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What do you guys think of this? If you go to one of the big box stores and order something that is made to ordered you will pay the full amount for the item but not the installation. If some one orders cabinets from any of us and it is made to order,we're did this 50% down payment come from. We have mis labeled manufacturing labor for construction labor. I would love to hear some input and how would you approach this to a client.
We get 50% up front, remaining balance must be paid in full prior to delivery. No exceptions for custom cabinetry.
Ask for anything you want. If the customer wants your work, then have the contract ready with the payment schedule you want.
50% is shared risk. They are entrusting you that you won't run off with half the money. You are entrusting them that they will pay you after you will have incurred 100% of the costs despite only receiving half the money. Asking them to pay you 100% up front is a lopsided business deal. No way I would ever do that, would you?
Furthermore, these are custom cabinets. There's no guarantee that you've done your job well and that they'll fit. Until the job is complete and fully installed, the cabinets are worthless. Even asking for the balance before delivery is presumptuous in my opinion.
It seems like these posts come up a lot. Is it because we're worried about not getting paid, or because we're having a hard time financing these jobs through completion on 50%? Two separate issues worthy of two separate conversations.
B- I agree with you that you get paid before they get them and most of the time there is not a problem. Do you have an insurance policy that will pay you in case they can't ?
Rich- I agree with the contract but that is hard to do if the norm is a 50% system
DS- if you go to any big box store you will pay for it up front such as a window from Anderson that is made to fit my opening. The big manufactures are not going to be banks these day I also see this with hardwood mills want to be paid in 10 days. For if the cabinets are done right or not is a contract issue not payment issue. Since suppliers have now broken the chain of 30 day accounts this I think changes the way we do business as we the companies do not become the bank and the client now has to pay before custom or made to order is built. Another way is 30% down 30-30-10 and with technology today the client dosent even have to come to your shop.
As already stated earlier by rich, anyone is free to ask for whatever they want. But if I can sense a little desperation in these posts, then certainly the customer can. The comparison of payment policies of a custom cabinets to that of a modular cabinet is not apples to apples. Size, specie, color and dozens of design choices make for a product where a lot of things can go wrong or be miscommunicated. And if any single one of those dozens of choices is wrong, then the cabinets could very well be worthless. That 50% is the only leverage the customer has to ensure that the job is performed to their expectations.
I'll make a comparison. In 25 years and hundreds of jobs, I've yet to witness a granite countertop job that was built to exact specifications. Invariably they will get an overlay wrong, the seam in the wrong spot, the sink off center, the wrong slab was used, the grain direction is incorrect, etc., etc. I personally would never pay a granite fabricator 100% up front for this very reason. I believe our customers should be extended the same courtesy.
So with all the computer software that's out we still have a problem with quilfied labor that seems to affect not just production but now trust between companies. I'm surprised we can get the 50 down with all the dis trust in the industry.
I've never had any issues with a down payment. If there is that great distrust that you mention, why would they give you any down payment at all? Most of my work comes from word of mouth. That puts them at ease before you ever walk in the door. Other work comes from designers. Same thing, they have personally vouched for me before I show up.
We switched from 50/50 to
60(payment)/40(delivery/10(installation) about 15 years ago. I will not argue with people about it. It is simply how we run our billing on shop work.
I believe a lot of our billing ideas in construction go back to when a carpenter was hired to build some cabinets. He asked for a 50% deposit and full payment on completion. He was buying the material from the lumber yard. He built in on site or in his garage. The material would cost roughly 1/3rd of the project. The payment system had some trust and ease in both directions.
Unless you are a trim carpenter building cabinets on site, this payment method is generally flawed for a high overhead company.
Pinetree, you should try commercial work to develop an appreciation for your 50% deal. Nothing down, 60 to 90 days to first draw, 10% retainage until entire project is complete, not just your part! Stacks of change orders. Schedules that change daily. Welcome to the real world.
The term I used was "entrust", meaning "I trust you with my money". I did not say distrust, as in "I'm only giving you 50% because I don't trust you". Some of you are choosing to hear what you want to hear to better fit your perspective. If I did not have trust in a customer or contractor or if I felt they did not trust me I would not do the job.
I'm not sure I understand the correlation between the use of software and a mistake free product. Software does not read minds.
Once again, it's about mitigating risk. For both parties. You have risk, they have risk. Fair is fair.
Do you guys pay your door vendors 100% up front before they start production?
Im actually on Pinetree's side of this but mainly with regards to small customs. I could never imagine a customer paying 100% for a job with a long fabrication window, then an installation window, even though thats how the big box stores run.
We are seeing a lot of our contractors, designers, and so on, paying invoices in full upon receipt but again these are sub $20K jobs. They are accustomed to virtually no terms on sales as many of them purchase from outlets that dont offer terms period (big box, ikea, wayfair, amazon, and so on).
I dont get terms from a lot of my suppliers. Their invoices are due upon receipt. When someone comes into my shop and orders a half a dozen function tables they pay the invoice, and the job is run and delivered.
Installation work is another animal.
With our products, we generally run a 50/50 deposit and balance on the majority of our orders, but most are delivered within 3 weeks of the day we start production. So we have a fast turn on most orders. Really unusual stuff, we don't hesitate to ask more, and on products I buy and resell, I normally get 60% up front. On rush orders or jobs where we get ask to deliver within a time frame, I get 100%. And to be completely honest, with some of my most trusted customers, I may request 50%, but if the order is under 2k or so, if they verbally commit, I may build their order before the first check arrives in the mail. That is a risk decision I may make to keep everyone busy, and to make my schedue work to my liking. But then my average order is probably between 4 and 5k. And too, window shutters seldom face construction delays like I see cabinet shops having.
I guess what works for your company is what works . If it's 50/50 or the 60/40/10 but the main thing is it works for your company. Larry, the worst thing about commercial work is the GC run your business. He tells you when you will have it ready,what you will do and then tell you when they will pay you. If you don't do that then they will go to the next guy in line. I have seen it over an over happen to good guys that get trapped in that and most lose their business or more when the GC that promised everything then nothing when you didn't play by their rules. Maybe that's why all those used CNC are for sale out there.
I've been doing commercial work exclusively for the last 30 years. Know most of the games played. We ship all over the country and a bit out of the country. it's pretty much the same no matter who you are dealing with. Keep working with the better ones, skip the others. Never work for GCs that are getting big really fast.
"Never work for GCs that are getting big really fast."
True words to live by, @Larry. What do you do in a market like mine where all the GCs fit this description?
Evan, I've seen enough of the "get big fast guys" go down the tubes that I know they are a hazard. Watch your time lines so you get a lien on the job before it is too late. Don't get talked out of it by the GCs. They will be afraid their house of cards will fold once the first lien goes on. They may pay you to prevent your lien. Some states have laws that are pretty much against you no matter what.
Some shops don't charge any down payment or deposit. It's been common practice for long time for larger manufacturers.