deposit reduction

[emahler]

So you want better then 2/3s before anyone has turned a screw driver?

If I was the customer I would pass on that one.



I also would never pay in full until the job was 100% complete including inspections.

That is my view as a customer, I have never owned or run a business.

NJ law has changed some years ago, which caused us to change our payment terms...

NJ law requires final payment be held until final inspections...now they really doesn't play in small service work (service upgrades included)...

but on larger projects, we used to do the standard 1/3 start, 1/3 rough, 1/3 finish...

now we do the same, exept, we take 5% off the top for the final payment, and break the other 95% down into 3rds...so, after we are done, we leave 5% on the table until inspection...makes the customer happy, satisfies us, limits risk...etc...

the problem with larger work is that it's expected that you will start and submit a requisition for payment...if you are under capitalized this can sting badly...

 

[iwire]

First off I not trying to say how to run your business, I assume your in business so that you can do things your way.

But as a customer I would not accept those terms, you would be more then free to stand fast and I would simply look for another EC.

I am not asking you to be a bank, I asking you not to bill for services that have yet to be completed.

I don't pre-pay the grocery store because they have to keep supplies on the shelf. I don't pre-pay the phone company because they had to maintain the lines.

Waiting for a final inspection can be fatal if the inspector nails them for something outside of the scope of work or if other factors outside of my control arise and delay the final inspection.

Stuff happens, IMO that is all a part of being in business and why I am still an emplyee....much less headaches.

I know the ECs I work for have almost always had 10% retainer held over them until the projects are complete and complete includes inspections.

 

[jrannis]

I dont see why the customer would want me to "pre-pay" for the materials.

 

[dduffee260]

I dont see why the customer would want me to "pre-pay" for the materials.

We do not "pre-pay" for the materials. The supply house extends us credit for 30 days. We install the materials then when we are paid we pay the materials bills. If for some reason a person cannot pay us in 30 days we charge the interest that the supply house charges us. If it goes beyond that point we start talking about collection fees and such. It only costs the person more money in the long run.
I also agree with Iwire, you are doing a project for $2,600 and are requesting $1,800 as a down payment for what? $1,100 for commissioning drawings and calcualtions? Honestly I don't see how a $2,600 project would take drawings, even contractor level drawings but maybe things are different there.
If I were the customer in this case I would ask why should I be a bank and give out free money before anyone turned a screw. There have been countless cases where a homeowner paid someone up front for materials, the contractor left and never came back. If someone wants me to pay up front for the materials I tell them to drop the materials off in the shop and I will write a check for the materials right then.
Then again there are countless times where a contractor does work then does not get paid for it, we have been there also. Just like a hosptial has costs built in for non-paying customers we have to include that also.

 

[iwire]

I dont see why the customer would want me to "pre-pay" for the materials.

The same way we expect the car dealership to pre-pay for the cars on their lot.

The same way we expect electrical supply house to pre-pay for the material on their shelfs.

Of course it may be furnaced, as customer that is not really any of my concern.

 

[jrannis]

We do not "pre-pay" for the materials. The supply house extends us credit for 30 days. We install the materials then when we are paid we pay the materials bills. If for some reason a person cannot pay us in 30 days we charge the interest that the supply house charges us. If it goes beyond that point we start talking about collection fees and such. It only costs the person more money in the long run.
I also agree with Iwire, you are doing a project for $2,600 and are requesting $1,800 as a down payment for what? $1,100 for commissioning drawings and calcualtions? Honestly I don't see how a $2,600 project would take drawings, even contractor level drawings but maybe things are different there.
If I were the customer in this case I would ask why should I be a bank and give out free money before anyone turned a screw. There have been countless cases where a homeowner paid someone up front for materials, the contractor left and never came back. If someone wants me to pay up front for the materials I tell them to drop the materials off in the shop and I will write a check for the materials right then.
Then again there are countless times where a contractor does work then does not get paid for it, we have been there also. Just like a hosptial has costs built in for non-paying customers we have to include that also.

