Deposits anyone????

[Don EMS 14]

How many of you ask for a deposit if your scheduling work more then a couple Weeks out. We just started asking for a 25% deposit if the job is to be done more then a month after its scheduled. We send out the invoice, a envelope w/return address and a letter thanking them for using our services and that if a deposit is not set out within ten days their job will be canceled. Its seems to be working good so far, haven't had any complaints yet. I think its a good way to keep people from backing out the day before you arrive.

[Beth n Rod 1,279]

Light reading : )

How to Manage Your Small Business Cash Flow Effectively

And there are a bunch of things here...

Improving Cash Flow, Accounting/Bookkeeping Article - Inc. Article

Beth

[RPetry 564]

Ken Fenner and Tony Szabo described how we operate our business day to day. Most of our customers come from referrals, thereby 'prequalified'. Most of our customers are upper middle class or higher on the income scale, they can easily afford the service. But what is really important is the 'trust' factor.

At least in NJ, residential contractors have a poor reputation. Bad press abounds, and it seems that many homeowners have been ripped off by non-performance, or late and shoddy work. If not, they've heard and read the horror stories. To stand out from the rest of the horde, a 'no deposit, payment in full when completed' policy is a powerful sales tool. I trust the vast majority of my customers, and I want them to trust Windsor WoodCare. Going on six yrs. now, we have never had a non-payment problem on any job. Better knock on wood!

I do make exceptions. On new customer jobs estimated over $300 in materials, or labor lasting > 4 days, I will often require a deposit and/or progress payment, but only after completion of the first day of work.

A few times I've sensed bad vibes from a customer, and my trust level was low. In these cases a stricter deposit/progress payment was agreed and stated in the contract. Thankfully to this point, my sixth sense has been wrong.

[Beth n Rod 1,279]

I find that no matter how dependable a company may be in fulfilling it's part of the contract, there is the other half of the equation which involves the customer to fulfill their obligations.

Ever get these types of responses?(commercial accounts do this to us)

We don't pay for 30, 45, 60 days after the work has been completed.

We haven't received your I-9

We don't have your insurance certificate showing our company as other insured

All this regardless of "Payable upon date of completion. No net terms extended." written on the contract. This is for first time contracts until credit is established. It is not a given. They never make these requirements up front but as a dodge to stave off payment. Not a good business practice and one I will not do business with again.

Most new commercial accounts have breached the contract payment terms despite our responsiveness and proficiency on the job completion. We operate with the same regard as retail. You want it...you pay for it before you go out the door. This saves us money in collections, staff time, communications costs and helps us to keep our costs down. It is responsible business. Bearing in mind that we are expected to pay given the terms to which we have agreed, I don't consider it a stretch to ask the same of anyone we do business with. We extend net terms to those who have shown financial responsibility and those are a relative few in which we have ongoing business relations.

They call, we do, they pay. It's that simple.

While I can see others points here about not requiring any down and the possible benefits. Thats fine to operate without a net. Just wait till you get burned. I feel that placing any faith in our economy is a huge mistake waiting to happen. I for one will not allow our company to be vulnerable to an ill turn in it.

Cash accounts only.

Rod!~

[kevinw 14]

This is a great thread...it's great to see how different folks fun their biz, and why. Just a quick example...recently had granite counter tops installed in my home and the terms were cash up front. Their logic was that the granite was cut to fit and couldn't be used anywhere else...cash up front. I didn't like it, but if I wanted the counter tops that's the way it was going to be.

We always get a deposit...always. I have a 30 day back log right now, and we're focused on schedules. Before we took deposits we had a couple of customers that waited until we pulled up in front of their house to let us know they'd changed their mind...or this wasn't going to be a good day...or whatever. We lost a day of production. Couldn't go to another job because they weren't ready for us.

I have run into instances where the customer wasn't happy with the job, and never intended to be happy, so he didn't want to pay. Kinda like taking your shirt back to the store...but you have to have a reason or you don't get a refund. Perfect reason...it's the wrong color. We went back to Mr. "Not Satisfied"'s deck 5 times...he pulled the wrong color...we showed him that it was the color he chose and signed off on...but we re-stained anyway...this board doesn't look right...replaced it...too many knotholes (they were already there!)...replaced it. Bottom line, we had to take him to court to get paid.

