Woodworking Business

You are not logged in. [ Login ] Why log in
(NOTE: Login is not required to post)

Holding deposit for upcoming work

5/15/17       
chipbored

Wondering if anyone has some sort of system in place for taking a holding deposit for upcoming work.

Currently in a quiet patch because I knocked back a few jobs with the understanding we would be busy with other work, of course the jobs we were supposed to be working on are delayed so we have a cashflow issue as we can't take a deposit on those jobs until we start.

I am putting together a plan to ask for a holding deposit from those people who have the jobs coming up in the near future so we can allow time in the schedule and I don't end up in this situation again.

People are always funny about giving any sort of money until cabinets magically appear in their house even thought we spend months prior to that in discussions, preparation, materials and construction.........anyway

-10% of job value as a holding deposit to book a job in xx amount of time advance
- Refundable for x amount of days
- Placed in a holding account or none of the customers business how this money is used??

Our standard terms.
All invoices 7 days from issue. Percentages Vary depending on customer
30-50% deposit
40-50% progress payment issued a few days before installation or when factory complete if it's known that the job will be delayed
Remaining on final completion. If job dragging out an invoice is issued leaving a $500 retainer that is paid when we are totally done with the job.

Would greatly appreciate any feedback or experience with this issue

Thankyou

5/15/17       #2: Holding deposit for upcoming work ...
rich c.

No residential job goes into my queue until I get a deposit. If there is a pretty long wait, more than 6 months, I ask for 1/3 for deposit, then another 1/3 with work in progress, 1/3 on delivery. If less than 6 months out, I ask for 1/2 down, 1/2 on delivery.

5/15/17       #3: Holding deposit for upcoming work ...
chipbored

Hi Rich

Thanks for your response. That is great, and I can imagine it helps scheduling and cashflow greatly.

I'm in a competitive market and whilst we have a good reputation we are a small operation and price higher than others with the focus being on quality and good service. I just can't see me fronting up to a customer (particularly builders) and saying they need to pay 1/3rd or 1/2 the job cost 3 - 6 months before we are supplying them with anything. Would love to live in that world but I just cant see it happening.

5/16/17       #4: Holding deposit for upcoming work ...
Adam B

Chip,

We also require a 1/2 down payment to "secure" a spot on our construction calendar. This is in place for 100% of our private clientele. With our established contractors we may give a little leniency to this policy if they approach us ahead of time for a model or such. I will say that our typical turnaround time is more in the 4-6 week category than the longer time frame that you referenced.

5/16/17       #5: Holding deposit for upcoming work ...
Paul Miller

Website: http://MCCWOODWORKING.COM

Unless it is a small job with a contractor we have a good track record with, we always get a deposit. The earlier the better. Contractors rarely meet their schedules so we will not usually turn work away either, even if it appears that we will be over booked.

At typical job will be between $25,000 to $60,000 and we like 1/3 down, and if we can show work in our shop, even if it has not been shipped, we will do a progress billing. When we are completed, it is normal for the Contractor to owe us about a 1/4 or a 1/3. Payment is rarely a problem and this gives the owner security as well. Also, we do not hold this deposit in any special account. We do have to pay sales tax on our sales, so we also pay the sales tax as we collect the deposits.

5/16/17       #6: Holding deposit for upcoming work ...
Jay Member

Chip, you can make excuses why you can't get $ up front and continue to live with this problem and others that stem from this practice, or do as most have mentioned here in some way, get $ up front. This is a business, not a game. Business runs on $. If you approach the need for $ up front professionally and rationally, if you are dealing with someone of the same thinking, you should get the same.
No $ no promises. $ secures your place in our schedule and we lock a delivery date down at that time too. Only very select builders might get a slot in our schedule without $, but they have a habit of respecting us and following through on what they say, so it is a 'perk' for them with us. There is still 0 production or product ordering until I have a signed contract, knowing $ will follow in a few days, even with my best repeat clients.
We require 50% up front, 40 at delivery and 10% at completion. Time till I can install does not change this in the slightest.
Do you get to order a car without $? A mortgage? cruise? air travel? Why is this any different? Part of why I choose not to play in the commercial arena much.

5/16/17       #7: Holding deposit for upcoming work ...
DS

Jay asks "Do you get to order a car without $? A mortgage? cruise? air travel? Why is this any different?"

The answer to that is because we as cabinetmakers have a reputation for being notoriously bad businessman, and I have heard at least a dozen stories over the years of deposits having been given and the cabinetmaker either disappearing, going bankrupt, unable to perform, spent money/need more, etc., etc. We have covered this topic before, and it's true that the vast majority of cabinetmakers require a deposit of some kind. Most of the time I don't ask for deposits, but I don't fault those who do. What I do take issue with is the insinuation that choosing not to take a deposit is an excuse for something, rather than a choice.

In my experience receiving a deposit has not prevented any of the negative possibilities from occuring, the worst of which is not getting paid in the end. At most, you are only guaranteeing that you will at least receive 50% of the contract. If a customer decides not to pay you the balance, you're in the same pickle as me.

