Payment Schedules for Cabinetry
Cabinetmakers and installers discuss the terms of payment. February 17, 2011
Question
I'm about to get new work in the custom home market to do the kitchen and hopefully the rest of the cabinets in a house. I am a high end cabinetmaker that has been busy for the last 5 years with 3 large jobs. I am about to get new work for the first time in about 3 years. Can I still get deposits up to 50% in the beginning, or have things changed in this new market?
Forum Responses
(Business and Management Forum)
From contributor C:
Set your policy in stone and stick to it. I just invoiced a bank for 50% up front. Yes, a bank. The other 50% is due upon completion. Remember - cash flow. And of course, cover your butt.
From contributor R:
I always get a 50% deposit. It is not a job unless I get a deposit. Then I get 25% at delivery, 15% progress and 10% at completion. If a customer can't do this they are not my customer. No way I can finance the job - cash flow is not what it used to be. If your customer can't understand why you need to get the deposit, I think they are looking for an excuse not to pay you.
From contributor B:
I recently updated my business practices to require 50% on all jobs. People pay it happily. Cash flow is much better. We have a tendency to sell ourselves short in this business. If you are good at what you do, people will pay.
From contributor W:
I get 80% down on my kitchens and 20% at time of delivery. I do not install. People happily pay it with no questions. This buys material and pays bills and a little profit. I find everything to be much easier this way. Tell them what you get with pride. If 1/3 of your total is material, this leaves little left over at 50%.
From contributor I:
Our policy for the past 30 years has always been: 50% prior to commencement of any phase of manufacturing, 40% at the end of manufacturing and prior to delivery, and 10% at completion of installation. So far no complaints from anyone.
From contributor J:
I base my deposit on size of the job. Anything small, say several thousand dollars or less, is 50/50. Larger jobs I usually break up into more payments, generally 40/30/30. This way I have most of my money before anything gets delivered, and if I have to wait or chase the last payment, it's a smaller payment.
From contributor D:
Some states have different laws on how much down you can take. Check your state's rules to make sure. Here in Oregon it's usually half down, and more incremental draws on longer jobs.
From contributor R:
My state allows only a 10% deposit for homeowner remodels. In 10 years I have only been asked about this 3 times. I tell them okay, 10% now and 40% next week when I order the material. They always write the check for 50%.
From contributor L:
I know California has a 10% max down payment and you can't get ahead of the work with payments. In other words, you need to use your capitol to finance the project and then get paid. Backwards, as far as I am concerned.
But for myself, most kitchen jobs are 50-25-20-5. 50% down, 25% after about 2-3 weeks, 20% when the cabinets are delivered, and 5% for substantial completion.
Haven't had any issues so far. One bank made me do 25% down, so I bumped the 2nd payment up in time and it was another 25%. I was on normal schedule relatively soon. And knowing it was a bank, I didn't worry if they had the money or not.
From contributor V:
Here's something to think about. The big box stores get 100% down on cabinets they say they will deliver in 4-8 weeks. I bet their corporate legal team checked out the law before they adopted that policy.
If I operated in California or other states with restrictive down payment rules, I would break out the installation labor as a separate agreement from the furnishing of the materials or fabricated goods.
From contributor R:
The Big Box stores get away with that because the cabinets are special order and everything is broken out and the cabinets are taxed. I think if you bought your cabinets and resold them you too could get a 100% deposit legally. The 10% deposit thing in California does not apply to new construction, only to homeowner remodels.
From contributor K:
50dep/40 at delivery/10 after install.
From contributor E:
50% deposit before anything will be scheduled or ordered. 45% before delivery (they can visit the shop to view their project if they want). 5% after substantial completion. Never had a client balk or complain. I am not a bank. I do not make loans and the bank does not make cabinets.
From contributor V:
To answer the original question, my terms include a design retainer based on the size of the job up front, then at least 50% down, 40% at start of production and 10% prior to delivery. Nothing goes to the site until all is paid in full.
In California law, seems if you are a home improvement contractor, the state gets to set the rules on how much you get paid and when those payments can occur. Don't you just love it!
Therefore, if it were me furnishing and installing custom casework for remodels in California, the casework agreement would not be done as a home improvement contractor entity. It would be done in a manner that would exempt me from those restrictive rules.
For example, ABC Cabinet Co would have a design and sales agreement (not a home improvement contract) with the customer to fabricate and possibly deliver the casework, with whatever terms and conditions would be allowable, including 100% up front. I'm 99% certain that is how the big box stores separate themselves from the home improvement law. They act as a material supplier, not as a home improvement contractor, in their agreements with a customer.
ABC Cabinet Installation Co. (a division of the same company with common ownership) would be the home improvement contractor installing cabinets from ABC Cabinet Co, and that contract would be subject to the local home improvement law.
Boy, am I glad I don't do business in California. It sure looks like you California home improvement contractors have a major pain-in-the-butt partner in the state's rules and plenty of hoops to jump through. Some of this stuff sure seems like a solution looking for a problem.
From contributor N:
I guess I am going against the grain here, but...
Homeowners/new contractors: 0 down, 30% when boxes are on the shop floor, 30% when doors are built/delivered to shop, 40% upon completion.
Old clients: 0% down, 100% upon completion.
Shaky contractors will pay 50% down/50% upon completion (pre-arranged) because of the obvious risk.
