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#196700 - 10/22/10 12:57 AM What's your terms?
wewire2 Offline
Member

Registered: 11/14/02
Posts: 246
Loc: California
I'm curious to know what other contractor's payment terms are for a small commercial jobs. I'm mainly interested in the incremental progress percentage billing. Let's say the job price breakdown is 20k materials 45k labor and 75k fixtures. Do you get a down? How many progress payments
until completion? Do you chase interest on late payments or
suck it up because it might annoy the customer? Haha!!
YOU know what I'm talkin bout!!


Edited by Trumpy (10/23/10 06:58 PM)
Edit Reason: Edited bad language out

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Business, Office, Estimating, Legal:
#196701 - 10/22/10 06:10 AM Re: What's your terms? [Re: wewire2]
wire_twister Offline
Member

Registered: 07/25/07
Posts: 265
Loc: Georgia USA
Materials in 10 days Labor in 30. Add a 1.5 percent service charge for anything over 30 days late. On a job with a big bill of materials I will get a down payment, or give the list to the customer and let them order the supplies. Doing it this way I make sure they understand 2 things: 1 materials must be exactly whats on the list, make, model, and serial number. 2 I will charge 15% of the total material bill for compiling and suppling the shopping list. Most of the people I have worked with are good about letting their contractors get a draw( progress payment) if I do this I usually get 1/3 of the labor on each draw, with the last one coming only after 100% completion and customer satisfaction, this is because too many fly by night contractors have been here and ripped people off so they are more cautious, and who can blame them.
_________________________
Jimmy

Life is tough, Life is tougher when you are stupid

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#196702 - 10/22/10 06:58 AM Re: What's your terms? [Re: wire_twister]
HotLine1 Offline

Member

Registered: 04/03/02
Posts: 6785
Loc: Brick, NJ USA
NJ has a State Law that requires final payment upon final inspection & approvals. There is NO percentage or amounts mandated; that is up to the contractors and customers within the contract terms.

I used a 'progress payment' schedule, based upon materials delivered and work completion. Most jobs were bill on 1st, check on 15th; 14 day billing to payment terms, which worked well.
Progress payments were calculated on materials & labor expended.

Large materials items (ltg pkg; gear) occasionally required a deposit.
_________________________
John

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#196704 - 10/22/10 10:26 AM Re: What's your terms? [Re: HotLine1]
wewire2 Offline
Member

Registered: 11/14/02
Posts: 246
Loc: California
Thanks for the replies! How about fixture markup? When you bid a job
do you mark up the fixtures? Just trying to see what the "norm" is.

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#196706 - 10/22/10 12:16 PM Re: What's your terms? [Re: wewire2]
HotLine1 Offline

Member

Registered: 04/03/02
Posts: 6785
Loc: Brick, NJ USA
If I had a lot of my time in the ltg package, a 'fee' (% or $$) was added to the number. The amount was dependent on actual time.

A pkg by the GC/Owner, etc. sometimes resulted in 'handling' costs that had to be recovered. Each situation had to be addressed 1-on-1.
_________________________
John

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#196707 - 10/22/10 01:50 PM Re: What's your terms? [Re: HotLine1]
Tesla Offline
Member

Registered: 06/16/04
Posts: 1280
Loc: Sacramento, CA
Typical commercial terms out my way specify 'retention', typically 10%.

Acceptance of the contract is accompanied by a downpayment large enough to cover the materials for a modest TI, say 15%... plus or minus...

As work proceeds, percentage of completion and other thresholds trigger progress billings.

When paid these billings are 'short' by the retention. You bill $100 and get a check for $90.

The retention is paid after the job is accepted and within so many days of that acceptance.

If you're not budgeting for the retention in your cash flow you've got troubles.

You also must have enough working capital/trade credit/credit lines to carry your payroll and such. You can expect to receive cash for labor paid to be a drain lasting weeks into months.

In todays world it is extremely common for the GC to ride all the subs for his working capital: ie he's going to pay slow, really slow.

I knew of one GC -- not a small player -- that was routinely nine months behind on his payments.

Government payouts are even slower. California famously paid all contractors with IOUs -- not redeemed for months.

Back charges for this and that...

