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Construction Programs & Results Inc

We Like to See The Good Guys Win!

Payment Schedules in Construction

by Michael Stone

A question came in this week from a potential coaching client about when to schedule payments on their contracts.

You should get a down payment of some kind, and then a payment about every two weeks. Small jobs should have at least 3 payments. It is better to get smaller payments and more of them. This will improve your cash flow.

Remember, your customers can argue about when some phase of their job is complete or not, but they can't argue about when you start a phase. So schedule your payments at the start of the phase, not the completion.

Comments

That's a very good idea, using the DSC and DC method. I do believe I'm going to try this in my next contract.....I'm growing very tired of the "games" that more and more homeowners seem to be playing. 2006 looks like it's going to be a good year for my attorney......checkmate.

Sonny Lykos (not verified) /

Furthermore, because some members of the public will play games with the last payment, I suggest making that last payment no more than about 3% of the contract price.

The next to last payment is called a "Declaration of Substantial Completion", which means the area is ready for it's intended use. Punch out items may still remain but no punch out item prevents the areas from being used.

The last payment, that 3% or less (like $2000 for a $200,000 project) is called a "Declaration of Completion" meaning all punch out items have been completed.

If one makes the last payment say $10,000, that's $10,000 that can be played with (and too often, is) and used as a "negotiating" amount for whatever reason the customer deems "right" in their mind. Baloney. Use the DSC and DC to prevent "innovative" customers from keeping "your" money in "their" checkbook.

 

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