Commercial Project Billing

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john_axelson

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Question for those of you that do a fair bit of commerical type projects that can last for several months.

What have you found the "normal" pay cycle to be?

I have been working with a particular GC that has been geting closer and closer to averaging 90 days on payment. My average for the other GC's are in the neighborhood of 45 days. And yes, the contracts that I have with the 90 day payer are that I am to receive payment within 10 days of him receiving payment from the owner - standard AIA contract language, but he is not following the contract. I did about 20% of my revenue with him last fiscal year.

What is everyone else experiencing?

Thank you
 
45 days is considered good, but 90 seems to be more the norm, and I have done jobs that ran 120-150+ days.

Check your state laws, I know in Texas the "pay when paid" clause is illegal, even if its in your contract.

Another solution is to front load your schedule of values in an effort to get a bit ahead so you can cash flow.

If it's too late to do that, then talk to the GC and let them know you have a deal with your banker, he agrees to not do any electric work, and you agreed to not finance any jobs.
 
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ITO said:
If it's too late to do that, then talk to the GC and let them know you have a deal with your banker, he agrees to not do any electric work, and you agreed to not finance any jobs.
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Well said, LMAO:grin:
 
On office fit-up work, that can take months to complete, the GC usually gets a hefty down payment on the project, and then he gives all the subs their down payments, Next payment amount and day, is based on progressive payment schedule agreed to at acceptance of project. The structure of payments will differ with every job, some contractors think they are a bank and let the payments strech out, others have strict payment schedules, many guys are afraid to ask for prompt payment fearing the GC will not deal with them or find someone else, I have news , they will do that no matter what your pay schedules are, so don't fear making demands for your payments, but do it up front in the contract, not after the job is under way.
 
Around here 30 days is the norm. 30 can often run into 45 though. I don't worry to much about that. You have to lean within 90 days here, so there is no way 120 pay would be acceptable. I am doing a bank now that they tried pay when paid and I insisted on 30 days. They have been very good to me on this job and have actually given me checks within 30 days from the date I invoice not the beginning of the month.
 
I sorta get a history going of certain GC's, and remember how they pay, and plan accordingly. I have at least two who won't pay their bill until the next one one on the schedule of values is sent. I know this ahead of time, so it's not as big of a catastrophe as it could be. I agree that we shouldn't be financing jobs, but if you know ahead of time that you're going to be "financing" the work, you can build in "finance charges". That might price you out of work from time to time, but so much the better.
 
john_axelson said:
Question for those of you that do a fair bit of commerical type projects that can last for several months.
What have you found the "normal" pay cycle to be?
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My orbit for the last 20+ years has mostly been with USA government. Some project durations were 30 days, some lasted 2 years. I always reviewed my upcoming invoice (including any change orders) with his inspector, hashed out any differences first, then submitted the approved invoice. The government always paid within 30 days. Great folks here!

Some ECs here have had similar results with the government, others have horror stories, just like anywhere else (the ones with pay problems were generally horses asses).

Don't want to paint a too rosey of a picture about government contracting, but one contracting officer even suggested "get those two 12mva transformers on site by 12/01/xx, and we will cut you a check before we go out for the holidays". We did, and he did.

This is not the norm, and many contractors hate government contracting. Start slow!

When it comes to going through a GC for payment, all bets are off. Some have dragged payment out to 180 days. Rhetorical question here. "But Mr GC, didn't you get paid 5 months ago for this work?"

Best Wishes Everyone in 2008
 
mdshunk said:
That might price you out of work from time to time, but so much the better.
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Marc is right on time with all of his post.

I always felt bad about losing a bid, but is it better to feel bad about losing a bid, or to feel bad about losing your money after the bid?

Best Wishes Everyone in 2008
 
I have a friend that I do work for (he's not an EC and needs my services at times). He is dragging out paying a final invoice (again). The customer still owes him $15,000 (he says) and he owes me $10,000. His contract was for $200,000, mine to him was $20,000. I told him I could understand if he wanted to hold $1,500 until he received his $15,000 but it was not right for me to be his banker. He laughed and said he will "try" to do something, and continued on how this is the way it is everywhere.

I can tell you, this is not the way it is everywhere. I've made up my mind I'm just not going to work for him anymore. I hope we remain friends.
 
hardworkingstiff said:
I have a friend that I do work for (he's not an EC and needs my services at times). He is dragging out paying a final invoice (again). The customer still owes him $15,000 (he says) and he owes me $10,000. His contract was for $200,000, mine to him was $20,000. I told him I could understand if he wanted to hold $1,500 until he received his $15,000 but it was not right for me to be his banker. He laughed and said he will "try" to do something, and continued on how this is the way it is everywhere.

I can tell you, this is not the way it is everywhere. I've made up my mind I'm just not going to work for him anymore. I hope we remain friends.
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Quote: "it was not right for me to be his banker. He laughed and said he will "try" to do something"

Many years ago I went thru the same problems until i learned to crack down on all payments, and on advice of my attorney I placed then in collection once they started taking bread from my table.

"He laughed" A friend, you say? He has to come up with the money, and then he has to be the one waiting, not you.
 
