Question for those self employed fabricators on here

[Sir Sidney Roughdiamond]

Do you take a deposit for your work?

I am finding I am spending more and more time chasing up overdue payment. Despite putting payment terms of 30 days on my invoices I am this morning chasing several customers who are 2-3 months behind. This is starting to become a cashflow problem now. I seem to be working harder than ever but this month I can't see me taking a wage.

 

[rtbcomp]

I would take a deposit to cover materials at least from punters who turn up out of the blue.

Regular trade customers are more difficult, you have to decide whether their custom is worth the hassle or whether they'd be offended by being asked for a deposit. On the other hand asking for a deposit may appear as being business-like and may impress customers, but then again they may be worried you'd make off with the deposit and not do the work!

 

[gavuk]

I agree with Roger ,not un-common to take a deposit to cover materials,explain to customer ,if you buy materials with their deposit there is no chance of material costs rising ,so your quote is fixed

 

[chunkolini]

I always take a deposit, never cut metal before some kind of downpayment.
I have always done this, I have a mate h hadn't used to bother.
He has a lovely half built wrought iron banister as a souvenir, and a legal bill.
If people cant face paying a deposit they are not interested in your work.
A difficult one.

Chunko'.

 

[madkayaker]

For a contract to be valued there has to be exchange of money. I normaly ask for a deposit for materialS unless its a regular cliant

 

[astro_al]

First job I had - went out and bought a few hundred quid in materials, spent time on the design etc, next thing I hear: 'oh don't worry, we've bought one now...'. Lesson learned.

Its easier to put a piece of standard text on your quotes stating that a deposit of 25 or 30%, or whatever you choose, is payable up front. What you don't want to do is make it look like you're making a judgement on the customer and then asking for one - like sometimes they'll ask 'would you like a deposit', don't go 'umm, actually, yes that wouldn't be a bad idea' - you might be thinking about materials cost, but to them you are thinking about whether they look like they'll pay. Best to have a rigid policy and stick to it.

I have customers who repeat work, and I never take a deposit. It stings at first, but there is little risk, and it evens out in the end.

In my first year, I did a few things at or around cost price, to build a 'portfolio', I also took no deposits. Now things are more serious I can confidently 'require' one, and charge a reasonable rate for my time.

Al.

 

[piman]

Hello all,

as a matter of interest we have just ordered a 3,500 litre stainless steel tank from a local manufacturer, four to six weeks delivery. After confirming the order and approving the drawings we received a pro forma invoice for the whole job, for immediate payment. (Approx £5,000).

A couple of years earlier the same company did three tanks and asked for a down payment to cover materials rather than full payment as now. Times are hard and this is a well known company been in existence for many years.

Alec

 

[brightspark]

Hello all,

as a matter of interest we have just ordered a 3,500 litre stainless steel tank from a local manufacturer, four to six weeks delivery. After confirming the order and approving the drawings we received a pro forma invoice for the whole job, for immediate payment. (Approx £5,000).

A couple of years earlier the same company did three tanks and asked for a down payment to cover materials rather than full payment as now. Times are hard and this is a well known company been in existence for many years.

Alec

the reason being. firms going bankrupt left right and center and taking other companys down with them . i was owed 6 grand by a firm i did work for . managed to get it off them fortunately then i wanted paying every month and gave them a limit of 500 quid credit . they went bust and owed me £200 no great loss

 

[scott0031]

Hi piman,

I'm assuming this was by agreement? Out of interest are you happy with these terms in this climate?


Kind regards,


Scott (ward eng)

 

[wobblemonster]

In France they do it a bit different, if I undertake a job its broken down into payments

10% on accepting estimate( non refundable)

30% On starting work

30% Stage payment

30% On completion

I prefere the French way

Over here it is illegal to issue a cheque without funds to back it up, they blacklist you and stop you having a bank account for 10 years

 

[piman]

Hello Scott,

we were a little surprised and had expected the earlier terms of part payment. However the company's work is very good, they are local and we need the vessel so we have proceeded.

Alec

 

[scott0031]

Do you take a deposit for your work?

I am finding I am spending more and more time chasing up overdue payment. Despite putting payment terms of 30 days on my invoices I am this morning chasing several customers who are 2-3 months behind. This is starting to become a cashflow problem now. I seem to be working harder than ever but this month I can't see me taking a wage.

You could always introduce a late payment % charge on your terms. Many companies do this. Its normally more of a deterrent than something that is enforced. I know its not always that easy as really its the bigger of the two companies that dictates the payment terms. Little man has to accept the terms of the customer if bigger, if ya don't no work for you. It's harsh and i personally do not agree with the way things work in business. The massive amount of credit in this country is one thing that snarls it up.