Now we take deposits. When the customer wants to know why, we tell them the deposit gets them a spot on the calendar. No deposit, no spot. If they cancel, the penalty is 25% of the contract price. We haven't had a problem with it. If they want to know why...it's company policy to deal with cancellations. If they say, "we won't cancel"...we say "that's what the other guy said too."

It works.

[squirtgun 122]

Kevin,

I need a copy of your residential contract.I want something that iron clad that shows the homeowners signed off and agreed to the deposit and cancellation fees.We no longer actively pursue wood restoration,but I have come to the point with cancellations and whining HO's that I need to get something more solid.

[Beth n Rod 1,279]

Scott,

Check with your local state and see what your consumer affairs office has in the way of verbiage that is accepted where you are. In Maryland there are certain things we have to say, in order to be compliant with the law. If you are following the laws that govern the consumer affairs act you can't go wrong, since you will have communicated to the consumer the way the law says you must. That's the best suggestion I can offer.

Beth

[RPetry 564]

Rod,

Your business and others are run one way, Ken, Tony , myself and probably others are run another. There is no strict answer. Tony stated he's been in business for over 16 yrs., Ken and I at the 5 - 6 yr. mark. We have all somehow remained in this business. In our markets, we have gained an "edge" with another approach. Hey, whatever works. Commercial accounts are a completely different animal, and I agree with much of what you posted on commercial credit.

I feel that placing any faith in our economy is a huge mistake waiting to happen.

What? You have no faith in the US economy? We're the largest economic powerhouse on the face of the earth, past, present and for quite a few years in the future. I do not understand the scepticism.

I for one will not allow our company to be vulnerable to an ill turn in it.

Price of oil, concurrent 1st world recessions, market crashes, anyone who's lived for more than 15 yrs. has been through all three. Ill turns are always around the corner, so what? How are you going to protect See Dirt Run!? By taking job deposits? Moving to Chavez's new socialism Venezuela? You cannot be serious in believing what you have written. Chicken Little has not gained the upper hand. America remains the promised land of opportunity.

[PressurePros 249]

Rick, I have my hand over my heart humming the Battle Hymn of The Republic. Good post (as usual)

I respect Rod's and anyone else's way they choose to do business. We are all passionate about what we think works. That's why we started businesses, right? So we didn't have someone telling us how to do things. I follow what my market dictates to me. Its like the contracts we all have. Each year they get longer and more strict. Welcome to the trades.

[kevinw 14]

Kevin,

I need a copy of your residential contract.I want something that iron clad that shows the homeowners signed off and agreed to the deposit and cancellation fees.We no longer actively pursue wood restoration,but I have come to the point with cancellations and whining HO's that I need to get something more solid.

"There are no promises, agreements nor understandings not expressed in this proposal, and this writing constitutes the entire agreement. All agreements are contingent upon strikes, accidents, or other causes beyond our control, and are subject to approval and acceptance by the company. If this is a credit transaction, credit documents will contain information as to scheduled payments and interest rates in case of legal action. Owner agrees to pay all attorneys fees and and cost of collection.

This message applies to door to door sales only. You, the purchaser, may cancel this agreement any time prior to midnight of the third business day after the date of this transaction. Purchaser understands that if this agreement is canceled after the rescission period, that the purchaser is liable for twenty five percent (25%) of the total sales price as damages to the Contractor. This is not an "Estimate", this is a legal binding contract.

[Beth n Rod 1,279]

See that's the cool thing about this, you make a decision that works for your company...and it's really a great feeling when it works for you. There is nothing wrong with either approach. It's all good! :groovy3:

Beth

[Beth n Rod 1,279]

Rod,

What? You have no faith in the US economy? We're the largest economic powerhouse on the face of the earth, past, present and for quite a few years in the future. I do not understand the scepticism.

Comparing the dollar against the other countries and the buck is down. Look at inflation, the stock market, G.N.P.(gross national product) consumer price indexes, they are all in un-healthy economic status ranges.

Price of oil, concurrent 1st world recessions, market crashes, anyone who's lived for more than 15 yrs. has been through all three. Ill turns are always around the corner, so what? How are you going to protect See Dirt Run!? By taking job deposits? Moving to Chavez's new socialism Venezuela? You cannot be serious in believing what you have written. Chicken Little has not gained the upper hand. America remains the promised land of opportunity.

