PDA

View Full Version : paymentsnand deposits



iceman007
08-12-2005, 01:03 PM
Hi,

for all of you who do large installations, for example 20-30 units and more, what (if there is one) is the usual practice for upfront payments, because a large contractor has asked us to do a big install. With my smaller customers it's normally 50%upfront, but a bigger client will be different. I don't yet know if my suppliers credit will cope with it. A company I used to work for I think did it in installments paid at each stage of the job. I need the benefit of your advice please.
Thanks

iceman007
08-12-2005, 02:03 PM
I don't want to know how the jobs are priced, we have our own methods of doing that.
This is a job I have to quote on for a large construction company. Always difficult when moving up from smaller installs of 10 units and less. I need to have an idea of whether to request a deposit and how much, The company I used to be with I'm quite sure took one third up front, one third when the installation was under way, and the final third on completion. I'm quite certain I'm in no position to be in any kind of competition with Fridgetech, Marc.
Thanks for the reply anyway
James

Cofreth
08-12-2005, 03:24 PM
Depend on the size of the project, you may state the progress payment terms in your quotation like 1st payment upon completion of running all copper pipings, 2nd payment upon equipment arrival on site and last payment upon handover to end user after testing & commissioning.
Hope that helps...

US Iceman
08-12-2005, 03:42 PM
I like the idea of progress payments. I use the same in my line of work.

These can be used a means of self protection to cover costs and labor. You should be able to ask for a specific amount up front as an initial payment.

This could cover your costs and labor up to a predetermined stage. When the next stage is ready to begin, I would submit an invoice for payment prior to the work actually beginning.

The whole trick to this is to cover yourself and limit your financial exposure, in case something happens. You want to have the money in hand before exposing yourself to more risk.

The contractor may request a percentage retainer (in their favor) until the project is completed and accepted. When everything has been commissioned and accepted, the final percentage retainer is paid to you. This is common here in the US.

If you cannot get terms you like, you may consider walking away from the project. Sometimes a project not received can be a blessing. Of course this is all hindsight logic, but you cannot be too careful in my opinion.

Cofreth
08-12-2005, 03:49 PM
US Iceman,
Do you have a cost engineer or clerk of work on site to judge the amount of work you have completed and he will certify approval payment to you in America?

US Iceman
08-12-2005, 04:00 PM
Cofreth,

This is usually initiated by the project manager for the sub-contractor. During the installation, meetings usually occur to discuss the work in progress. The project manager for the main contractor will know what stage of completion is being reached.

The contract simply states the steps of completion everyone has agreed on. When this stage is reached, a progress payment invoice is sent out.

The progress payments could be as simple as; an initial down payment, payment when equipment is delivered to the job, another payment when the equipment is partially installed, and a final payment when the equipment is commissioned.

Andy W
08-12-2005, 05:15 PM
I have turned many big jobs down because of the following:

1) I am a sole trader, if I go bump I loose the lot.
2) Working for main contractors has problems of it own, some can with hold X amount as a "retention" for 12 months or more in case there are any problems.
3) Architects (sp) dont always get the sizing of equipment right and you are left with all the aggrovasion afterwards or even not getting paid at all.

My list of reasons go on and on but I have been in the fridge trade for nearly 28 years so I have come across a lot of problems and scenarios. I have even come across main contractors having no intention of paying you and declaring themselves bakrupt as soon as they have been paid, that happens all to often, well engineered.

I always ask myself one important question on any installation that I take on, If I don't get paid will it finish me?

A friend of mine is currently awaiting payment of £42,000, he has had to put the contractor in court for it and that takes longer still.

US Iceman
08-12-2005, 07:09 PM
I always ask myself one important question on any installation that I take on, If I don't get paid will it finish me?

That is exactly what I was trying to warn of. Sometimes the big job which you may think will put you over the top, can put you under.

