Getting Paid

Mark Hunt

and I have MANY like this.

My terms on any new construction job are 50% on start, 40% at rough completion, 10% on completion.

Did a job for a builder that I had known for several years. He always paid. One day I show up on a job site only to find out that he had closed his company and left the state. GONE! BUT!!! I got my 50%. The HO was terrified that the builder had stiffed him and took off with LOTS of money. When I told the HO that I HAD received half of the contract, he was greatly relived. My policy actually protected the HO.

Wanna' hear about the "project manager" that stuck another HO for 125K?? I got my 50% out of that crook BEFORE he was caught. The HO was completely distraught. Had NO IDEA who had been paid and who had not. Told me to send all of the equipment back because he could not pay for it. Imagine his relief when I told him it WAS paid for and so was my labor to install it!

This 1/3, 1/3, 1/3 stuff is BS. The first day on the job we show up with WAY more than 1/3 of the contract value. When we do a radiant job, the only thing we have left at the end are freakin' thermostats. I am supposed to let a builder hold 1/3 of my contract to install thermostats?!?!?!? HAHAHAHA!

Change outs are a different story. No money down, payment upon completion.

You are correct Mike, there are scumbags out there. You will probably end up working for one of them sooner or later. Those crooks don't just get the HO, they get EVERYONE!

Mark H



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Josh_10

The hardest thing about running my business is getting paid on time. I get every excuse in the book. "My dog ate my checkbook" kind of stories.

So I thought I would ask some of you what your favorite strategies are for getting paid on time. So far I have tried finance charges, Statements, and I have our office girl call every 2 days.

What do you seasoned veterans do?

Tim Doran_4

Get it up front

I get a 50% deposit and an additional 30% when materials go on site and work starts. I then bill out the balance as work progresses so I am always ahead of the curve.

Tim D.

Brad White

Although I approach things

from the design side, I always liked the honey versus vinegar approach:

Pay in 10 business days (or whatever you choose), take X percent off the bill. Same thing as an interest charge but you give them a positive choice.

Don't apologize for having to feed your family.

Paul_11

COD

Tim has the right answer for large jobs, get 50% start up and then progress payments so you are always spending their money. We want every penny except for $1000 before we sign off the job. So we could get stuck for that last $1000 but it doesn't happen very often.

Service work should be COD for residential work and get signatures for all work before you do it. This is critical. Develop a nice invoice to use. I'll send you mine if you need one.

We get one signature to authorize the trip charge and then another to authorize the work and then a third to confirm that the work was done to their satisfaction.

We do have open accounts for large customers, landlords, coops, etc, and we give them 30 days to pay, but require a credit card to charge the work if it is not paid in 30 days.

This is not so hard to say, but start doing a lot of work with a handful of employees and it doesn't happen this neatly. It really becomes a question of constantly training your people with written guideline that you repeatedly go over with them to get close to this happening the way you want it to.

Good luck,

Respectfully,

Paul B. Shay
pshay@arealgoodplumber.com
LMP 1307
LMFS 654B
OUR MISSION: TO PROVIDE WORLD CLASS PLUMBING, HEATING, AND SPRINKLER SERVICE TO EACH AND EVERY CLIENT WE SERVE, FAR EXCEEDING THEIR HIGHEST EXPECTATIONS!

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Josh_10

How many of you guys charge deposits? We started out that way. Paid cash to our suppliers ever time, and then we got into situations where banks wouldn't give draws until work was completed. Then we got into the rut of builders not paying.

Singh_3

Forgot stamp.

Got lost in the mail, lost your address. Yea, I get those also.

As for Banks, Most of that is hogwash. If that was the case no one would get paid until house 100% complete, and I find that not even lumber would be delivered to job site if that was the case. It just a case of who can I delay paying, with the old bank won't pay story. Insist and you find the money always pops up, I even met with the bank people , just to prove I'm x % complete and this is owed to me.
But I learned this the hard way, as I'm sure many here have.

Unknown

Hey Josh,

on my side of the border, a 50% down payment is a must. If you don`t, and "the boat needs a new prop", who do you thinks kept waiting! I find no matter how "Great" a heating man you profess yourself to be, if you have no money "up front", they will keep you waiting! Try telling your bank manager that if your short on your mortgage payment!

Dave

mikea23

JOSH


I said the same thing till one day my accountant took me to lunch and informed me I was going broke. I said how can that be I have tons of work. He replied look, your business acct has 35K in it and your recievbles are 95K. He then said you need the recievables to be less then 40% of cash on hand. If you are going to give credit you cant lend your last dollar or borrow from another job to lend to them.

He was right all I was doing is spining money sure my bills got paid but if you subtract the recievables I would be broke. If one contractor closed and burned me for money I would be in the red big time.