I am serious about it. We are on shaky ground and it isn't getting better with consumer confidences running so low. Don't even get me started on the billions in deficit dubya got us into for his war of retaliation. He is trying to get another going next door to Iraq. We could probably go round and round but from what I see in the business section of the post, well, you go see...:)

Rod!~

[Chappy 138]

I was hoping to never again get involved in a discussion of GW and this economy. and Im not going to now. Dang proud of myself.

anyway, deposit takin only on jobs that take materials, decks, pavers, large roof cleaning jobs etc. as for commercial, I beleive that you should have enough in reserve before you accept the contract or you shouldnt take it. No commercial bus here is going to put a deposit down. they'll call the next guy. the only problem Ive had is a massive commercial project with $65k in receivable for 60 days. then I was sweating, but the client was govmt. so I knew the money was going to come eventually. and I only had about $12 in labor and expenses already paid out.

I will keep getting deposits, but Ive never been screwed even on the ones where I dont.

[RPetry 564]

Rod,

Not sure how old you are but suspect I have more than a few years on you. Let me tell you about the "doom and gloom" prognosticators and American skeptics throughout just my lifetime.

In the '60's, remember the book, think it was Silent Spring by Rachael Carson? Was all the rage. Pesticides were killing nature and humans. We were all going to die. Fact is, pesticides are used more today than ever.

Maybe a bit later was the "population time bomb". This remarkable idea was that humankind was breeding itself right out of the food supply. Potable water and food production would not keep up and half the world would starve. Really, bet at least half of Americans took this as gospel. What happened? Population soared, but so did food production. Agriculture expanded at a tremendous rate, thanks in part to the use of more pesticides! Mass starvation today is nowhere near the levels at the time this nonsense took hold, while world population has since maybe doubled.

In the early '80's my family business was living on bank credit. Interest rates were at 18%! A partner and I had been trying to finance a startup at the time. Let alone walking on eggs with an old established business, a new venture at those rates was just not feasible. Talk about "doom and gloom". Everyone thought it was the coming of the next Great Depression. What happened? Change of executive branch administration and economic policy jump started a furious economic comeback. Ever wonder why so many older Americans loved Ronald Reagan? My family business survived, and the startup venture went no where but in '82 successfully launched and operated another startup on my own. There were no soup lines, no Depression, and the American economy roared back, bigger and better than ever.

Again, in the I think '80's, Japan was taking over the world. Their management, culture, quality control, etc. was burying American business. We were doomed. What happened? America remains on an upward economic growth curve while Japan has been mired in little or no true growth for what, 15 to 20 years?

In Sept. 2001, this country suffered a huge blow. The financial infrastructure in the US and much of the world was dismembered. What happened? The stock market tanked. So what? Slow hands took a beating, and my wife and I had substantial paper loses in equities. Friends with weak hands and no faith finally bailed near the bottom. Then what happened? Real estate went through the roof. The equities markets came roaring back! For two years, I did a lot of trading and made money without having a clue! The DJIA over the past 50 years has yielded ~ 11%/annum with dividends. Compound that. Take a look at a long term DJIA chart since 1920. What do you see? Think thats going to change anytime soon?

Ok, so the looming disasters of the decade are national debt, Iraq war, global warming, energy crisis, a booming China, poor public education, too many fat people. Newscasts and the media love to trumpet this trash. And most people are sheep, blindly believing background noise without thought.

There are problems, real measurable issues. But is the US becoming the next France? Are we all going to die from heat or drown from rising sea water or eat ourselves to death because we're too stupid due to bad education? Is China going to own each and every American? Back to the buggy due to no fuel for our cars?

Please. Doom and naysayers have been around much longer than I have. They generally are short term prognisticators, either making a buck off of feeding the masses this sensational pablum, or just miserable people trying to justify their unhappiness. They have no knowlege of history or appreciation of the strength, will, and dynamic change the American people and econcomy have demonstrated time and again.

In short, I think most of this hand wringing, Chicken Little worldview is pure, unadulterated B.S.

[PressurePros 249]

If this is what you write after you have a few drinks I'd hate to see what you can crank out sober as a judge. Nice writing, Rick.

[RPetry 564]

Ken,

Two Bloody Marys is not drinking, its refreshment. Writing tonight cut substantially into my happy hours.

