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Posted by on June 8, 2007, 3:12 pm
Hi,
I just started a business as a plumbing contractor and I was
wondering what the normal procedures on sending in a bid and signing
whatever needed contracts. Currently, I just looked over the plans
for the job site and I figured out how much it will cost for materials
and labor. Now that I have that done, what else needs to be done?
What is this whole concept of progress payment? I understand you get
paid for the work progress you make, but do I have to pay for the
material expenses up front?
The construction company that I'm working with is saying that I have
to pay for all the materials up front (without getting any money from
the construction company, either a deposit or funds for the
materials). Before I entered into this business I assumed that I
would get paid a deposit and the cost for materials once the materials
arrive (this is even before I start doing physical work), and the
progress payment is only pertinent to the amount of physical labor I
put into it. Is the company trying to take advantage of me since I
just started out in the business? What are the normal procedures?
I checked online to see how it's done and I couldn't find that much
information. I found some sample contracts (not about plumbing) and
there were at least 3 stages to the deal.
1) Initial deposit
2) Cost for materials once the materials arrive (pipes, etc) + any
damaged materials
3) Progress Payment for labor
(then repeat 2 & 3 if it's a long job).
Is this the normal procedure? If not, how can you protect yourself
from the construction company from not paying you? I heard of horror
stories from a friend that's also a plumber who put in $20,000 up
front into the job (for materials alone, so basically the plumber is
paying the construction company to work for them), and the contruction
company never paid the plumber and just used the excuse that the
company that hired the construction company is stalling their
payments. In the end, the plumber had to file a lawsuit that can take
up to 2 years to be settled.
I thought that the construction company is in charge of paying their
subcontractor whether or not the company that hired the construction
company is paying them. Is that just an excuse that the construction
company is using?
Please help me clarify this because I really do not want to fall into
the "horror" stories you hear about.
So to summarize. Is this the normal procedure:
1) Plumber purchases all materials and works for 1 month
2) After the month is over, the plumber files in an invoice with the
construction company
3) Then a month later, the construction company pays you for that
invoice
and the process is repeated?
Thanks a lot. Your help is very much appreciated.
---Paul
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Posted by CWatters on June 8, 2007, 4:05 pm
> Hi,
> I just started a business as a plumbing contractor and I was
> wondering what the normal procedures on sending in a bid and signing
> whatever needed contracts. Currently, I just looked over the plans
> for the job site and I figured out how much it will cost for materials
> and labor. Now that I have that done, what else needs to be done?
> What is this whole concept of progress payment? I understand you get
> paid for the work progress you make, but do I have to pay for the
> material expenses up front?
Not if you open an account with a materials supplier that offers good
payment terms.
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Posted by on June 8, 2007, 4:34 pm
On Jun 8, 1:05 pm, "CWatters"
>
>
> > Hi,
> > I just started a business as a plumbing contractor and I was
> > wondering what the normal procedures on sending in a bid and signing
> > whatever needed contracts. Currently, I just looked over the plans
> > for the job site and I figured out how much it will cost for materials
> > and labor. Now that I have that done, what else needs to be done?
> > What is this whole concept of progress payment? I understand you get
> > paid for the work progress you make, but do I have to pay for the
> > material expenses up front?
>
> Not if you open an account with a materials supplier that offers good
> payment terms.
So is it normal for the contractor to invest $20,000 into materials
and do work for the construction company and wait 2 months until you
get the first payment from them?
What happens if the construction company gets fired OR the
construction refuses to pay up? Do you just invest money into an
attorney to get the $20,000 back in 2 years? What if they file for
bankruptcy? Do you just lose the $20,000?
Sorry if these questions sound very trivial, but it would help out a
lot if it was clarified.
---Paul
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Posted by dpb on June 8, 2007, 5:35 pm
sabinblack@gmail.com wrote:
> On Jun 8, 1:05 pm, "CWatters"
>>
>>
>>> Hi,
>>> I just started a business as a plumbing contractor and I was
>>> wondering what the normal procedures on sending in a bid and signing
>>> whatever needed contracts. Currently, I just looked over the plans
>>> for the job site and I figured out how much it will cost for materials
>>> and labor. Now that I have that done, what else needs to be done?
