Deposits and Payment Schedules for Cabinet Jobs
Cabinetmakers share their views on schedules of payment for custom cabinetry. March 18, 2006
Question
I am a small time professional, 2-man shop, and I build high end custom cabinetry and furniture. I usually ask for 1/2 to 1/3 of the entire estimate before starting work. Am I asking too much of the customer? What about on the large jobs (40k+) - do you do the same thing?
Forum Responses
(Cabinet and Millwork Installation Forum)
From contributor A:
I ask for (and get - or I don't do the job) 50% up front, 40% when the job goes to finish, and 10% upon delivery. There are no exceptions.
From contributor B:
I am a one-man shop that designs, builds, and installs custom cabinetry. I get a 50% deposit. That places the job in the production schedule. I get 40% before the cabinets are unloaded at the job site (I do my own finishing), and 10% when the job is complete. If the client insists on modifying these terms in their favor, I will pass on the job.
From contributor C:
I am a similar sized shop. I always get 50% up front. On jobs less that 30K I get 50% up front and 50% upon delivery. For bigger jobs, I break up the remaining 50% in two and sometimes three payments - usually 30% when I send stuff to the finisher and 20% upon delivery.
From contributor D:
On jobs not requiring installation, I get 50% down and 50% on pickup. On installed jobs I get 1/3 down, 1/3 ready to deliver but still in shop, and 1/3 on 90% completed installation. I say 90% now because in the past I have had clients who withheld the entire last 3rd because a $10.00 item was missing, therefore considering job not complete.
From contributor E:
A 50% deposit is an industry standard for custom millwork items – cabs, windows etc. If any customer has a problem with it he is probably not going to give up final payment either. It’s best to walk in that situation.
From contributor F:
It seems we all agree on the 50% up front and all seem to have variations on the next 50%, so here are mine. I collect the 50% up front, then the next 40% after it’s built and the customer comes to the shop to inspect it. I put the finish on and again the customer comes to inspect it. If he/she is happy I get the last 10%. If he/she is not happy, corrections can be made. In either case the delivery is after the last coat goes on - the delivery is after the check clears.
From contributor G:
I also write my contract for 50% in advance. I am wondering if any of you have trouble with building or remodel contractors who sub you out and do a cost-plus on your products. I have some contractors who have no problem seeing that I get my front money, but have their own billing schedule and, for instance, pay only once a month on a certain date, for example the 10th of the month. This is a problem for me if I deliver product on the 12th of the month. Then I have to wait 28 or so days to get the other 50%. Does anyone else have to deal with this?
From contributor H:
I had this problem before and thought it was part of the deal when working with contractors. The bottom line is you and your company have bills to pay and you are not funding the remodel of this job. You should be paid on your terms. If a contractor insists on paying every 30 or tenth of the month, let him know that the price will reflect his inability to manage cash flow.
From contributor A:
That's what people have to understand - we are not finance companies. We are woodworking companies. I've heard some people badmouth our trade for this practice, but quite frankly I don't care. Maybe they wish they could do the same. Like the ad says "we're a small business we don't have IT guys.” Well, we don't have deep pockets either.
From contributor I:
I'm also in the 50-50 group. Most of my work is direct to end customers, but the small amount to contractors/builders can be frustrating. One GC, when discussing required down payment terms, said "that's why a lot of builders don't work with custom cabinet builders". I thought, “That's why I don't like to deal with GC's.”
From contributor J:
In California, as licensed contractor you can only ask for 10% or $1000.00 up front.
From contributor B:
To contributor J: Are you a lawyer or a furniture/cabinetmaker? Are you telling us you only take 10% to start a job that you’re going to have to spend more than the 10% you collected up front to get the materials and then spend days /weeks on labor?
From contributor K:
Contributor J is just trying to stay out of the slam. Of course he could ask for the remaining 90% after he gets his 10%. After you get the 10% you can pretty well do what you want as the state doesn't define the payment schedule.
From contributor L:
We only do 50% on jobs under $5000. Up to $15,000 we will do 1/3. On the big jobs, $50,000+, we do 20% on acceptance, 20% at start of fabrication/approval of shops, 20% at mid point of fabrication, 20% prior to finishing, 10% on delivery, balance upon completion. Change orders are billed the same way - if it comes at the mid point, we get 40%. It seems unreasonable to ask for $50,000 on a $100,000 job up front when all they have seen are pictures of your work. But I find that this actually works out good for us since it evens out the cash flow, there is always a payout on one of the jobs right around the corner.
From contributor J:
To contributor F: No, I am not lawyer but I am a licensed contractor. I am currently booked into 2006 and would not feel right charging someone 50% when it might be 8 to 12 months before I get started on their job. Like contributor K said, you can set up your draw or payment schedule however you want.
From contributor F:
To contributor J: I concede that contributor K had a good point! At 10% can we assume that you only want to retain this guy as a client and insure he goes no where else for his cabinetry? If you take the 10% upfront on a job that gets pushed out by 9 months, do you ask for any more when the time comes to start the job? At 10%, like I said before, you’re laying out the money for materials and labor too. If the client pulls out of the contract after giving you only 10%, you’re out a lot of money!
From contributor M:
For jobs in excess of $50,000, we take 10% with a signed contract, 40% with shop drawing approval, 30% with delivery of materials to site, and 20% upon completion of installation. For those contractors that have to be billed by the 5th so they can pay on the 30th, we bill a month in advance and tell them to hold the signed check until our milestone is met. For jobs under $50,000, we usually bill it 50% down, and the balance upon completion.
From contributor N:
We are in California. If we are installing we charge 10% or $1000.00 whichever is less, 40% when we start cutting, 40% when delivered, and balance when installation complete. If we're not installing then it is 50% and 50%. This arrangement, however, does not work if you want to work for general contractors or for commercial work; the choice is ours. In the same manner that we buy lumber on account we choose to extend terms to clients who we have checked out - clients that we have a relationship with and have worked for before and know their payment patterns. New general contractors are placed on COD until checked out and we consider that part of doing business. Pre-liens are always issued, no matter what.
From contributor O:
One thing I'd like to comment on – contributor J stated that a licensed contractor in California is only allowed to get 10%. I don't know about the rest of you but I certainly do not consider myself in the general contractor field. I would never schedule a job or purchase materials on just a 10% deposit.