Well said Andy.

slingblade
08-12-2005, 08:54 PM
It is your right to dictate whatever payment structure you see fit. the 1/3 1/3 1/3 order/dely. to site of gear/completion of works is generally accepted. do beware of retentions as stated before by andy x. in some cases they can take more than 12 months, much more. it really is up to you.

Abe
09-12-2005, 07:18 AM
I have turned many big jobs down because of the following:

1) I am a sole trader, if I go bump I loose the lot.
2) Working for main contractors has problems of it own, some can with hold X amount as a "retention" for 12 months or more in case there are any problems.
3) Architects (sp) dont always get the sizing of equipment right and you are left with all the aggrovasion afterwards or even not getting paid at all.

My list of reasons go on and on but I have been in the fridge trade for nearly 28 years so I have come across a lot of problems and scenarios. I have even come across main contractors having no intention of paying you and declaring themselves bakrupt as soon as they have been paid, that happens all to often, well engineered.

I always ask myself one important question on any installation that I take on, If I don't get paid will it finish me?

A friend of mine is currently awaiting payment of £42,000, he has had to put the contractor in court for it and that takes longer still.



These are my comments:

I have particularly listened to Andy W.......and tend to agree with him.

I can appreciate that its really great to get a big contract, but dont let the size and " potential " profit cloud your astute business ethics.

This is my motto:

Always stay in front:

ie: Dont order stuff from Distributor on their 30 day account.

If you order say 5 systems.................Have the money for the whole order in your hand......
Also for all the piping, etc, etc

And pay for it with your order........

That way.............No one will chase you for that money in thirty days time..........

Now you put in the systems..........

At the time you starting work , all the parts are paid off for. So say that constitutes 50%

When you finish the install.............You now collect another, 25% , So in total you now have 75% of the job.

You have paid off for all the stuff, and wages and expenses.

Give them 30 Days nett to pay the balance 25%, which is mostly profit.

If they dont pay the last 25% youre ok.............No one will chase you for money........

Secret is: Always stay on top.............

Never get in debt buying stuff for another........

Covering the contract

Get everything in writing..................
Cover yourself contractually

Ask yourself, if your business can handle the contract
Do u have the staff
The equipment

Insurances: Do u have cover?

Put in contingency for call backs.........things that Will go wrong......

Good luck

Think carefullly before taking the job............

Whisty
09-12-2005, 12:41 PM
And watch the payment terms as well. If you sign up to payments on 90 days then potentially you wont actually recieve a staged payment untill after you have completed the next stage 3 months down the line.

Argus
09-12-2005, 03:51 PM
Always stay in front:


Secret is: Always stay on top.............


Never get in debt buying stuff for another........


Think carefullly before taking the job............


Aiyub is spot on, as is D-I-C-K-E-N-S (Damn this profanity checker)
Micawber was a pompous old fool, but the words are as true today as they were in the 1830's

" 'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know. Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and - and in short you are for ever floored' ".


My tuppeny worth is to do nothing on a word.
All in writing or not at all. You can't invoice your time chasing debt.

The consensus is to stay within your means. It's best to a make a small, good profit instead of a large amount at a small margin because your time and profit is erroded.

Good Luck.

.
________
Chrysler UK specifications (http://www.dodge-wiki.com/wiki/Chrysler_UK)

Abe
09-12-2005, 05:58 PM
I learnt my lesson the hard way

Five years ago "my buddy " comes to me.......yes..........My Buddy..........someone I had worked for at his previous restaurants and clubs......someone I trusted, someone who always paid me, even if the cheque was paid late.

He says he wants me to do all the stuff on his new venture.........a hip hop swanky bar.and a new restaurant

The bar equipment alone cost 38K. Cost/ trade prices.
I bought all the gear...........

Finance for the equipement was coming from from a Finance Company.

My buddy kept saying...............No worries..........We will sort everything out at the end of the contract............Dont want nothing in writing........We will sort it all out in the wash.

Then he specified air conditioning..........This came to 15K, He says the AC is being paid for by the builder.......not him.