I just get very ticked at this constant stream of negative stuff. I think its mostly trash. What did Spiro Agnew say, "nattering nabobs of negativism"? Now there was a fine American. A true entreprenurial, corrupt, slimeball politician.

Ever wonder how many judges are really sober? After all, most were attorneys early in their careers. Got a fun lawyer joke:

Diogenes went to look for an honest lawyer. "How's it going?", someone

asked him, after a few days.

"Not too bad", replied Diogenes. "I still have my lantern."

[PressurePros 249]

Speaking of Diogenes and the Cynics, Rick.. ever want to just get away from everything and live a life free of the herds? Nobody relying on you to perform to a standard or forcing you to listen to their regurgitated rhetoric? Just you and maybe a loved one.. out in the wilderness living self sufficient bliss.. I know Jon Fife would come with us and build a log cabin. Then we can stain it.. back to reality.

[James 625]

Rick ,I'll drink to that............

[Beth n Rod 1,279]

Rick is an intelligent guy and I respect what he has to say. My perspective on the economy remains.

With respect to others here, I think I took this thread off topic.

My apologies. Back to deposits anyone?

Rod!~

[kevinw 14]

My favorite deposits are the ones that go in my bank account!

[jnoden 15]

Taking deposits have many benefits. Another one is that when you are booked out and people are trying to get their work done asap. Now the next bidder gets the job mostly because he can do it sooner. I got burned on a $6000 job a couple years ago because of this. The guy told me I would have the job but he wanted it started before the three weeks that I had told him so he gave it to another guy. If I would have sold the job and collected a deposit.....

they will not have other estimates completed even though they scheduled the job with you.

you can rest assure that the $300 you just spent on that dark red or brown sealer is an investment and will not just sit around

reduce sticker shock when handing them the final bill

Id say even if you risk only one job cancellation per year then it warrants taking deposits. Of course there are exceptions to the rule and money can be refunded if the cancellation is an absolute necessity.

[sealerguy 14]

30-50% down after cleaning seems to be fair, I have also thought of 10% down upon acceptance (non refundable) to eliminate the customers who "shop around while they are waiting". After all, we drove for the estimate, maybe spent time with the customer, and scheduled the job. I get a few a year but still haven't done it, anyone else?

Edited February 16, 2009 by sealerguy

[MudDuck 20]

Rod,

What? You have no faith in the US economy? We're the largest economic powerhouse on the face of the earth, past, present and for quite a few years in the future. I do not understand the scepticism.

Price of oil, concurrent 1st world recessions, market crashes, anyone who's lived for more than 15 yrs. has been through all three. Ill turns are always around the corner, so what? How are you going to protect See Dirt Run!? By taking job deposits? Moving to Chavez's new socialism Venezuela? You cannot be serious in believing what you have written. Chicken Little has not gained the upper hand. America remains the promised land of opportunity.

LOL thought this post was funny revisiting it ONE year later,,,No offense Rick, aint 20/20 hind sight a *****....LOL

After almost getting burned last year where I bid two of three decks on a home, (they did not want the 3rd done "it doesn't need it")...I took 1/3 down for materials then did the job over the weekend while they were out of town at their request and pick up check on Monday. Well no one home on Monday, then called all week then on Fri still no anwser or call back I drove out 26 miles one way to the house and "caught" the lady home. The lady loved it but was mad because the 3rd deck looked bad next to the two I did and she thought I should "just work it in" FOR FREE!!! (a 10x20 deck w/ rails) And tried to hold my 2/3rd final payment as hostage to making her happy,,then wrote a check for the second 1/3rd and wanted me to talk to her husband about the final 1/3rd. I refused it and refused to leave until I had the final payment IN FULL as agreed!! I got about as ugly as I've ever been with a lady, almost threatening, and told her she better get her husband on the phone if thats what she needed to do but I expect to be paid before I leave.. I wasn't making another 50 mile trip to have a convo we could have had any time this week if you would have returned my calls. She got him on the phone and he told her to write me a check in full...I then RAN straight to their bank and cashed it,,LOL,, From that point on it's 1/3 before job start (for stain costs) 1/3rd after strip / clean then final 1/3rd at completion...PW and House washes are different as there isn't several hundred dollars of materials involved. I don't require deposits for them unless it's going to be awhile until job so some lowballer doesn't shoot you out of the saddle. But that might change if I get burnt.