Question
We are a small, mostly residential, custom cabinet shop that has been in business for several years. All of our work has come from referrals and that will likely continue to be the case. We have never up to this point had a formal contract, but feel it is necessary at this time. I am looking for some suggestions or examples of what others have in their contract and what your terms and conditions are. What about deposits, when payment is due, etc. Is there a good source to get a template for making a contract?
Forum Responses
(Business and Management Forum)
From contributor T:
In regard to terms, we are recommending the following to all of our clients:
50% down with order.
40-45% on delivery.
Remainder upon completion.
What we've been doing is splitting out an installation fee in the contract, which is not subject to sales tax. That portion gets paid when installation is substantially complete. The rest (usually about 90% of the total price) is split into two payments - one to start, the rest when we deliver. If it's a very big project, like a $65,000 job we had last fall, I split it into three payments. That way they feel it's less money up front, but we end up getting 2/3 of the payments before we deliver - it's helped spread our cash flow better.
One of the things that flashes in my mind when I flirt with guilt over asking for a decent price or deposit - for some reason, my work is expensive but $3000 to $5000 for a television (what many of my clients spend) is not?!
Here is a cut and paste from our contract. This section is included right after the description of work to be done. The other "terms and conditions" (such as warranties, etc.) are included later in the contract.
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TOTAL PRICE: $5,000.00
We propose to hereby furnish material and labor, complete in accordance with the above specifications, for the sum of Five Thousand dollars and no cents.
Payment to be made as follows:
(50%) $2,500.00 Production Deposit
(40%) $2,000.00 Before delivery of cabinetry to the jobsite.
PLEASE NOTE: Cabinetry will not be released until payment has been received. You will be contacted two days in advance, either by phone or email, or both to confirm release date and time.
(10%) $500.00 Upon substantial completion of the installation of the cabinetry.
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All of the numbers ($ and %) are in bold. We go over these figures with the client as we review the contract before signing.
Notice that we ask for the 40% before we even load the truck at our shop. This avoids the possibility of excuses, delays, etc. at the job site, a lot of wasted time, or worse, getting stiffed. The clients can see the finished goods in our shop prior to delivery if they so desire.
If you are getting a design fee, and applying it to the job, you can list that here also. It will show the client how they are getting a credit for that fee. For example, your terms might then be 10/40/40/10 (10% for the fee, 40% Production Deposit, 40% before delivery, 10% after substantial completion of the job).