But I says, I dont know builder..........He says...............no worries...............He will pay..........If he doesnt..........I WILL

So I put in first part of ac..........comes to 10K
Builder doesnt pay............Finally I get a cheque............Cheque bounces.........

Now Im S.H.I.T.T.I.N.G. myself........

I go back to bud...............Im not putting any more AC in...........

He says.............No put it in......................IEverything will be ok.........

But I dont............I get another cheque for 10K...........It goes thru...............I pay the cxompany I bought the AC from.

Then I stand my ground.............Im not putting in second phase till I get paid...............

Buddy says............Hey..............Just put it in...........I will pay you, if Builder doesnt.

I insist I wont.........Then a twist

I had told Distributor ( whom I shant name) that put gear on order.............BUT DO NOT DELIVER

I get a shock of my life....................THEY DELIVER ALL THE STUFF TO SITE.

What do I do??

Install it and hope for best, or return it back.

I ring Distributor and shout at them..........Why they delivered it........

But Fool that I am..............I install the Air conditioning.

It takes me four months to put in all the bar equipement wqorking 24/7

All the remote bottle coolers, bottle wells, cold rooms, freezer rooms, ice makers, shakers, cappucini machines. the bar itself, dish, glasswasher...........A stack of stuff..........All 38K's worth

End of Project..............

Finance company sends me cheque for 38K.......I pay for all the bar stuff

I send invoice for the balance of AC..............Builder gone............doesnt answer his phone......inaccessible

I send an invoice to my budd for the profit on my equipment and my labour.......

He says.............What labour? What profit?? Wheres the contract..........Who will the court believe??

So I miss out on 7k profit on my effort for all the restaurant gear and my labour,

Builder dissapears with my 5K worth of AC gear,

I manage to get 2K for my AC, after much harangiing from buddy

Still out of pocket for 3K, plus my labour plus my 7K profit on the other stuff

Distributor chases me for the AC money.........I pay from my savings.......

Im an honourable man.......

Where I went wrong:

I mixed Freindship with Business
Now I trust no one.........

This guy sold his soul for a few pieces of silver........
He said...........No worries.............I will pay you........
I trusted him.

I was reckless.............feckless.............This could have destroyed me forever..........

Yes.............I learnt my lesson..............I dont wish anyone else to go thru what I experienced........

Nearly five months of hard sweat, and nothing to show for it. Plus all the anxiety , stress and white hairs

Dont get taken in my sweet talk
Do everything by the book

Get a lawyer to do your contracts., set out your conditions in black and white

The simple rule, No Money up front, No Job
No freinds...........No favours


Finito

slingblade
09-12-2005, 06:06 PM
Ouch. if that were me i think a very stern talking to with some stilsons would have been my next move.:eek:

US Iceman
09-12-2005, 06:17 PM
We will sort everything out at the end of the contract........We will sort it all out in the wash.

Have I heard this before!!!

I had a similar problem for about $110K US back in 1985 for installing two large screw compressors in an ammonia system.

I got paid for the equipment, but not the installation, piping, insulation, labor, parts.... nothing.

That was the last time I ever trusted a handshake and a gentleman's word. Obviously, the guy was not a gentleman. What I would call him would get omitted by the profanity checker on the forum.:D

The moral to the story is... Put in writing and agree to terms that suit you. This still doesn't mean you will get paid though. It just means you have a contract so that you can take legal action.

As I said before, some jobs are better if you just walk away from them.

frank
09-12-2005, 07:29 PM
On the other hand, I've been paid for all the work and equipment on a large project but came unstuck on all the extras.

When you are doing the job and everything is going well and the cash is received against the monthly invoices then you tend to think that all is tikkity boo.

The owner or manager comes up and says - oh, we've changed that so can you do this and that etc - and you go along.