I think you are and should be entitled to ask for a deposit as a commitment from the customer. It's a two way deal and not one way. Why should you take all their risk on top of loaning them money for 2 or 3 months or how ever long it takes them to pay? That's what it boils down to.

The way i work is this if i have work from what i would call a private customer. IE a member of the public wanting a gate or something. I would ask for a deposit, they are a risk and open to changing their mind with no notice. With companies that are sizeable i have to accept their terms or do not work for them, there is no choice in this case.

All you can do is try to evaluate the risk. Take into account if they are are a sole trader a limited company or a member of the public. The 3 have varying risks, the highest risk being the limited company. (believe it or not)

Its all very well having loads of work and keeping busy, but that work is only good when the money is in the bank. The job is worthless until you are payed. Having loads of work and not getting paid for months on end which is typical, is only a vanity thing. Doing the work and getting paid in a timely manner is sanity. I know which i prefer.


Kind regards,


Scott (ward eng)

 

[Drains]

Piman, i'd object to paying the full amount up front for an order, particularly on a vaguely extended delivery, just as I would find it reasonable as a supplier to ask for a deposit. Why? Because EITHER party might fail to fulfill the contract. If your tank supplier goes bump, what guarantee is there you will get either your tank, or your money back? Although you accepted their terms because you need the tank, perhaps you could have negotiated better terms, as they almost certainly need the work.
Staged payments are a winner (mind you, if the supplier goes out of business, you still don't get the tank).

 

[pidgeon chit welder]

If you consider yourself as a free of charge bank then never ask for a deposit .

A deposit after a certain percentage has some sort of legality of contract I seem to recall .
I ended up asking for and getting deposits of around 400 from private customers for a £1500 job and about 5% from some bigger jobs then staged payments.

Stops them reneging on the job knowing that they have paid you money and discourages the sort of customers you really do not want ..the ones that cause you to lose money by failing to come collect & or pay for a job .

 

[Mikey D]

Is the tank coming from Fabdec piman? Certainly a well established company ...

 

[piman]

Hello Drains,

yes, you are quite right but we feel pretty confident in the company.

Mikey, yes spot on.

Alec

 

[Sir Sidney Roughdiamond]

Cheers fellas for all the replies. Plenty for me to think about.

Talking to someone today about the problem and he had a novel spin on the late payment charge Scott mentioned. He mentioned maybe putting on the invoice something along IF THIS INVOICE IS SETTLED WITHIN X AMOUNT OF DAYS FROM THE DATE SHOWN THEN X% DICOUNT WILL BE DEDUCTED. Obviously X% meaning you would have to put a skim on top of your original quotation, but as happened with me this morning it goes someway to making up for the 4-5 hours fannying on with phone calls and knocking on doors etc. and also as an incentive to the customer.

One job I was chasing today I was owed just shy of £1k yet after materials galvanizing and powder coating only £230 was labour. The invoice date was March 1st. The customer is a retail business who I had never dealt with before but I got the job on recommendation. I paid the steel stockholders, galvanizers and powder coaters ages ago. I think in cases such as this in the future I shall certainly be asking for a deposit.

 

[Drains]

Ah, I see your problem Sir SRD. If you only make £230 labour chrge on a £1k job, they don't pay you cos they think you're doing them a favour!
You think that someone in retail has such a crappy markup?
Really mate, you're taking the **** out of yourself! Sorry, I don't mean to be rude, but really, surely you deserve better?

 

[rtbcomp]

Prompt payment discount is a good ruse, the smaller firms tend to take advantage of that.

One thing you could do is put deposits into a client's account, so if you go bust the client's money is safe - that may give the customer some confidence - ask him to make the cheque payable to "Fred Bloggs Client Account." It does mean you can't touch the cash until the invoice is issued.

If you're registered for VAT issue a Request For Payment rather than a tax invoice, then issue the invoice on receipt of payment. That way you don't hand the VAT over until you have the money and the customer cannot claim the VAT until he pays (assuming he's VAT registered)

 

[paulmowers]

Simon (drains) is spot on really, under 25% profit on a job is no good to you at all.
Plus paying for all extras they want up front is not a good place to be either, If i have to have galvanising done or a special made like a cast iron plaque to go in a design I will get money up front first, the only exception would be with someone who i have dealt with for years and am 100% certain they will pay.
Remember poor cashflow management is what causes most business failures.
If they don't want to pay, and pay on time, then they are not the sort of customers that you need.
Regards Paul