Like most shops, cash flow concerns are a constant struggle in our business. One of the major factors is not because we are not efficient, but because we struggle to get invoices paid on time. Often times we are given the following excuse from our contractor:

"The client has not released payment to us yet. We will release funds to you once we are paid."

While on paper, this sounds like a reasonable excuse, it puts the person at the bottom of the totem poll(us, the cabinet/millwork shop) in a tough spot. I looked online and did not see evidence of other shops instituting a late fee penalty, and was curious as to how other shops are handling this problem.

Constant battle for me as well.

Simplest solution, quit and get a normal job. Crosses my mind daily.

Outside of that, change your terms. Don't start a job until it's paid in full. If that's a problem, he can try and find somebody else. You're not short on work.

Tell them that next project won't be started until the previous job is paid in full.

Call daily. Maybe twice daily.

Park in front of his house and tell him today is the day.

I have contractors that are slow to pay. I have contractors that jobs are paid in full before we even start. Guess who's phone calls get answered immediately, or a solution to a problem is created quickly? Guess who's isn't?

How long is the average late payment? Are they residential or commercial? Unless you know the general contractor is sitting on payouts, I'd give them some slack. They are aware of what it means to get late payments for their business too. If the late payments are causing you enough financial hardship that you are about to go out of business, I've have a sit down with them and work out terms.

I'm with Karl. Our jobs are paid for before we deliver. I sleep much better now than before we instituted this. That being said, most of our jobs are residential.

Yes, this is always a problem.

One of my favorite vendors will occaisionally call me and just fess up that he has several other projects waiting for money, so could I perhaps pay my bill. It works every time. I'm happy to help. So I guess a little up front honesty can help when in a pinch.

We have recently changed to everything less 15% to be due after installation (by us). Being pretty rigid about this has been like a weight off my shoulders. But I'm embarrassed to say it took me a while to wrap my head about asking for the money up front. It doesn't always work, sometimes they don't pay immediately, and we just want the cabinets out of our shop.

I'll bet I could go to 5% due after installation and it would still work. I mean you and everyone else pay for most things before you get them. Remember that. You are not someone else's bank.

.ahem.. I need to edit the above slightly!

We have them pay up to everything less 15% the day they are to receive the cabinets.

And I never really responded to your actual question- I have a late payment penalty on our invoice. I NEVER enforce it. Things just don't work that way, unfortunately. It seems like they should, but at least to me, they don't. Better to get the bulk of the money at delivery.

We get 50% deposit, and state we like the balance shortly after delivery.

When I started my shop 32 years ago, I diligently applied some percentage to late invoices. I was laughed at. One of those laughing said "Boy, you are no ATT!" He was right, little guy gets no respect. If they had signed the paperwork that clearly stated penalties, then you could fight them in court. But you will never do work for them again.

So..... No contracts, no signatures, just keep in touch and stay friendly. If someone is going to be late, jack up the price next go around, but don't mention it to them unless they specifically ask. I have had one guy go bankrupt on me, and several had to pay by the week or month until paid. I prefer working woods rather than creating and enforcing contractual documents.

I have found when working with contractors they don't like to put their money out, If they are paying cash, they will often drag out the Job as long as they can so they get paid and don't have to use their own money, Homeowners are usually better to work for, you don't have to give them a wholesale price and they pay you when the job is done. That being said you will do one kitchen for a home owner and you could do 10 a year for a contractor, so you. have to make it work.

We put in for shop drawing fees and materials draw telling them to bill the client for the money

I have one gc that is for Sh........ most are good

Keep this ball rolling and it's pretty easy on the momentum thing to keep the cash rolling but it's gonna take diligence on your side and knowing the billing cycles

This all comes down to leverage.

If it's for a private customer you can make up whatever terms makes you and them comfortable. 10-15% upon delivery has become more of the norm in our neighborhood. Back in the day it was 1/3.

If it's a GC they typically think that they have the leverage because they are the middle man. At the end of the day, if they want you to work for them you can set the terms. If you want to work for them, they set the terms.

In that case, I mean the actual terms, not what you wrote on the contract and you both signed.

Unfortunately, you will become jaded as a small business owner. There will be the good, bad, and ugly aspects of your business relationships.

Usually, you can figure out how each GC operates after the 1st or 2nd job. Unfortunately, for some of them you have to add a financing fee to each of your bids because of their prior history.

Your moral compass may say "I'm overcharging the customer". The reality is the GC is overcharging the customer, because of their incompetence, them not paying you in the past on time, or they don't care about you or your business.

After it all goes sideways you can make death threats, threaten liens, sue them in small claims court, or harass them with a collection agency. But that will be the end of that relationship.

Communication is the key. Don't be afraid of being politely blunt and telling them the last jobs payment schedule wasn't acceptable. If you don't call them out on it, you have enabled them to do it again. Based upon their response, you will know what type of GC you will be dealing with in the future if you so choose.