Can you give me some examples of payment schedules? like for jobs that are $50k and less? What are others doing out there? What do you think is best?
2 replies
Feb 3, 2020
There are a ton of different variables which will play into how a specific job gets billed. And, it's hard to prescribe one specific billing schedule that will be best.
With that being said, it's common for jobs to be paid in three distinct ways: First, with a down payment/mobilization costs (very typically under 25% of the job cost). Then, with progress payments that are tied to the work done during the progress period (often billed every 30 days for the previous 30 days work). And finally, a large portion at the end for retainage (often 5 to 10%). Obviously, there's some flexibility at every stage.
Certainly, though, it's possible for different payment terms to make sense for a job. If it's a short construction schedule, quicker progress payments may be in order. If the parties are comfortable with each other, reducing or even eliminating retainage might make sense. If there are high up-front costs, larger down payment might make sense. Or, in the alternative, maybe no down payment is in order.
Ultimately, as long as a reasonable schedule is in place, and as long as both parties clearly and openly communicate their expectations about project progress and payments throughout the job, there are any number of payment schedules that will make sense. But, a contractor should pick a payment plan that makes sense with how they'll need to pay to perform the project, themselves. That way, there isn't a cash flow bind putting the project in jeopardy.
The best structure that has worked for my clients is to require Deposit to start the job and then progress invoicing. This way your client is funding their own projects and you are not drowning in debt. Progress invoicing is usually outlined in the contract and is split up either evenly 30/30/30/10 something like this, or by phases which is my preferred method.
I hope this is helpful! Let me know if you have any other questions!