How much of your year are you carrying at any given time?

If I sell $100 worth of cabinets over the year, I've usually got $15-$25 hanging out in space that I'm waiting on payment for.

That seems fricking insane to me.

We invoice on the 25th of each month and I can expect to see payment between the 10th and 25th of the following month. When I invoice each month on the 25th, if I notice there's an unpaid invoice from the previous cycle, that invoice will get a lot of my attention and there had better be a darn good explanation. So, I guess that means I'm never waiting on more than about 1/12th of our annual sales. There is no legitimate reason for receivables to carry beyond 30 days in the residential market.

We do not require deposits, nor do we invoice based on performance targets such as payment due on delivery or on completion etc. We are primarily wholesale; asking for payment immediately on delivery or as a condition of delivery is tacky and unprofessional. Furthermore, by billing on a monthly cycle it leaves nothing to interpretation and there is no debate. Contractors pay their bills monthly, subcontractors expect to get paid monthly. That is how the industry works. If you're going to work for a contractor and you're expecting to get paid on delivery outside of the normal cycle you're going to get a lot of resistance.

Retail customers are different, and I avoid them like the plague. You have no ongoing relationship with a retail customer that needs to be respected. Therefore, they can withhold payment for any reason they can come up with and you have no leverage. Your leverage with a contractor is basically "do you want to keep working together or not? Then I suggest you pay your bills on time".

"do you want to keep working together or not? Then I suggest you pay your bills on time"

Agreed. Some of them you want to question them on exactly how long they are assuming their life expectancy to be....

My expectation of getting paid is: I sent you an invoice. You need to pay it. Whether I started the job or not even. If you have an invoice, it's in the que, and is either started, or will be started very soon. (As in less than a week probably) The more professional contractors I work for, that is exactly what happens. An invoice goes out, and I usually see payment in a couple of weeks. Some are even direct deposit with a lien release sent out, signed digitally, then paid the next day. The money just shows up in my account. Those people, I will bend over backwards to make happy. I don't have to worry about them. I'll start jobs before payment has arrived, because I know I don't have to worry about it.

We're busy enough at the moment, that I can just tell contractors, if you invoice is not paid in full, you will lose your spot in the que to the next that is paid up. The problem with that, is this bubble of work is not going to last forever, and I don't want to crap all over some fairly long running relationships.

I'm getting awfully tired of having $50k to $100k dollars not sitting in my account, that I feel should be, where it can be put to work.

"asking for payment immediately on delivery or as a condition of delivery is tacky and unprofessional"

I couldnt disagree more. We dont offer terms, and on commercial work often bill 90/10 with regards to deposit/final but the vast majority of contractors I deal with understand fully that their terms would come with a cost. You running term, paying for material ahead, absorbing risk, it all adds to your production cost PERIOD. You might consider offering your customers a price with and without terms. Paid out the door, or net 30-45-60-90- or never.

Ive been on this site for a long time and the "10%" thing has always been an issue, and was stated to me from may trying to dissuade me from chasing commercial. In the end, contractors are tired of dealing with suppliers that just flip them off because they know the are going to get dick'd off on the 10% so if you price fairly/aggressively, and ask for it all up front, they are more than willing to pay to get their sh-tuff when they want it.

I have never had a single contractor hold back the 10% ever, nor have I ever had one ask for terms. But thats clearly stated up front to discount our bid and that no materials will be ordered or production will commence prior to deposit.

Ive been in this game long enough on both sides to know that I am not going to be someones bank without getting an interest rate profit boost to my margin. My production lead times outweigh any 30 day terms I get from my vendors (and I dont run terms, I process payment the day the material lands with 98% of vendors). I dont have enough volume to route out the contractors that come up short or underbid and will string me along. Most all of them nowadays are buying a hefty portion of their materials from home centers and they are not getting terms rather they are buying on a credit card and paying interest. If they want the cash price, pay up pre production, you want the terms price, aint gonna be the same.

Thinking you have to extend terms to be in the game his horsesh(t... If you have the fat in your market to afford it so be it... Even if I had the fat I would not pay out the slack other than a monster account and even then I'd be pushing for heavy deposit. No GC starts a job without deposit. Why should you? My deposits cover me to where all my expenses are covered and if I have to take them to court its fror the cream on top.

One of the better ways to collect on time is to offer a discount for early payment. Now how you do the pricing to handle a discount is up to you. Also add a penalty with a certain number of days after the contract payment terms. In my experience, residential jobs paid on time better than commercial. That last 10% took a long time to show up.

I think the problem with incentivized pricing and penalties is it seems like in most of these situations shops seem to feel the contractor/customer has all the power and they will pay what they want, when they want. Its an odd situation that seems to repeat over and over. Its understandable you want to keep your contractors but on the flip side fair is fair. It seems a rare occasion for most shops to have the confidence to penalize/push/ride a contractor.

Sad state of affairs.

We get 50% down and the final 50% before we deliver. My designer/salesman thought it would cost us jobs. It has not. We all have enough headaches in this business and these terms eliminated some of them. Now it's amazing how cooperative customers are if an issue does arise. I know these terms won't work for everyone. We do residential and deal directly with the homeowner.

Our terms are 100% payment upfront no less than 8 weeks before expected delivery date.

Been this way for two years after 17 of 50/50. Has it hurt sales? Nope. People will even pay far further than 8 weeks to get a production slot locked up. There are lots of cabinet shops. Very few though that are top notch on design, build and keep delivery dates. If you’re good they will pay. All day every day.

I'm thrilled to hear that attitudes surrounding the collection of money have not changed in the many years I've been on this forum. It has always made my job easier in setting us apart from the rest.

We don’t build cars or even houses where I can get full market value from someone else. I build a custom product. Made to fit both a custom home and a custom client with specific tastes. Worth a fraction of what they were sold to if you have to find another buyer. If You get a dishonest person, someone dies, a plane flies into a building, a government shuts down the economy or a hundred other ways that are out of my control where things can go wrong. I’ve seen the books of ten contractors over the years. Even the good ones and honest ones. Most are in hawk up to their eyeballs.

I’m a huge reason their houses sell.
I haven’t sold a job in almost a decade. They have to sell themselves to us. It doesn’t get easier than that.

Full payment upfront. No exceptions. I’m a known commodity. And one that warrants those payment conditions. No apologies. I’ve yet to have a single client go elsewhere due to that-not one.

After thinking about this over the weekend I want to add the following. My clients get the best hours of my life. They get the majority of my waking hours. The reality is my family gets the left overs in almost every aspect. It's sad and of course what I do I do for them. But If I'm selling my life...they pay upfront. I regret I didn't, or couldn't, do it earlier. But if you can in my opinion your nuts not to.

Demanding payment at delivery is unprofessional. Heck, I have had clients vacationing in Africa, feeding refugees in Albania, ringing the bell at the NYSE and more at the time I deliver. Getting paid 1-2 weeks later is almost like money in the bank. I can pay my bills on time, and there is no problem.

We don't demand payment at delivery. We demand it before we deliver, before we even load the trailer. Unprofessional or not, that's how we will continue to do it.

Things changed after the crash, no more credit on commercial work

FWIW
I only give a schedule spot on 50 % deposit.

The other 50% is due upon delivery, and while we don't demand it the second the cabinets hit the floor , we do get it within the week of delivery.

That is residential,

On commercial we bill out shop drawings and materials upon contract signing , and the balance upon delivery, they may take 30-45days to pay this , I am ok with that .

We are giving 5%discount on jobs paid up front , we have several jobs each month that use this option.

Residential is 30% margins , Commercial closer to 50% margin so I don't mind waiting for commercial to pay.