Extras, change orders: you'll need to get these paid 100% -- no retention and in double quick time or you'll bust out. There is no way you can carry these to the end of contract. First, as time goes by the perceived value of them fades and fades: soon the Owner/Arch/GC can't understand why your bill should be so high. Second, should a dispute arise, you still have operational leverage -- probably enough to get paid. On one job, I shut the work down for one day -- to get payment on extras. The banker insisted on maintaining the timetable: we got paid with a cashiers check driven up to the office. ( It was a five hour drive for the Owner/Builder.)

In ANY commercial contract you'll have to amend it with your exclusions and inclusions. The exclusions will be essential. Typical exclusions would be taxes and fees and permits. Other exclusions might be buried difficulties like tough ground or undocumented crossing utilities. If you were a unionized contractor you'd have to have a wage pass-thru if the union contract is up for renegotiation.

You'll also have to have stipulations WRT GC/Owner supplied utilities: ie the temp power is on them. Alternately, you might bid a temp power side-deal. Normally, that is to be avoided. You'll find that the GC has your boys hopping all over the site replacing bulbs and repositioning light strings -- without compensation -- telling you that it's lumens on target that he contracted for. Now that the light string belongs to you -- it gets trashed -- I mean REALLY trashed. Stolen power boxes are your problem, etc. You can quickly see why most ECs just dump the temp power on the GC. Once it's his obligation it's amazing how the other trades respect his assets -- so they don't get back-charged!

Other issues that always affect profitability: parking, security issues, storage of major materials, storage of minor materials, etc.

Then there is the tough question of the GC himself: does he run a smooth operation or does he stack every trade known to man at the same time in the same place.

And then there is the issue of materials shifting. ( lighting package ) Our stuff is bulky, fragile, and comes in stages and from multiple sources. Who is to receive it on a smallish TI?

Do you HAVE to be on the site EVERYDAY?

-----------

You should develop a punch list of these issues for every job bid so that you don't overlook a gotcha item.

8 years ago, my PM forgot to include the lift rental charge in his no bid contract submission. The profit on that deal thus became ZERO. He kept pulling such mistakes that eventually -- a million dollars later -- he got fired and was run out of the industry.

-------

Because of the massive distress in construction -- which will last for years -- you can expect to be invited to bid on work that is improperly financed and which requires you to be the banker. So watch out.

Many, many, many GC's are busted out and need you to be their banker, even the ones you think are solid veterans. Until you see the inside of their books everyone's solvency is guess work.
_________________________
Tesla

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#196708 - 10/22/10 01:59 PM Re: What's your terms? [Re: Tesla]
HotLine1 Offline

Member

Registered: 04/03/02
Posts: 6785
Loc: Brick, NJ USA
Tesla:
Thanks for bringing up the retention.

It's a part of any AIA agreement/contract on this side of the country also. I overlooked it.
_________________________
John

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#196717 - 10/24/10 08:30 AM Re: What's your terms? [Re: HotLine1]
Obsaleet Offline
Member

Registered: 04/05/03
Posts: 361
Loc: Pa
I havn't done many large commercial jobs, and large for me is small. I have been able to get 1/3 to start, 1/3 after rough inspection, 1/3 on final. extras are billed ASAP with a net 10. Final payment is net 10days. No discounts. I have been able to negotiate away retainage , being that the jobs are considered small. If there is large exspencive equipment a may get a larger downpayment. I'm not a fan of being anyones bank, so my goal is to only work for people who pay. If they can't pay the start payment they can't pay the others. I walk. Being small is good that way.
_________________________
Choose your customers, don't let them choose you.

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#196718 - 10/24/10 08:31 AM Re: What's your terms? [Re: Obsaleet]
Obsaleet Offline
Member

Registered: 04/05/03
Posts: 361
Loc: Pa
Thanks wewire and to all of you for this post am going to borrow some of your ideas.
_________________________
Choose your customers, don't let them choose you.

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#197374 - 11/24/10 12:27 AM Re: What's your terms? [Re: Obsaleet]
Niko Offline
Member

Registered: 08/17/06
Posts: 358
Loc: Campbell, CA
Just like many of you i am a small shop. I mark up everything. Any item i buy will get marked up.
I try to leave $1000 or 10% for the final whichever is less.

I have made my share of mistakes so now change orders or extra need to be paid soon.
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