Deposits on Commercial Jobs

[jmellc]

Serious question here. You guys who badmouthed deposits on previous threads, please pass this by.

I just turned in bids for a commercial renovation. The lights are the major expense by far. They alone are twice my credit limit with any supplier. I asked for a deposit about equal to my cost so I could pay for them when received. I noted that the supplier could not quote freight, that I would bill it when I got billed. 1 GC I talked to said his co. never pays deposits, will not consider it, and that most GC's contractors have the same policy. His co. takes billings from subs by the 25th of each month, then bills customer by the 1st. Said he pays subs within 10 days of his payment but that many GC's take 30 days. I could be out 60 days.

I have calls out to my suppliers asking if any will set me up with "job account" for such a job. 1 has refused, 1 is considering, I haven't heard from others.

Have any of you found this true, that deposits are a deal breaker? Have you been able to bill when received, or ask customer to purchase the lights?

 

[480sparky]

Ask your supplier to up your credit cap, or at least allow you to order them and have the GC make out a draw check to both you and the supplier once the lights are on-site.

 

[flyboy]

Please don't take this personally, it's not my intention to insult you, but I don't believe you are in the financial position to take this job.

Current Assets (e.g., cash, joint venture accounts, accounts receivable, notes
receivable, accrued income, deposits, materials inventory and prepaid
expenses);
Net Fixed Assets;
Other Assets;

In line with your Current Liabilities before you take on this job.

Take on jobs that will be less risk for you and work your way up.

 

[satcom]

Serious question here. You guys who badmouthed deposits on previous threads, please pass this by.

I just turned in bids for a commercial renovation. The lights are the major expense by far. They alone are twice my credit limit with any supplier. I asked for a deposit about equal to my cost so I could pay for them when received. I noted that the supplier could not quote freight, that I would bill it when I got billed. 1 GC I talked to said his co. never pays deposits, will not consider it, and that most GC's contractors have the same policy. His co. takes billings from subs by the 25th of each month, then bills customer by the 1st. Said he pays subs within 10 days of his payment but that many GC's take 30 days. I could be out 60 days.

I have calls out to my suppliers asking if any will set me up with "job account" for such a job. 1 has refused, 1 is considering, I haven't heard from others.

Have any of you found this true, that deposits are a deal breaker? Have you been able to bill when received, or ask customer to purchase the lights?

What we do is check the GC's credit, and if he does not have a good credit report, we demand an up front payment, not a deposit, a GC with a poor rating is a high risk, for payment.

It is usually a deal breaker because the GC is smart enough to try and throw the risk on the sub, and if the sub falls for the ploy, we have one more EC ready for food stamps.

You are not a banker, and the GC is the one that should be taking the risk if he wants the rewards, and he should of checked the accounts credit, and if the account failed had them order the fixtures.

 

[satcom]

Please don't take this personally, it's not my intention to insult you, but I don't believe you are in the financial position to take this job.

Current Assets (e.g., cash, joint venture accounts, accounts receivable, notes
receivable, accrued income, deposits, materials inventory and prepaid
expenses);
Net Fixed Assets;
Other Assets;

In line with your Current Liabilities before you take on this job.

Take on jobs that will be less risk for you and work your way up.

And even then he had to be sure the customer is credit worthy.

 

[roger]

We have a job going at the present where the contract states we can not bill for material (stored or installed) or sub contractors unless the pay app is accompanied by a lien release from the material suppliers or sub contractors that they have been paid for what we are billing for.

On your schedule of values you should include a line item for mobilization that will get you some money upfront.

Roger

 

[satcom]

We have a job going at the present where the contract states we can not bill for material (stored or installed) or sub contractors unless the pay app is accompanied by a lien release from the material suppliers or sub contractors that they have been paid for what we are billing for.

On your schedule of values you should include a line item for mobilization that will get you some money upfront.

Roger

Yup, and that is common with commercial projects, just hope is is working with good people.

 

[roger]

Yup, and that is common with commercial projects, just hope is is working with good people.

