hi, i am looking for replies on customary "Payment Terms" as it relates to a contract with a client for electrical work.
first, on any job over $500 i always obtain a signed contract. my contract is a standard one here is a generic copy of it... http://www.mikeholt.com/free/free.htm i use this one for my business.
i generally ask for 50% in advance and the remainder upon completion of the job..i used to ask for 25% but i found out if there are any problems getting paid then 25% doesnt cover the expenses...
i have lost one job i know of from a client who said "i dont pay anything in advance", the job was at least $2000 and would take at least a few weeks to complete everything, thats a long time to go without any payment on the job not to mention if the customer decides not to pay for some reason then you are in a pickle... a signed contract would be helpful but it would still take months and an attorney to collect...
You should check with the state - all contracts fall under a state contract law with respect to a requirement of being in writing. Also your state contractor board probably has a set of laws with respect to types of contracts required, especially with homeowners. I know Calif. has VERY strict contract/disclosure requirements when dealing with homeowners that pretty much spell out EVERY detail of the contract, work to be performed, how and when you will get paid (Maximum of 10% down payment).
You should ALWAYS get a minimum down payment - a client who says "I don't pay anything in advance" sounds like someone who doesn't plan on paying anything at all. Also make provisions to get paid as you go. E.G. 10% down, 25% after new service roughed in, 25% after all new outlets installed (2nd level of inspection)...balance upon final. This process of getting paid as you go insures you don't have a lot of money being owed to you at the end.
I take the opposite view about downpayments. Unless you are special ordering something that cannot be returned or has a return charge, you should not be asking for a downpayment. You should have enough working capital or credit to carry most jobs for 30 days.
Around here, asking for a downpayment is equated with "fly by night" operations (I'm not painting you with that brush).
However, you can set it up so that the day you actually show up on the job for the first time you can get some $$$. We usually call it "mobilization expense."
Few things are harder to put up with than the annoyance of a good example.
I always pay within 30 days of being billed after the work is done. In fact, I don't think I've ever even discussed terms with an electrician. I call one out, he does the job, either hands me a bill or sends one and I pass it along to accounting for payment.
For contract items, same deal...Always paid after work was done.
hi, thanks for the replies. i used to do every job without any deposit. but i found out that some jobs have a tendency to drag on or take longer than expected, i also found out that in KY you have very little chance of getting paid by a general contractor/homeowner who either cant pay or decides not to pay..
i had a job where the payment terms were as follows...25% deposit, 25% at 50% complete then the remainder upon completion.
unfortunately for me the contractor who hired me was stringing not only me along but others as well...after getting a signed contract, i was told by the contractor that the initial deposit was "in the mail" after several days (over a week) of not getting the check and getting excuse after excuse as to where it was i finally had to walk off the job. now i have an attorney who is trying to get my money...
as far as what other people regard to be "fly by night" i havent got much to say about that...they are entitled to assume anything they like...many professionals charge a deposit or retainer...
i am a small business only one employee...ME...i'm not a bank..
every business is a small business at one time..
i was just looking for some friendly advice and replies as to what others have been experiencing...
i am also not an attorney, i have a contract that i feel is a good one.. and as far as I know Kentucky doesnt have any kind of law about what kind of contract is required (other than it be in writing)to do business with a homeowner..
heck as far as i know in ky only electricians and plumbers even have to be tested before getting a license...general contractors here just need to pay for the licnese then they can do business..no financial responsibility to speak of..kentucky doesnt have statewide licnesing for electricians...only plumbers...each city or county has its own or no authority...its really bad here..i have five licenses just to work in KY! no big time contracotrs board here...they need one in the worst way...
i would prefer to have a deposit on a large job when dealing with a homeowner...i ususally dont have a problem getting paid but there have been a few times that a problem arose...i generally find most people honest and fair but there are some contractors who do not operate on an ethical basis
i would not rely on a mechanics lien because mechanics liens dont carry much weight do they?
[This message has been edited by frodo (edited 01-21-2002).]
30 days net, 1.5% per month, 18% per annum is a normal billing 'small print' addendum.
Rule #1--- we are subject to what the market, or individual, corporation, etc will bear, so take all the dale carnegies, how to do the 'contract shuffle' & wanna be books written by loosers who can't do but write and wing em' in the ocean.
Rule #2--- we are small, and as such , vunderable. Obviously we should seek to lessen this effect by any means necessary. we contract to win, not loose..... Anyone who has had to go knockin' on doors to get what's owed them knows what i'm barkin' up here!!!
Rule #3---- we cost money honey, gotta have some green to be seen. Crybabies, wierdo's,fairytales, and those with thier own 'quantum theory' about wiring need not apply....refer to a good 800 #, and leave us alone.