Not long ago there was a poster here who mentioned how much more eager customers were to make decisions when you refused their money until those decisions were made. Although that's not my policy either, I thought that was very intuitive. Which cabinetmaker do you think looks more confident and professional, the one who casually dismisses your deposit until you can prove you have the ability to make timely decisions, or the one who desperately asks for money 6 months in advance in the hope that they can survive until your project comes around?

I work almost exclusively with contractors rather than homeowners. When I work with a homeowner, I too receive a deposit for all of the reasons that have been laid out here. But my terms with a contractor are no deposit, progress payments monthly, and from an accounting standpoint it is far easier to invoice for work produced than to try to force any sort of benchmark system that may or may not be provable.

Most importantly, in my experience the moment you take money before anything is built, the contractor has all of the control. They will wield this control in a ruthless manner from start to finish and never relinquish it. Conversely, when you have performed the work, performed it well, and there are clear terms about when you expect to be paid, you are the one in control. If your services are unique and in demand, you hold the position of strength. Slow payment will not be tolerated. Partial payment will not be tolerated. We have given them absolutely no excuse not to pay us in a timely manner, so any hint of it tells me there are other underlying problems within their organization. Ask the job superintendent what those problems might be and see how fast you get a check.

Any fly by night contractor and seedy homeowner can come up with the down payment. It tells you nothing about them. And frankly, you shouldn't need it. A slow paying contractor after you've done the work and the work has been approved and for which you know they've been paid by either the bank or the homeower...now that tells you something.

5/17/17       #8: Holding deposit for upcoming work ...
chipbored

Thanks for the in depth responses. So many great points are made.

this stood out for me "If you approach the need for $ up front professionally and rationally, if you are dealing with someone of the same thinking, you should get the same. "

and DS point about the contractor wielding the power when money is paid.

After letting this advice sink in I had a look through my books and categorized the personalities.
There were interesting correlations between difficult customers and their payment methods/styles.

Thanks for the advice. I'll put it into play.

5/17/17       #9: Holding deposit for upcoming work ...
Ryan

I know a lot of shops ask for a deposit before anything is started and some amount of money at or before delivery of cabinets with the remainder to be paid at completion. How do you deal with it when the contractor or homeowner states that the bank needs to see the cabinets in the house before they will do a draw from the construction loan? I know banks will give out the deposits but its the amount of money that is due at or before delivery that I am asking about.

5/17/17       #10: Holding deposit for upcoming work ...
Dave

This is a fairly simple one for me. I separate cabinet cost from installation. Cabinets are 100% upfront at the time of the order, just like how they are purchased at the big box stores or other similar dealers. I do the same thing with any other special ordered materials for a job.
No $ means no cabinets. Simple, and very easy to understand.

Installation can be on whatever terms you wish, but I would suggest an additional deposit to "secure a spot" on the schedule.

5/17/17       #11: Holding deposit for upcoming work ...
Alan F.

Requiring deposits to eliminate or reduce risk is a policy decision.

Needing deposits because your slow and have no cash flow is a separate issue. If x% of a deposit is OH and profit during the project and we take 50% a year before we spend a dime, if the $ is gone when the projects starts how is the project funded?

A business should have a line of credit for operating and project costs. Choosing to use it to finance projects is policy.

As for the bank, they don't want to finance something that they can't touch, but they will based on the who the loan is for. Just be firm that you require deposits for one of a kind, made to order, non returnable merchandise.

5/18/17       #12: Holding deposit for upcoming work ...
Pdub Member

We take a drawing deposit 1st
Then 50% when drawings are "signed off"
Then, if it's not someone we have extensive history with, the remainder is paid at (or prior to) delivery. I have instructed my guys when they deliver that if they don't get handed a check for $XXX to bring them back. Our good contractors are invoiced and given 30 days.
When someone buys HD cabinets or orders semi-custom versions, they pay up front for the whole shebang.


Post a Response
  • Notify me of responses to this thread
  • Subscribe to email updates on this Forum
  • To receive email notification of additions to this forum thread,
    enter your name and email address, and then click the
    "Keep Me Posted" button below.

    Please Note: If you have posted a message or response,
    do not submit this request ... you are already signed up
    to receive notification!

    Your Name:
    E-Mail Address:
    Enter the correct numbers into the field below:
     

    Date of your Birth:



    Return to top of page

    Buy & Sell Exchanges | Forums | Galleries | Site Map

    FORUM GUIDELINES: Please review the guidelines below before posting at WOODWEB's Interactive Message Boards (return to top)