1. I dont know what that was all about but, my credit with the supply house places a debt on me and not the business or the owner.
2. $800 for drawings. If I put time in for the call and design shouldnt I get paid for it?
3. Countless times a contractor does work and does not get paid for it? Not me!
4. Charge an collect interest? Thats too funny. Cant even get paid.
5. Most professional building departments require drawings and calculations

 

[480sparky]

If I was the customer I would pass on that one.

That's typical in my area. If you ask for a deposit, you will starve instead.

Customers here are thinking of the finished product.... wire, boxes, devices, and light fixtures that work. They could care less about what it takes me to get to that point.

When you go to a fancy restaurant, do you pay a deposit so they can order your steak, have it delivered, purchase the stove & pan, have the gas lines installed, put in a working Ansul system, buy the table and chair you're sitting in.....?

 

[iwire]

I would not refuse any deposit, I would have a problem with more then a 1/3 or so.

If the contractor does not know me I think I owe them something to demonstrate I am serous.

 

[BryanMD]

If the contractor does not know me I think I owe them something to demonstrate I am serous.

and vise versa.

Different regional practices aside, it is just one of several 'terms' by which a contact can be offered. No up front costs to the consumer very often hides a higher total price for the purchase.

On small, minimum material or repair service, where the gear being installed is common or even on the truck (well ok, on MDShunk's truck) then there is no need to charge anything up front.

(If you have a cashflow *need* to get a material deposit you have larger issues)

On bigger commercial projects the Gc will get a prompt progress billing the second the tailgate is closed on the suppliers delivery truck.

The ones in the middle will (and rightly so) vary.

 

[aline]

When you go to a fancy restaurant, do you pay a deposit so they can order your steak, have it delivered, purchase the stove & pan, have the gas lines installed, put in a working Ansul system, buy the table and chair you're sitting in.....?

They might require a deposit if you were ordering a steak, having it delivered, purchasing a stove & pan, having a gas line installed, having a working Ansul system installed, and buying a table and chair but you're not you're just ordering a steak.

If someone wants to come out to my shop and purchase twenty dollars in materials from me I wouldn't require a deposit either.

You can bet if you eat that steak and then get up and walk out without paying for it the police will be called.

I can't call the police and have my customer arrested because he decided he doesn't have the money after I installed the materials. I have to lein his home or take him to small claims court and hope to eventually get paid.

The customer can pay me the deposit the same day I begin the work if he wants but I want the deposit before I install anything.

Comparing contracting with buying a steak from a restaurant or groceries from a grocery store doesn't make any sense. They're completely different businesses.

 

[aline]

Usually before I'm even awarded a job I've got several hours into it with going out and looking at the job, estimating the job and then writing up a proposal. Then if I get the job there's time spent ordering the materials.

If nothing else, the deposit is paying for my time I've allready spent on the job. Installing the materials at the job site isn't the only work you do on a job.
Before you even order materials for a job you've got time and money invested in to it.

It's not like the customer is paying you money for nothing. He's paying you for time allready spent on the job. If you feel that the time you've allready spent on the job is only worth $200 then just charge a $200 deposit.

 

[aline]

You know all those free estimates the customer got. Well now it's time to pay for them. It's called a deposit.

 

[satcom]

We have a lot of custom cabinet and closet shops in the state, they sell and install custom jobs, they all ask for a hefty deposit, before any jobs are started, they can't afford to schedule jobs and then have them canceled because the customer had nothing invvested in the order.

Everyone seems so positive about not paying a deposit on installation services, try in your area to buy installation services, and just see how many ask for a deposit, my bet is there are darn few that will install without the deposit, just because some of the trades have been operating without using deposits as a safegard, does not mean other businesses operate that way.

I think the main reason a lot of the trades don't ask for a deposit, is fear of not getting the work, so they sell the farm, and hope things work out.

I wish we could have three of the larger companies that went belly up in the last 3 years as guests here to tell their stories, what does this industry need to wake up?