Well - beware - years ago when i had a full head of hair and it wasn't grey :D we did just that on a large hotel job - Ha! - it turned out at the end of the day that we did £120k+ worth of extra's for which we did not get a penny because the proper paperwork was not contractually in place. And we did not stand a chance of winning through he courts all because of paperwork.

As Abe say's - trust no one. And don't mix business with friendship or pleasure.

US Iceman
09-12-2005, 07:55 PM
it turned out at the end of the day that we did £120k+ worth of extra's for which we did not get a penny because the proper paperwork was not contractually in place. And we did not stand a chance of winning through the courts all because of paperwork.

Verbal contract are worthless....

I have seen this also. Once you are in doing the install, the owner may ask you to go ahead and do some additional work (not in the contract).

If the owner wants to add work, get the proper addition to the contract.

The people to really watch for are the ones that talk fast and always in a hurry. Don't worry... We'll take care of it, but right now, I'm busy... Trust me...

You know the types when you see them.

Be very, very careful...

slingblade
09-12-2005, 09:41 PM
On the other hand, I've been paid for all the work and equipment on a large project but came unstuck on all the extras.

Very good point. make sure your quote includes the words "anything else not specified, will be subject to....." at the end.

slingblade
09-12-2005, 10:26 PM
Hmm, not sure if I'd share our methods with anyone. But then if everyone was like me I might forever be unwittingly stuck with a second rate method. Hmm, still think I shouldn't tell though.... :(

Having just read this post for the third time i now feel compelled to respond. You appear to suggest that in some way your business methods are superior to everyone else in business, and by disclosing information about your methods you will be disadvantaged in some way. you further seeem to think that if all other people in business adopted your policies then you would become second rate as they are now. this implies to me that you consider all people in business, be it in the refrigeration industry or otherwise, to be inferior to yourself. i find this insulting to a high degree and suggest you retract your post forthwith. at the very end of your post you added a symbol which suggested a frown, i find this also in bad taste as iceman007 asked a reasonable question in the first place to which everybody has given a reasonable response apart from yourself MATE.

Daddy Cool
12-12-2005, 03:46 PM
Iceman, If you are working for a 'building contractor' they will probably be issuing the work to you on a sub-contract basis. This will involve some form of JCT contract, and a bill of quantities. This document will be littered with clauses and payment terms that you would be deemed to have accepted should you tender.

The contractor will no doubt have a QS working for him, and his trusted ally, the black pen. The black pen is used to draw lines through your claims for payment, and ask stupid questions to waste time in paying you.

Generally, payment terms would be trashed out at a pre-contract meeting, and are likely to be on vaulation with payment being DUE 90 days later.

The idea is that you are programmed to say do all the pipework, you submit a valuation on the prescribed date, miss this at your peril, the QS then values this work, and adjusts you valuation accordingly. valuations can be each month on say the last Friday of that month, if you submit your valuation, or have equipment on site that can be included under the contract terms(ie condensing units on site, but not installed) the QS should take these into account. if however the equipment arrives on site late Friday afternoon, you invoice from the supplier starts ticking, but the QS will ignore them until next month.

It's all a big game with big financial implications, i have never met a large contractor that will provide money up front.

The QS's job is to only pay for works completed at valaution, and they were worth their weight in gold during the 80's/90's recession when many large contractors were forced to price projects at 0% margin and make a profit from screwing the subbies.

Be very careful, they can seem fantastic at the outset, but ruin you 12 months down the line.

if you need any further info, let me know, and good luck.

iceman007
20-12-2005, 08:23 PM
Hello Daddy Cool,

Thanks for the info. The job is actually for a consultant on a new build contract. To be honest with you, I've always said if it sounds too good to be true, it probably is. We were asked to supply and install the equipment, but it's either on out terms or not at all. I've been down the long road of trusting people too many times, and I'm not getting caught out again. It is useful though to know how this all works with these builders as we've been asked about doing work for a big contractor. I would probably get our solicitors involved to sort out contracts etc so I don't know if I feel compelled to get involved because cashflow has always been king in my business.

Cheers
James