Then I made new payment terms informed all my contractors that this was the new policy. That week I lost 30% of my customers I was scared but after a few weeks things got better I was working less and I was able to make more money My acct was not going up and down like a EKG machine it had a steady rise the way things should be.

I took all my big jobs and we do alot of large trophy homes and made them not 3 or 4 payments but 10 or 12 payments. I didnt get those big checks we all like but almost every week I got a check from them. Looking at the big picture its nicer to get 10 small checks then one large one. This way if you do have a guy tell you his dog chewed his checkbook its only a small amount. Its also alot easyer to get a check for 3K then a check for 20K most contractors or homeowners doing a big job wont blink at 3K or 5K but ask them for 20 and they tell you its in the mail or next week.

My small jobs we do on a cod basis unless we have billing arangments. My office people inform everyone that they need to give a check to the Mechanic upon compleation. They also tell them any special order parts are do in advance and nonrefundable.

Josh dont be afraid to cut people off. If you have a contractor that pays slow there is a reason for it. I spent 4 years runing around like crazy for people that dont pay ontime. Then you start doing things like I cant put his boiler in till so and so pays me for that other job and the good customers suffer. It got so bad i couldnt take it. And worst of all it was costing me money alot of it. I was sending crews to jobs 4 or 5 times and they would only be able to do 3 days work because I was working around all the big ticket things instead of doing the job the most profitable way.

When you start out in this business all the SH@%# contractors call you and pay the first or second job ontime then the games begin. But being new this is what you have to deal with once you make it past a few years and have a good name the good paying customers will call and you need to keep them. My best advise is make a policy and stick to it in the end it pays off.

Mike A

Cosmo_3

I have run into the same problem Josh

This is why residential construction has it's pluses and minuses..

The banks want to make sure the work was completed. It doesn't matter that the builder already knows he won't get the money from the bank until th ework is done, he still signs our contract and then cries about the bank like he didn't know that was going to happen.

This is most common with inexperienced, or uncaring builders. They find themselves in a money crunch, and take the money the bank issues and pays for the trades on the last house who have been waiting for 60 days.

2 years ago I had a builder who had some really sweet jobs coming, I am talking 3+ million dollar homes and he messed it all up because he couldn't handle the accounting end. He was in over his head, and when he stopped paying the subs, work didn't get done, and then he started getting sued by homeowners who had half-finished houses. I was lucky and had a homeowner who personally financed my contract, and took it up with the builder on his own to get my money.

There should be some kind of protection for us, these builders with big jobs and no brains can sink small contractors like me.

Cosmo

mikea23

50%

50% down is alot of money. I had a roofer tell me that he wanted 50% down to do my house I wouldnt do it and in todays world with all the BS contractors out there you cant expect homeowners to do it. People hate contractors they all have had or heard of nightmare storys.

I ask for a small deposit to reserve the date 500 or 1000 then I ask for a check the day we show up. I also inform them that we will need multiple payment as the job goes forward. That way I dont have any of there money and they dont have any of mine. People are happy to pay if they see progress and if for somereason you need to pull off the job for a day or two the people dont get all upset and think you got there money now they have to wait.

50% deposit sounds great to us the contractor but the homeowners dont like it. We shouldnt have to work with there money if you are in business you should be working with yours. I also use this as a selling point it works great

Mike A

Unknown

Mike A

How long have you been in business for? I bet not long!
If you as a contractor does not ask, or demand a fair amount in advance for a "signed contract job" I will guarantee you will be kept waiting for your payment! I tried that crap before, and it never worked! Trust is a 2 way street! One good beating, and your bank will say ADIOS!

Dave

mikea23

draws

I have alot to say about this topic FU&^$% the builder and his draws just because he has a bad relationship with his bank doesnt meen we need to be his other bank. Builders with good relationships with there bank get draws any time they need them. The guys that get 20 bank inspections on one job have a bad credit rating with them thats why they hold back payments.

I did a 24 house development a few years back one day I went to lunch with the HVAC guy and the Electrician he owed all of us 70 to 110K each then I spoke with the lumber guy and he owed them 300K. Thats only 4 guys on the job and its almost 600K. This builder just financed 2.5 homes for FREE. He probably financed 10 homes of the project with subs money. If the guy cant pay you till he gets more money from the bank how can you get paid from him if he walks off the project. My policy is if he has to wait for the bank to pay him he has to wait for heat and a toilet till he pays me

MikeA

Brad White

50% depends on 50% of what

I can see that point, Mike. There are scam artists who run with the deposit in all trades. At the same time, a deposit to secure materials (so you the contractor is not out and oweing the supply house) seems reasonable and so long as the materials are delivered not just promised. Around here on small contractor jobs a "1/3 - 1/3 - 1/3" plan for start, mid point and acceptance seems to work for smaller jobs say under $10K.

