Thoughts on deposits for jobs

[Jim Watkins]

Good afternoon everyone.

I asked this in the middle of another thread and should have just started a new one.

I would like to get your thoughts on deposits. A few points to ponder. Any input for relative newcomers like me would be appreciated...

When working commercial jobs, what estimate level do you require a deposit? (e.g. estimate exceeds $500, $1000, etc.)
If your collecting a deposit, what percent?
Material (you as the engraver supplying the material)
Labor
Or on entire estimate

Does it matter if the customer is established or not?
My initial thought has been if it is a large order (assuming a non-established customer) to ask for at least 25% of the estimated labor and 100% of material costs(assuming I am supplying the material) up front.

Am I off base everyone?

Thanks Creekers

[Bob Cole]

I haven't been separating labor and materials cost. I give them the cost of doing the "job". I haven't done a big enough job to worry about it, but when the day comes, I would expect 50% upfront of the entire cost. This should at least cover the materials that you would have into the job plus a cushion so any money you would be out is your time along with laser time. Adjusting the cushion would be up to you depending on the risk.

[Mike Null]

It's a very good topic and I don't have a policy. If I'm dealing with a regular customer who is on 30 day terms I wouldn't require a deposit. But...one of my regulars gave me a rather large order for plaques in July. I bought the material and cut the metal in preparation for the job. Then the company decided to change their name so I have been on hold since July with about $4000 expenses so far. They are now telling me it will be October before everything is finalized.

I explained about my investment and that I'd like to invoice them for that amount. They said please do and they would expedite payment. Not all customers are so accommodating.

But new unknown customers must pay in advance or agree to a deposit which would cover materials and initial preparation. Most of my orders are under $500 so my exposure is fairly limited.

I'm currently working on an order for $9000 which I will finance as it is a long standing customer who pays promptly.

One more thing, I do very little retail where I might be inclined to have a stricter policy.

It is rare for me to have to spend any time on collections.

[Lon Schleining]

In California, for state licensed contractors, there is a 10% maximum deposit. Seems like a good guideline. I typically ask for the 10% upon signing the contract. Then I ask for another (usually 25%) deposit amount after the working drawings are approved. Subsequent draws are mostly a function of progress on the job. A lot depends on my relationship with the client; if a stranger, it depends on who referred them, and in the end, how much I trust the client to pay as agreed.

[Bill Cunningham]

Just about everything I do is personalized, and paid up front by a signed purchase order and a Visa# I have a 'few' customers that I send a invoice along with the job, but they are old regular customers.. The Merchant visa costs are a small cost to avoid chasing people for money..
I have a small sign on my wall that says:
"NO, I'm sorry! You can't have it today and pay me tomorrow, next week or whatever! We may both die tomorrow, then I would have to chase you all over hell for it!"

[Joe Pelonio]

I haven't been separating labor and materials cost. I give them the cost of doing the "job". I haven't done a big enough job to worry about it, but when the day comes, I would expect 50% upfront of the entire cost. This should at least cover the materials that you would have into the job plus a cushion so any money you would be out is your time along with laser time. Adjusting the cushion would be up to you depending on the risk.
Same here, for a new customer it's 50% up front and that should be more than enough to cover materials. And don't call it a deposit, that implies refundable. It's advance payment of 50%.

[Frank Corker]

I do the same thing as Joe, I have quite a few items here which are engraved with no sentimental value to me whatsoever and I get to keep them. :mad:

[Doug Bergstrom]

We do the same thing, 50% down on all jobs for customers who do not have accounts with us. Larger jobs from account customers (10K+) usually require 50% down as well. A lot of building jobs get delayed for months and we have everything ready to go and are left waiting to install. This way most of our materials are covered and it makes the waiting a little easier.

[Phyllis Meyer]

Hi Jim,

We require a 50% deposit for larger jobs (new customers). If it's a customer that we have worked with before such as: schools, hospital, churches...we don't ask for a deposit.

Sincerely,
Phyllis:)

[Mark Winlund]

One thought.... In my years in this business, I have found that a deposit (non refundable, of course!) makes the customer take part of the risk. They are far less likely to call up and say " I changed my mind and don't need it now" or "That color doesn't match my fingernails, can I change it?". Except for open accounts, always get a deposit!

Lesson learned from painful (read expensive) experience!

Mark

[Jim Watkins]

Thanks to all of you for your thoughts and experience. I figured I was not the only one thinking about it.

50% of the total estimate makes sense and I expect I'll follow suit to protect myself. Plus I didn't want to do something that would water down our industry.

Continued thoughts and comments appreciated.

[Mitchell Andrus]

Look at it this way... if you accept the job, finish it and stack it up by the door and then the customer gets hit by a bus on the way to your shop to pay you, how much money would you had to have gotten up front to at least break even?