Sometimes I'll be nice and go 50-40-10. 50/50 is kinda
standard around these here parts. Getting my house painted next month...guy
wants 50 up front....standard stuff.

Small jobs...100 upon completion.

 

[Bob La Londe]

Hi All,
Our contracts state that we will receive a 50% down payment upon signing
with the balance billed after completion. Today, a new customer (who
already signed the contract and sent a large downpayment since it's a big
job) called very upset about the practice. He said no other vendors
require it and that it smacks of being a fly-by-nighter. I think it smacks
of sound money-management... but of course it made me wonder what the norm
is in the industry so thought I'd ask for some feedback.

Thanks for sharing!

I have only had problems with that from companies who don't want to pay or
want me to carry them. Usually big multi state companies, and sometimes
from internationals. I have to admit admit one of my best and fastest
paying clients is an international though.

My contracts say:

Jobs under $5k
1/3 down balance on completion

Jobs $5k or larger
1/3 Down
1/3 Equipment Delivered to Site
Balance upon completion

I also have a clause which specifies a progressive payment schedule based on
percentage of equipment on site and work completed for jobs over $10K or
which may last more than 30 days from start to completion.

Anybody who doesn't want to make a reasonable deposit can get somebody else.
I don't need that kind of headache.

None of the better customers who want quality stuff and are willing to let
me take the time to do everything right have ever had a problem with my
policies.

Every customer who has a problem with my payment policy has been a royal
pain to deal with and to make final collection on completed jobs.

I have a few exceptions for government contracts (city, county, state, fed
etc), but in those cases I will always have a government purchase order in
hand before doing anything. I bid goverenment jobs based on their historic
speed to pay. If I know its a 60 day payment schedule I add on enough to
cover the cost of borrowed money plus some aggravation factor for my time.
With that kind of planning and a government purchase order in hand I can
walk into my local bank and borrow money against the purchase order without
any problems for larger stuff ($10K or more). For smaller stuff I have a
revolving line of credit I can use.

I know some companies have preferred to pay half down and half on completion
.. If its not too big a job I will allow that.

The only time I will do a residential job without a deposit is if its a
quick job for an existing client. Like a home owner that has had me install
a couple alarms in their stores and now wants one in their home. If its a
larger job or may string out over months like a new home under construction
I demand a deposit.


--
Bob La Londe

Win a Tackle Pack
Jig Fishing - Tips and Techniques Contest
Courtesy of Siebler Custom Baits
http://www.YumaBassMan.com

 

[Bob Worthy]

Small jobs that are done in a day or two, bill at completion.
Larger jobs and constuction type jobs, 50/40/10
40% due at time material is delivered (goods sold)
Builders, 50 percent at prewire, 50 percent at trim
Large corporations, government, PO's with terms and won't start until a PO
is received. Contracts also need to be in place prior to start which should
outline payment schedule.

In all fairness to your client, there are alot of warnings about "fly by
nighters" taking deposits and running. Makes it tough to be lumped in with
these types of tactics. Just supply references, licensing, business
information, website, brochures, etc. which the truck slammers don't have.
Do it upfront during your sales presentation. Should make them feel more
comfortable.

 

[Jim]

Hi All,
Our contracts state that we will receive a 50% down payment upon signing
with the balance billed after completion. Today, a new customer (who already
signed the contract and sent a large downpayment since it's a big job)
called very upset about the practice. He said no other vendors require it
and that it smacks of being a fly-by-nighter. I think it smacks of sound
money-management... but of course it made me wonder what the norm is in the
industry so thought I'd ask for some feedback.

Thanks for sharing!

I do mostly residential and small commercial. No more large commercial
and municipal ... anymore. I simply got tired of doing all the bid
paper work and then waiting for payment. However, now ALL my quotes
say, 50% at startup, 50% upon completion. If job is delayed over 30
days, 50% of the balance is due upon demand with the remaining balance
due upon completion.

What this does is as follows: In reality, if the job is going to take a
few days, I simply don't ask for the 50% and collect total upon
completion. If theres going to be a short, (days or weeks) delay I ask
for it. But ..... the important thing is that the initial agreement was
made and the paperwork "says" pay upon startup ..... just in case
there's any problem and it goes to abitration. At that rate, at least I
know I'll be awarded that much, even if the job isn't completed. The
other part about 25% if job goes longer than 30 days is included for
builders. If the job "does" go longer than 30 days, but is progressing,
I'll just not ask for it. But, if it appears as if it isn't going good,
I'll ask for it and if refused, I know it's time to bail ..... with
less loss. Equpment is always in the last stages.

 

[Doug L]

If its a new customer and a reasonably large job then I usually ask for 10%
down, a further 40-50% progress payment at an agreed partial completion
point, and the balance upon completion.

Doug L

 

[Jackcsg]

I have to tell you....if you think it's only about what you ask for
down...that is the least of your problems. I learned the hard way how to
legally protect yourself with regards to any sale, regardless of the terms
you lay out, or even what's accepted, or not accepted from, or by a
potential customer.

You need to lay out your "Legal Terms of Sale" of what's expected by both
parties.
Depending where you are (state, country, county), you'll probably find that
your current methods for selling/installing and servicing equipment falls
way short of protecting you.

The only thing that saved my ass on over $28,000 of services and equipment,
was the right to reposses certain kinds of equipment.

Pay to have the legal advice given, it's that simple.

 

[J. Sloud]

Hi All,
Our contracts state that we will receive a 50% down payment upon signing
with the balance billed after completion. Today, a new customer (who already
signed the contract and sent a large downpayment since it's a big job)
called very upset about the practice. He said no other vendors require it
and that it smacks of being a fly-by-nighter. I think it smacks of sound
money-management... but of course it made me wonder what the norm is in the
industry so thought I'd ask for some feedback.

Thanks for sharing!

It's generally accepted that the customer who pays something up front
will be more likely to pay in the future. If they object to paying a
deposit, I'd wonder what their intentions will be down the road.

 

[Bob La Londe]

It's generally accepted that the customer who pays something up front
will be more likely to pay in the future. If they object to paying a
deposit, I'd wonder what their intentions will be down the road.

There you go. From the little guys to the big guys we all pretty much agree
that if they balk at a deposit there is a much larger chance of a problem
down the road.


--
Bob La Londe

Win a Tackle Pack
Jig Fishing - Tips and Techniques Contest
Courtesy of Siebler Custom Baits
http://www.YumaBassMan.com

 

[Crash Gordon]

Bingo!

It's generally accepted that the customer who pays something up front
will be more likely to pay in the future. If they object to paying a
deposit, I'd wonder what their intentions will be down the road.

 

[Guest]

Exactly how much down is 50% on a free install?

 

[Bob Worthy]

First several months of monitoring at a discounted rate.