Fodo. Sparky is ABSOLUTELY CORRECT. You have ventured into the world of the "Not so Nice" person. They will do everything they can to beat you out of your hard earned dollar. If you do service work for homeowners you will find that they will give you a check when you ask and it will never bounce. Doing small jobs (light fixtures, fans, timers etc.) for homeowners will get you a cash flow. THEY ALWAYS PAY. When you work for Contractors or homeowners where you are doing remodel or new work you will not find that same luxury. If you have a good paying contractor keep him all the rest get rid of. I know it will make your life better. I used to have mixed emotions about getting a deposit before doing the work and actually thought along the lines of Tom. And that is why I am not in business any longer. Tom is correct if you're smart enough or have the luxury of starting a business with some capital. I should have talked to him in 1991. You, like me do not have that luxury so get that deposit and get a permit. I'm not sure how it works in Ky but if they require a permit get one it will help your cause along with a contract. A lot of commercial jobs require holding a retainer so make sure you know what it is so you can plan your expenses for it. When I was in business I thought cash work was wonderful because I did not have to declare it but it is like being a waiter or bartender. By the next day you have spent it on some frivolous items. Now when your bills come due you have to scramble for the money. Put all you money in the company checking account and draw a salary. You may already do this but if not do it. I will give you one bit of advise someone gave me just after I went into business and I should have listened: "Everyone wants your money before you". Avoid "Punch out" lists they will drowned you in them. Charge for extras - all extras. Write them down, get them signed by the important person, then do them, not before. Remember you are an Electrician you can work anywhere anytime. That is your best way to accomplish Sparkys' Rule #4. Don't let them intimidate you. Long winded I know and I could go on and on but if I can help one person with this advise it is worth it. Good Luck
Re: Payment Terms#7080 01/24/0211:02 AM01/24/0211:02 AM
Down payments: I agree with Frodo, I always ask for 50% upfront, if they balk about a downpayment they will probably balk when the bill is due. As a contractor, its important that you remember that your company is not a Mortgage company, bank or lending institution. I am not in business to lend money, so why should I be expected to start and do a job out of my own pocket ? Anyone who says that no money should change hands upfront is rediculous! Why should we in the construction business put up money out of our own pockets to get work started on someone elses property ? Theres and old saying in our business, "Its a wise and prudent contractor who works off the other guys money." In ten years I have had only one customer say no. Sure I could carry the guy, but why should I if hes late on a payment I lose the 10 days or 2% on my bill that I owe the supplier. This way at least I know for sure that the material is covered and part of the labor. The idea of carrying a customer sounds great but how many do you want to carry. I am trying to make a living and am not into giving charity. As Frodo said, I am a small business man and have only one employee, Me. As far as a contract goes I write a letter of agreement, and spell out in lay-mans terms, I am not a lawyer, as to what work will be performed and said work will be inspected, then I sign it and the customer signs it. It then becomes a legal, binding aggreement. In this aggreement it states that the work will be started after the downpayment is made. This document serves two purposes it assures me that the customer is involved in the job, and understands what is required and also it prevents the customer from saying well you didnt do such and such, and I politely refer him to the agreement he signed and say if such and succh is to be done then there will be a wco involved. This is how i feel about the matter, and this is my opinion if it differs from anyone it is not meant to offend anyone, its just how I feel and do business.
Check your state law - they can be VERY powerful...again, you state contractor board prob. has a law book (Calif. has 'Calif. Contractors License Law & Reference Book for around $20 ...it is invaluable!) - these reference manuals tell you when and how to file a mechanics lien --- most states do look out for contractors. A mechanics lien can allow you to foreclose on a property within 90 days of filing if you are not paid!! You do have to file you lien within a certain time period (60-90 days of completion of work).
> > A businessman was in a great deal of trouble. His business > > >was failing, he had put everything he had into the business, > > >he owed everybody-- it was so bad he was even contemplating > > >suicide. As a last resort he went to a priest and poured out > > >his story of tears and woe. > > > > > >When he had finished, the priest said, "Here's what I want you > > >to do: Put a beach chair and your Bible in your car and drive > > >down to the beach. Take the beach chair and the Bible to the > > >water's edge, sit down in the beach chair, and put the Bible in > > >your lap. Open the Bible; the wind will rifle the pages, but > > >finally the open Bible will come to rest on a page. Look down at > > >the page and read the first thing you see. That will be your > > >answer, that will tell you what to do." > > > > > >A year later the businessman went back to the priest and > > >brought his wife and children with him. The man was in a > > >new custom-tailored suit, his wife in a mink coat, the children > > >shining. The businessman pulled an envelope stuffed with money > > >out of his pocket, gave it to the priest as a donation in > > >thanks for his advice. > > > > > >The priest recognized the benefactor, and was curious. "You > > >did as I suggested?" he asked. > > > > > >"Absolutely," replied the businessman. > > > > > >"You went to the beach?" > > > > > >"Absolutely." > > > > > >"You sat in a beach chair with the Bible in your lap?" > > > > > >"Absolutely." > > > > > >"You let the pages rifle until they stopped?" > > > > > >"Absolutely." > > > > > >"And what were the first words you saw?" > > > > > >"Chapter 11." > > > > > > > > > >