I enjoyed your accounting lesson by the way!

Brad

Unknown

Hey Brad,

I hear even some guys charge for heating estimates,, try that stuff here and CP Rail will give you a free ride!!

Dave

mikea23

DAVE

I have been in business for 12 years. I have done the 30% thing the 50% thing and like I said 50% is great for us but like you said trust is a 2 way street how can they trust you when you dont trust them. thats why I do small payments I never have any substantial amonts of there money they never have any of mine.With those payment terms there is no need for trust. The only thing I ask Large deposits on are Big heating systems that have to be special ordered and the only reason I do that is that they in the most part are non returnable.

Brad White

Yeah Dave but

at least they charge $CDN.

A bargain -for now!

Unknown

Mike A

let me ask you this. I knew a guy who "plumbed" 3 houses, after the fact he was told he would not be paid until the 3 houses sold, that was not in the contract but was "sprung" on him later. He is a good plumber, but at what point did he join the real estate business? (Me? I would have KILLED the guy).
Now I`m not saying everyones a Bad-****, but get money down! Or maybe I`ll start a roofing business.

Dave

Unknown

Brad

You know what I meant!

Dave

mikea23

Dave

I would call him a Good plumber that needs to get a job working for a good plumber that is also a good business man. He is the guy that lets the builders get away with this crap. Alot of builders are smart why pay interest to the bank when the subs will finance the job. I bet he also gave him a good deal its 3 houses. I can also bet that the builder got other estimates and the higher ones all had payment terms the builder tossed them out with the trash they wont help finance his project.

That guy is the typical plumber he does a great job and has pride in his work but his lack of business savy is having a negitive impact on the industry.

With my terms we would have pulled a permit and spent one day there then left till we got a check. and if not we would be out maybe 500 bucks.

Mike A

Boilerpro_5

I charge to go out and look at jobs....

Estimates are easy and can be done over the phone. Giving a person a real price involves alot of time...the trip, reviewing the structure and use, heat load calcs, budget and putting together the proposal. A typical home boiler replacment can easily run 6 hours or more to produce a proposal. I charge a small fee. If they won't pay for a professional review, they probably won't pay to do the job properly.


Boilerpro

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Unknown

Mike A

good for you, I`m very glad you have all the "kinks" worked-out for us that are so stupid, I look forward to reading about you in Forbes Magazine! Good Luck!

Dave

lee_7

for larger jobs, parts are broken down into phases, labor also. First check for first phase parts and labor, and so on. If they do not pay, work stops and I am not out of money. Been Scr@#ed before and it will not happen again. Do whatever is needed to make sure you can make money. Not getting paid will put you out of business in a hurry.

mikea23

Dave

It will be a long time till we see a plumber on the front page of Forbes and if we do I hope it is me but not likely.

Kinks worked out not yet I learn every day and alot from this site. And to be honest I was that guy years back doing jobs and not geting paid ontime then I wised up. We can run a business and still have pride in our work but being a good plumber doest always make a good business man thats what I ment by that post.

I have made and lost alot of money in this business and most of my money was made in the office not in the field. I would love to go back to me in a truck all day doing service work or boiler replacments but the fact is that me on the phone or doing takeoffs and piping schem makes me more money then me with a torch. Alot of guys forget about that part and builders and homeowners take advatage of that. I ment no disrespect by my post.

Mike A

Vermonter_3

Gettin' Paid

I've run the gamut. Small jobs with HO payout. Bank financed with draws. Service calls with no "service rendered" payment. My bank account usually forces the issue as far as collections. Generally, if I need the money, it's there. We all have our horror stories.

If I have a new client who balks at any upfront money, I tell them to have a 50% check AT material delivery. Not the next day, etc...! Like you all said, it's about trust. They have no reason to trust me until I have material delivered to their jobsite.

I've never offered a discount for early payment nor penalized for late. When a customer gets a little behind, a nudge is usually all it takes. I feel bad for all you service oriented guys. Too many many small dollar recievables. In those circumstances I think I'd go cash on the barrel.

Josh, along those lines, remind your clients, it's not your job, nor was it figured in the estimate, to FINANCE their job. Your work is done. You want to get paid. The financial burden is not your responsibility.

TG

Unknown

Mike A

I do take disrespect in your postings as it is a very different world out there! Things are tough on a small businessman, and I meant an advancement should be paid when the majority of materials are delivered on site, do you not think that is fair? After all, we are not talking about shingleing a roof here, we are speaking of heating the home.