Thank you

Thank you

Thanks for the feedback.

I am really considering moving away from my later paying customers. I say that because while the one I said averages 90 days, he is also the one that is out 105 days on a couple of invoices. It is always the larger ones ($50,000 plus - largest one is $112,000) that he is holding onto and he is paying the "service" bills $500 to $5000 in about 45 days. He is just banking my payment and making interest.

Unfortunately, the pay me a down payment theory doesn't work because he isn't getting a down payment from his building owner and there are at least 3 other guys waiting to take the work if I don't take it. Right now I am leaning towards letting the other electricians be his banker and going to be an electric contractor!
 
john_axelson said:
Thanks for the feedback.

I am really considering moving away from my later paying customers. I say that because while the one I said averages 90 days, he is also the one that is out 105 days on a couple of invoices. It is always the larger ones ($50,000 plus - largest one is $112,000) that he is holding onto and he is paying the "service" bills $500 to $5000 in about 45 days. He is just banking my payment and making interest.

Unfortunately, the pay me a down payment theory doesn't work because he isn't getting a down payment from his building owner and there are at least 3 other guys waiting to take the work if I don't take it. Right now I am leaning towards letting the other electricians be his banker and going to be an electric contractor!
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Are you charging him interest on the money he owes you?

If you're charging him more interest than the interest he's making by holding your money maybe he will quit holding on to it.
 
hardworkingstiff said:
I have a friend that I do work for (he's not an EC and needs my services at times). He is dragging out paying a final invoice (again). The customer still owes him $15,000 (he says) and he owes me $10,000. His contract was for $200,000, mine to him was $20,000. I told him I could understand if he wanted to hold $1,500 until he received his $15,000 but it was not right for me to be his banker. He laughed and said he will "try" to do something, and continued on how this is the way it is everywhere.

I can tell you, this is not the way it is everywhere. I've made up my mind I'm just not going to work for him anymore. I hope we remain friends.
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What he is doing is making his problem into your problem. That is not the act of a freind. The fact it involves money makes it worse.
 
be careful.

be careful.

Be careful who you work for. Some of them hold your money just because they want to make more for themselves or they like to see you squirm. Others don't pay because they are terrible business men and don't know how to collect themselves. you do not want to have too many customers that more than 45 days MAX. You can't afford it. Unless of course you are independantly wealthy and are just doing this for fun.

If you do have a customer or two who takes longer to pay, certainly he/she understands why your margins are so high. (if they are not. Shame on you)

What I like to do:
Bill monthly as follows.
1st invoice - As project starts, 10% of base project for mobilization + 50% lighting package and major purchases. (depending on your supplier relationship, this should get you ahead)
2nd invoice- 30% of base labor and materials.
3rd invoice - 40-50% of base labor and materials + balance of lighting and major purchases
4th invoice - 10-20% and your finished***


*** If the contractor is savey he is going to hold 10% retainage until all punch list, documentation, inspections etc. are done. At which point you will then invoice for the final payment.

This is the way I do it. My jobs tend to fit into this 3 -4 month category. Of course you can customize it to fit your needs. Point is, you should try and get ahead and you should be recieving payments on these type of jobs minimally once a month.

Remember this "Sometimes your best job is the one you could've had but did not take"
 
lightning bug said:
?

What I like to do:
Bill monthly as follows.
1st invoice - As project starts, 10% of base project for mobilization + 50% lighting package and major purchases. (depending on your supplier relationship, this should get you ahead)
2nd invoice- 30% of base labor and materials.
3rd invoice - 40-50% of base labor and materials + balance of lighting and major purchases
4th invoice - 10-20% and your finished***

?
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With all due respect this may work for small commercial work, but it would not fly on bigger contracts that last 12 months or more. Even smaller work like big box finish outs will not let you draw 10% base and 50% for fixture without some kind of supply house invoice and proof they are either on the job or in your bonded warehouse, and if you let them joint check you its the kiss of death.

Generally speaking we do not invoice for our money, we submit a draw against the contract which undergoes a review by the GC and owner; if we do it right and can back it up, they accept our draw and don?t cut it, then sometime in the next 45 to 120 days we are funded.

A lot of states are passing laws that make the ?pay when paid? clause illegal, so technically there is little reason why a GC wont pay you on time other than they think they can get away with it. Your best defense is to have a draw strategy and know how your GC wants his draws, know your local laws and rights, understand your contract, and work hard on getting paid on time. (It also helps to have some money in the bank too).
 
ITO said:
With all due respect this may work for small commercial work, but it would not fly on bigger contracts that last 12 months or more. Even smaller work like big box finish outs will not let you draw 10% base and 50% for fixture without some kind of supply house invoice and proof they are either on the job or in your bonded warehouse, ...
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You are exactly right! We have to have proof that the material is on site, or in an insured, secured warehouse that is approved by the owner, in order to get paid for stored material.

Lien rights don't expire here until 120 days after your LAST day of work on the site. Not the last date of your pay application. So if the project is over a year long and I am having problems getting pay application #4 paid, I still have 8 months until the project is done and 120 days past that for lien rights.

I am just trying to find out what the experience is from the group on their larger projects.
 
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