  • WOODWEB is a professional industrial woodworking site. Hobbyist and homeowner woodworking questions are inappropriate.
  • Messages should be kept reasonably short and on topic, relating to the focus of the forum. Responses should relate to the original question.
  • A valid email return address must be included with each message.
  • Advertising is inappropriate. The only exceptions are the Classified Ads Exchange, Machinery Exchange, Lumber Exchange, and Job Opportunities and Services Exchange. When posting listings in these areas, review the posting instructions carefully.
  • Subject lines may be edited for length and clarity.
  • "Cross posting" is not permitted. Choose the best forum for your question, and post your question at one forum only.
  • Messages requesting private responses will be removed - Forums are designed to provide information and assistance for all of our visitors. Private response requests are appropriate at WOODWEB's Exchanges and Job Opportunities and Services.
  • Messages that accuse businesses or individuals of alleged negative actions or behavior are inappropriate since WOODWEB is unable to verify or substantiate the claims.
  • Posts with the intent of soliciting answers to surveys are not appropriate. Contact WOODWEB for more information on initiating a survey.
  • Excessive forum participation by an individual upsets the balance of a healthy forum atmosphere. Individuals who excessively post responses containing marginal content will be considered repeat forum abusers.
  • Responses that initiate or support inappropriate and off-topic discussion of general politics detract from the professional woodworking focus of WOODWEB, and will be removed.
  • Participants are encouraged to use their real name when posting. Intentionally using another persons name is prohibited, and posts of this nature will be removed at WOODWEB's discretion.
  • Comments, questions, or criticisms regarding Forum policies should be directed to WOODWEB's Systems Administrator
    (return to top).

    Carefully review your message before clicking on the "Send Message" button - you will not be able to revise the message once it has been sent.

    You will be notified of responses to the message(s) you posted via email. Be sure to enter your email address correctly.

    WOODWEB's forums are a highly regarded resource for professional woodworkers. Messages and responses that are crafted in a professional and civil manner strengthen this resource. Messages that do not reflect a professional tone reduce the value of our forums.

    Messages are inappropriate when their content: is deemed libelous in nature or is based on rumor, fails to meet basic standards of decorum, contains blatant advertising or inappropriate emphasis on self promotion (return to top).

    Libel:   Posts which defame an individual or organization, or employ a tone which can be viewed as malicious in nature. Words, pictures, or cartoons which expose a person or organization to public hatred, shame, disgrace, or ridicule, or induce an ill opinion of a person or organization, are libelous.

    Improper Decorum:   Posts which are profane, inciting, disrespectful or uncivil in tone, or maliciously worded. This also includes the venting of unsubstantiated opinions. Such messages do little to illuminate a given topic, and often have the opposite effect. Constructive criticism is acceptable (return to top).

    Advertising:   The purpose of WOODWEB Forums is to provide answers, not an advertising venue. Companies participating in a Forum discussion should provide specific answers to posted questions. WOODWEB suggests that businesses include an appropriately crafted signature in order to identify their company. A well meaning post that seems to be on-topic but contains a product reference may do your business more harm than good in the Forum environment. Forum users may perceive your references to specific products as unsolicited advertising (spam) and consciously avoid your web site or services. A well-crafted signature is an appropriate way to advertise your services that will not offend potential customers. Signatures should be limited to 4-6 lines, and may contain information that identifies the type of business you're in, your URL and email address (return to top).

    Repeated Forum Abuse: Forum participants who repeatedly fail to follow WOODWEB's Forum Guidelines may encounter difficulty when attempting to post messages.

    There are often situations when the original message asks for opinions: "What is the best widget for my type of shop?". To a certain extent, the person posting the message is responsible for including specific questions within the message. An open ended question (like the one above) invites responses that may read as sales pitches. WOODWEB suggests that companies responding to such a question provide detailed and substantive replies rather than responses that read as a one-sided product promotion. It has been WOODWEB's experience that substantive responses are held in higher regard by our readers (return to top).

    The staff of WOODWEB assume no responsibility for the accuracy, content, or outcome of any posting transmitted at WOODWEB's Message Boards. Participants should undertake the use of machinery, materials and methods discussed at WOODWEB's Message Boards after considerate evaluation, and at their own risk. WOODWEB reserves the right to delete any messages it deems inappropriate. (return to top)


  • Forum Posting Help
    Your Name The name you enter in this field will be the name that appears with your post or response (return to form).
    Your Website Personal or business website links must point to the author's website. Inappropriate links will be removed without notice, and at WOODWEB's sole discretion. WOODWEB reserves the right to delete any messages with links it deems inappropriate. (return to form)
    E-Mail Address Your e-mail address will not be publicly viewable. Forum participants will be able to contact you using a contact link (included with your post) that is substituted for your actual address. You must include a valid email address in this field. (return to form)
    Subject Subject may be edited for length and clarity. Subject lines should provide an indication of the content of your post. (return to form)
    Thread Related Link and Image Guidelines Thread Related Links posted at WOODWEB's Forums and Exchanges should point to locations that provide supporting information for the topic being discussed in the current message thread. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related Link that directs visitors to an area with inappropriate content will be removed. WOODWEB reserves the right to delete any messages with links or images it deems inappropriate. (return to form)
    Thread Related File Uploads Thread Related Files posted at WOODWEB's Forums and Exchanges should provide supporting information for the topic being discussed in the current message thread. Video Files: acceptable video formats are: .MOV .AVI .WMV .MPEG .MPG .MP4 (Image Upload Tips)   If you encounter any difficulty when uploading video files, E-mail WOODWEB for assistance. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related File that contains inappropriate content will be removed, and uploaded files that are not directly related to the message thread will be removed. WOODWEB reserves the right to delete any messages with links, files, or images it deems inappropriate. (return to form)