Down Payments?

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.

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.

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.

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.

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.

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

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.

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.

Bingo!

First several months of monitoring at a discounted rate.