Dave

mikea23

Dave

I cant agree more with you materials on the site is progress and should be paid for by the customer. But I dont think that you give them an estimate for 20K and ask for 10 upfront then put them on the schedual and show up 2 weeks later that is them financing you. That is what the builders try and do with us. I just put clear terms in the contract.

If i do a P&H job in a new home and the job cost is 35K I want 1K down plus the permit fee. when we get there to start I want another check for 3K after we finish the PVC I want another 3K when showerbodys are in i want another payment and so on. When the heat is on in the home and all we have to do is fixtures I expect the contract to be 90% paid.

I do this cause things are tough out there. I cant aford to get burned just like you. I am not smart enough to be a banker so I dont want to finance the job for them.But at the same time I understant that they dont want to finance your business as well. With alot of small payments nobody ever gets hurt bad. Can I get burned sure but never for alot of money. If I do get burned my business will not sufer my men will still be paid and my kids will still eat. I also wont make the dam lawyers rich If I need to go to court its only small claims.

Mike A

Unknown

Mike A

You must be very sly then,,,try that here(many have), and you`ll be bankrupt tomorrow!

Dave

mikea23

Dave its not sly. I just tell them the terms before we start. I have had alot of people just give me big checks when we get there. I do take them but thats there choice.

I am in NY its a very tough market some people say its the toughest. The system works well for me and most people especialy homeowners love it. I have some builders that just give me 4 or 5 payments they feal it is easyer for them 5 biger checks instead of 10 small ones.

I think that whatever your terms of payment are they need to be clear upfront and in writing. If we all did just that we probably would be alot better off. If that other plumber you spoke about just did that he never would have gotten in that perdicament. If we all doted are I's and crossed our T's more we would have alot less chance to get burned. Bottom line make a company policy and stick to it.

Mike A

mikea23

TRUE TRUE TRUE

I hate the 1/3 third stuff I also want to be at 90% after rough. I have one job bin going on for 2.5 years we finished the rough 2 years ago I got my 90% I could care less if it takes another 2 years till they call for compleation. Another thing I do is never change the contract If there are extras I bill them seperatly and its due on reciept.

I had one builder years back that kept telling me ya do it and so on and at the end of the jod he says how do you get 30K in extras. I think we just all need to CYA more now then ever if the markret keeps going down the builders all go with it.

Mark Hunt

As Emeril would say


BAM!!!!

Changes now. Not at the end, now. I ain't arguing at the end. Contract said this, I did it. YOU changed it, pay me.

Signed, sealed, delivered. Pay.

NEVER, EVER change ANYTHING without a written order!! A written CHANGE ORDER with a fee attached. T&M, fixed quote, whatever. Do NOTHING without authorization AFTER you tell them that the work is EXTRA. "Extra's" can kill you.

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ScottMP

Markie Mark !!

I can't agree you with you more !! I used to do that 1/3,1/3, and a 1/3 thing. Same as you .. waiting for thousands to put in thermostats. Or on plumbing jobs, waiting for five thousand to set three toilets and a pedastal ...... I don't THINK so !

I also agree that asking a customer for five grand before you even show up is tough. Thats why I tell customers I want 5 or 6 K the DAY WE SHOW UP WITH THE BOILER. Or what ever 50% is.

Now Josh's question about getting layed. After a couple has been married awhile, things start to ...... oh wait ... I'm sorry I read it wrong ...... Never Mind.

Scott

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Mad Dog_2

You Need to make it MORE clear

Our contracts state payement terms: 50% deposit...50% upon completion (boiler install). They are also reminded verbally: "Mrs Smith, we will be done tomorrow we can "settle up" then.....or, this way you'll have time to hit the bank. I have found that telling them verbally and VERY DIRECTLY and you will generally get your $$$$ then. As straight and assertive as you are, a good percentage of people will play the delay game EVEN after you tell them and write it up. That is when we say: " ok, Mrs Smith....WHAT TIME can we come back to settle up? Never leave it open ended. Service calls for everyone except regular steady and reliable customers is C.O.D. and that is made clear from the first call. Big One: Mrs Smith...will someone be there to pay the man when he is done? Can you leave a check with the nanny? Also, how will you be paying today. Look, Josh, we all drop the ball once in a while and forget to bring it up, but make it a habit and the times will be rare. As you have learned...getting paid in The HARDEST AND MOST IMPORTANT part of business. Mad Dog

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mtfallsmikey

Been there, done that

and I've said this before: For residential service, get signatures for authorization, take all major credit cards (add transaction fee to overhead), have a GOOD lawyer design a proposal/contract form that is airtight, don't do anything else without WRITTEN,SIGNED change orders. If someone wants to "charge" it, give them an open account application. Then, be aggressive with the deadbeats! Establish a reputation that you don't mess around with them. the word seems to get out. Have written collections procedures to back you up.