Yes it is, not to mention bonding, retainage that can take years to get, doing closeouts, warranties, etc....

Roger

 

[hardworkingstiff]

Yup, and that is common with commercial projects, just hope is is working with good people.

Yes it is, not to mention bonding, retainage that can take years to get, doing closeouts, warranties, etc....

Roger

Yup, I sure don't miss those days.

 

[flyboy]

And even then he had to be sure the customer is credit worthy.

You are absolutely right.

Many of the questions which a GC asks a sub-contractor in the document listed below are the same I would require from a GC.
http://www.dtrcontractors.com/files/prequalification.pdf

 

[ksmith846]

You have to be prepared to wait on your retention and sometimes change orders to be paid in full at the end of the job.

All of my Commercial Contracted work is bill on the 20th and paid by the next 20th on a draw towards my Schedule of Values which was submitted with the contract documents.

You should be able to get a job account with your supplier once you produce a contract for the work. Then you have the right to have the supplier go after their money by liening the job if the GC does not pay you.

I feel you should make sure you are liquid enough to handle these delays in payment if you take that kind of job. Last year I had a job that took 4 months after completion to get the final $60K. I have worked for companies that were waiting on final payments for jobs in excess of $1,000,000.

Good luck to you in whatever you decide, just be careful.

 

[jmellc]

Please don't take this personally, it's not my intention to insult you, but I don't believe you are in the financial position to take this job.

Current Assets (e.g., cash, joint venture accounts, accounts receivable, notes
receivable, accrued income, deposits, materials inventory and prepaid
expenses);
Net Fixed Assets;
Other Assets;

In line with your Current Liabilities before you take on this job.

Take on jobs that will be less risk for you and work your way up.

Jobs of any kind are scarce around here; I am trying to survive. This would be an excellent job except for cost of lights. A lot of the work is simply reusing existing conduits and swapping out lights.

If I have to always wait 60 days for payments, I'll have to go up a lot on the price.

 

[jmellc]

What companies do you use for credit checks? How much expense?

 

[satcom]

What companies do you use for credit checks? How much expense?

There are plenty of companies that can run a customers credit, this site may be able to answer many of your questions on credit checks The expense in not the credit check, the expense is the credit check you did not run, that is the one that can cost you, do you know any business that will extend credit with running a check

http://smallbusiness.dnb.com/125500...word-_-online-_-credit+report+on&LID=62723715

 

[cdslotz]

What the hell is a deposit?

 

[stevenje]

What the hell is a deposit?

A deposit is what you do with the check you receive from the GC 30 days after you complete part or all of a project. What everybody is really taking about is a down payment. And yes many EC's along with most other subs do bankroll the project is some form or fashion. Remember cash flow is king.

 

[satcom]

A deposit is what you do with the check you receive from the GC 30 days after you complete part or all of a project. What everybody is really taking about is a down payment. And yes many EC's along with most other subs do bankroll the project is some form or fashion. Remember cash flow is king.

The exception is, if the account can not pass the credit test, they will have to pay up front, only accounts worthy of credit can pay on a schedule.

 

[bradleyelectric]

If your supplier wont extend a job account to you see if they will extend a job account with a joint check agreement. That meaning the account will be set up in a way that the GC will write a check to you and the supplier for the agreed amount of materials. You still retain your right to OH, profit and warrenty of the supplies and the supplier has the security of you wont be holding their money.

 

[zog]

You need to be able to cover jobs to run a business, issuing Purchase Orders (Usually after a credit check) to your vendors can help bridge that gap, but more and more are now NET 30 or less so depending on your payment terms there may be a gap there, and of course you have to be able to pay the bills when you have late paying customers. It blow my mind how many EC's I talk to do not issue purchase orders.

 

[roger]

and of course you have to be able to pay the bills when you have late paying customers.

This is an important point. The norm in todays world seems to be 45 to 60 days for us to receive payment on AIA billings however, suppliers are not playing by those rules, they still want the 30 day turn around and you will have to be able to do this.

Roger