>>> What is this whole concept of progress payment? I understand you get
>>> paid for the work progress you make, but do I have to pay for the
>>> material expenses up front?
>> Not if you open an account with a materials supplier that offers good
>> payment terms.
>
> So is it normal for the contractor to invest $20,000 into materials
> and do work for the construction company and wait 2 months until you
> get the first payment from them?
>
> What happens if the construction company gets fired OR the
> construction refuses to pay up? Do you just invest money into an
> attorney to get the $20,000 back in 2 years? What if they file for
> bankruptcy? Do you just lose the $20,000?
>
> Sorry if these questions sound very trivial, but it would help out a
> lot if it was clarified.
That's why cash flow is important...and you begin to see some of the
risks of being in business for yourself. If there's a serious doubt
about whether a potential client is able/willing to pay, it would
behoove you to get upfront payments to cover out-of-pocket costs.
Many individuals dba sole proprietorships and for homeowners or small
business do ask for an up-front payment for materials, but that _should_
be make clear in the bid/proposal, not as a "oh, by the way" after
winning a job.
Sounds to me like you're not ready for this step, maybe???
--
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Posted by PeterD on June 8, 2007, 6:01 pm
On Fri, 08 Jun 2007 13:34:07 -0700, sabinblack@gmail.com wrote:
>On Jun 8, 1:05 pm, "CWatters"
>>
>>
>> > Hi,
>> > I just started a business as a plumbing contractor and I was
>> > wondering what the normal procedures on sending in a bid and signing
>> > whatever needed contracts. Currently, I just looked over the plans
>> > for the job site and I figured out how much it will cost for materials
>> > and labor. Now that I have that done, what else needs to be done?
>> > What is this whole concept of progress payment? I understand you get
>> > paid for the work progress you make, but do I have to pay for the
>> > material expenses up front?
>>
>> Not if you open an account with a materials supplier that offers good
>> payment terms.
>
>So is it normal for the contractor to invest $20,000 into materials
>and do work for the construction company and wait 2 months until you
>get the first payment from them?
I would not say that is normal. It is whatever you can negotitate with
the customer! As well, if you don't like waiting for payments, make it
so that payments that are charged interest. Most states (today) don't
limit the interest, so if that is true for your state, make it
substantial (say 5% per month after the grace period, which can be 10
or 30 days, again negoitiate!)
If you don't want to finance the construction, don't do it! <g> No
one's forcing you.
>
>What happens if the construction company gets fired OR the
>construction refuses to pay up?
If you have to ask, you probably should not be in business. A:
whatever you are owed is probably a lost cause unless you are willing
to go to court. Make sure your contract allows you to place a lien on
the property for unpaid work and materials!
>Do you just invest money into an
>attorney to get the $20,000 back in 2 years?
Yes, that's probably what will happen. If you win. And you won't win
unless you have a good contract.
>What if they file for
>bankruptcy? Do you just lose the $20,000?
Yep. You're probably screwed.
>
>Sorry if these questions sound very trivial, but it would help out a
>lot if it was clarified.
>
Not trivia, at least you are thinking. And you are asking, which tells
me you are worried, but want the job!
I'd suggest if the job is that big (20K materials plus just how much
for labor?) then having a (good) lawyer draw up a contract would be a
really good move.
I've dealt with companies where I had to pay deposits with cashiers
checks, and all kinds of odd things! But, on the other hand, so far no
one has hit me for much in the last 20 years or so. I lost one time,
and learned that it would have been much easier had I talked to the
lawyer *before* contracting the job, not after when the customer had
excuses to not pay up! (Yea, they all will say "When we get paid, you
get paid...", to which I usually say "bull, when you get paid is your
problem, I get paid as the contract says".)
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