Some of the failed companies are from resiatance to the changing times, and construction practices, and some from poor planning and business practices, no one fits all for failed companies.

 

[jrannis]

They might require a deposit if you were ordering a steak, having it delivered, purchasing a stove & pan, having a gas line installed, having a working Ansul system installed, and buying a table and chair but you're not you're just ordering a steak.

If someone wants to come out to my shop and purchase twenty dollars in materials from me I wouldn't require a deposit either.

You can bet if you eat that steak and then get up and walk out without paying for it the police will be called.

I can't call the police and have my customer arrested because he decided he doesn't have the money after I installed the materials. I have to lein his home or take him to small claims court and hope to eventually get paid.

The customer can pay me the deposit the same day I begin the work if he wants but I want the deposit before I install anything.

Comparing contracting with buying a steak from a restaurant or groceries from a grocery store doesn't make any sense. They're completely different businesses.

Yeah the whole steak thing is way out there. I dont see any comparison

 

[480sparky]

Yeah the whole steak thing is way out there. I dont see any comparison

The comparison is that the restaurant (gas station, grocery store, etc.) has a huge cash investment long before any customer walks in the door. Yet they do not ask for a deposit.

A new Home Depot opens somewhere in the world every 26 hours. That is a complete store... lock, stock and barrel. Do I need to pay a deposit before I go in the new store?

 

[emahler]

The comparison is that the restaurant (gas station, grocery store, etc.) has a huge cash investment long before any customer walks in the door. Yet they do not ask for a deposit.

A new Home Depot opens somewhere in the world every 26 hours. That is a complete store... lock, stock and barrel. Do I need to pay a deposit before I go in the new store?

try to special order anything through hd...or any retail store for that matter....they all take deposits....our services are special orders....

if someone hires you for a 4 week job...you don't take a deposit....you book the time for them....the day before you are due to start, they cancel (they have no vested interest i this deal yet...what do you do?

 

[satcom]

try to special order anything through hd...or any retail store for that matter....they all take deposits....our services are special orders....

if someone hires you for a 4 week job...you don't take a deposit....you book the time for them....the day before you are due to start, they cancel (they have no vested interest i this deal yet...what do you do?

Also in the food business and the retail store, if you run out on the bill, or leave without paying ypu will promptly be arrested, where as if we install a job and have a no pay, it can be years or never collect.

Quote: " A new Home Depot opens somewhere in the world every 26 hours. That is a complete store... lock, stock and barrel. Do I need to pay a deposit before I go in the new store?"

But you pay before, you leave the store, and their mark-up assures them a nice profit, they do not ride to your house, with a stocked truck, you go there, what in the workd are some thinking?

 

[jrannis]

The comparison is that the restaurant (gas station, grocery store, etc.) has a huge cash investment long before any customer walks in the door. Yet they do not ask for a deposit.

A new Home Depot opens somewhere in the world every 26 hours. That is a complete store... lock, stock and barrel. Do I need to pay a deposit before I go in the new store?

Yeah. Its not a very good one.
Contractors have buildings and overhead too Thats about it

 

[aline]

If you don't want to call it a deposit call it a progress payment. I've already gone out and looked at the job, estimated the job, wrote and submitted a proposal for the job, spent time generating a material list and ordered the materials. This is all part of doing the job. Shouldn't I be entitled to some kind of payment by now?

So far the customer has probably gotten ten free estimates and consumed a lot of contractors time and money and hasn't had to pay a dime yet. Why shouldn't he fork out some dough for what he's already recieved?

I wan't to get paid some money for what I've already got invested into the job before I spend more time and money to not get paid.

I'm a little bitter about this subject right now because I recently got stiffed by two customers who didn't want to pay the deposit and against my better judgment I did the job without getting it.

Now I'm spending more time and money trying to collect.

 

[wireman71]

I've worked for a EC that doesn't require deposits. At least for smaller stuff. You don't pay they slap a lein on your property and keep going.