Payment Contract with Client

17larsson

Hi,
I supply and install electronic devices in homes. I am looking to set up a contract with payment terms of 50% up front and 50% on completion. Once the first payment is received I purchase the products and set them up off-site. This will take a few weeks so I am concious of the fact that the client is handing over money before any work has been done so I would like this contract to put their mind at ease. It will be protection for me also. The contract would be signed by me and the client.
Would this be an acceptable/practical way to do things or are there other options?
If this is the way to go would I need to get the wording checked by a solicitor?

duploelabs

17larsson wrote: »

Hi,
I supply and install electronic devices in homes. I am looking to set up a contract with payment terms of 50% up front and 50% on completion. Once the first payment is received I purchase the products and set them up off-site. This will take a few weeks so I am concious of the fact that the client is handing over money before any work has been done so I would like this contract to put their mind at ease. It will be protection for me also. The contract would be signed by me and the client.
Would this be an acceptable/practical way to do things or are there other options?
If this is the way to go would I need to get the wording checked by a solicitor?

Just attached it to any quote that payments terms are 40% on order, 40% at start of install, and the final 20% on final sign off as per initial spec. Used to be the way for audiovisual installs if we couldn't get credit insurance on prospective client

pedroeibar1

You definitely must have a sales contract.

It’s a give and take position that has to be fair to buyer/seller for it to be sell-able. Your image is very important and several factors influence this, such as length of time in business, belonging to a trade body or accredited professional register, decent web-site with customer endorsements, etc. being just a few.

I have to assume your product is a few grand Euro as you do not give any figures. Also, values are important e.g., the split of the labour and material cost, off-site input costs, re-saleability of end product should a cancellation occur, etc. The amounts involved would influence the procedure and what should be written into / contained in the contract.

I think Duploe’s 40 + 40+ 20 is good BUT it might be pushing it unless you were very well known. It might be acceptable if you are writing software for a device and its value would be a major constituent. Some double-glazing companies require 50% with order and the balance on delivery (they want the cheque before the product is unloaded!).

For capital goods it usually is 15% with order, 75% on commissioning and 10% retention paid 30 days after that to allow for snagging. If your initial off-site work is costly and the product cannot easily be resold/reused, I would expect a much higher deposit. Get a few sample ones as models, draw up your own and then get your solicitor to review it. Not costly, money well spent (and your Ts & Cs of sale should also be on the reverse of your invoices).

You won’t get credit insurance on domestic buyers but if you start doing substantial commercial work it would be a good idea – a contracts cover policy, which would give you protection for sums outstanding and WIP and finished product in stock.

17larsson

Thanks for the detailed response Pedro.
I have the vans, website, experience, trade body memberships and had a small bit of national exposure on tv that I shamelessy plug on the website. I want to have everything in order before I try selling it on a large scale so replies like the above help a lot.

The material cost would be about 50%. That's why I was hoping to minimise our initial cost by looking for that up front. The products are easily re-saleable so if somebody did pull out of a deal maybe it wouldn't be a major problem so 50% might be a bit on the heavy side. Average total cost would be €5000 to €10000. I have the off-site prep work on the products stream lined at this stage so there is not much labour time involved apart from going through the clients preferences.

Just one other thing, does this contract and t&c's need to be signed or is printing it on the back of the invoice enough?

davindub

17larsson wrote: »

Thanks for the detailed response Pedro.
I have the vans, website, experience, trade body memberships and had a small bit of national exposure on tv that I shamelessy plug on the website. I want to have everything in order before I try selling it on a large scale so replies like the above help a lot.

The material cost would be about 50%. That's why I was hoping to minimise our initial cost by looking for that up front. The products are easily re-saleable so if somebody did pull out of a deal maybe it wouldn't be a major problem so 50% might be a bit on the heavy side. Average total cost would be €5000 to €10000. I have the off-site prep work on the products stream lined at this stage so there is not much labour time involved apart from going through the clients preferences.

Just one other thing, does this contract and t&c's need to be signed or is printing it on the back of the invoice enough?

Probably want to put the T&C's on the purchase order process. But consumers are tricky, you might actually plan for returns/ etc. You could go to court, but you end up with negative exposure etc.

Have you got an accountant working on this as well?

pedroeibar1

17larsson wrote: »

I have the vans, website, experience, trade body memberships and had a small bit of national exposure on tv that I shamelessy plug on the website.

Great – you are starting from a position of strength, so play to those strengths and keep them prominent on your marketing material. If used properly it is a big differentiator with your competition. Exploit your advantages. Don’t be afraid to ask satisfied customers to leave feedback on the website – and follow up with a thank-you positive comment.

17larsson wrote: »

The material cost would be about 50%. That's why I was hoping to minimise our initial cost by looking for that up front. The products are easily re-saleable so if somebody did pull out of a deal maybe it wouldn't be a major problem so 50% might be a bit on the heavy side. Average total cost would be €5000 to €10000. I have the off-site prep work on the products stream lined at this stage so there is not much labour time involved apart from going through the clients preferences.

Nobody likes paying too much up front but serious customers are aware of and accept that they must pay some ‘cash with order’ when buying a specifically-made expensive product. Remember that you cannot go into the customers house to uninstall the product if there is a dispute, so the 40 – 40 – 20 of Duplo above is not wide of the mark (I’d go for 40 with order – 50 paid on delivery onsite – 10 on completion.) If possible I’d avoid any post-completion credit period, too much room for the customer to wiggle and too much paperwork/follow-up for you. If your profit margin allows, it is a good marketing ploy to allow it as it indicates you 'stand over product/service satisfaction' but you need to be very firm and say 'no' to any messers. Find out what others in same-price houseld product suppliers are doing –kitchen providers, doubleglazing, cobble-lock driveway people, etc. and see what the market norm is. Your sales people should know the market norms to counteract any ‘barriers’ to your terms.

17larsson wrote: »

Just one other thing, does this contract and t&c's need to be signed or is printing it on the back of the invoice enough?

You need to design a formal sales & order process. Spell it out to the prospect after s/he had agreed to go ahead – have your quote validate everything in writing – who does what, where, when, over what length of time, access, etc. (You don’t want a job to drag on over weeks because the owner is away constantly and won’t allow unaccompanied access.) Both parties sign, each gets a copy, the document evidences a binding contract (provided it is done correctly). Make sure you have a retention of title clause in it – i.e. the customer does not get ownership of the goods until the final payment is made, and yes, the credit aspects of the contract should be detailed on the reverse of the invoice.
It seems like you are in a good place from a timing perspective – you should be talking to architects – particularly those who specialise in one-off houses.

duploelabs

Well yeah. To back up what I said, I've over 10 years in major high-end corporate AV installs before I changed career. The first 40% should cover the order of the equipment specified and also give you time to liaise with the sparks for your first fix wiring requirements. Once those requirements are fulfilled as per your absolute spec, you should have your equipment in stock and be ready with boots on site. Then tap them for your next 40%, that'll cover your installers time whilst installing equipment (again so you won't be out of pocket if the project goes tits up and puts a flame under the feet of your client to get their sh!t together. And the final 20% on completion and sign off of your install with your contracted client, I know Pedro quoted that retention which would pertain to the majority of subcontractors on a site, however if it is LV (low voltage) work as it seems with OP post, then you should be exempt for this as you could be waiting months upon months for that retention to be finally signed off by all parties (and time for equipment to be damaged whilst other contractor are farting about on site)

pedroeibar1

Yes but......OP says he is operating in homes, and does not mention commercial work, so ....:)

17larsson

Yes it is all domestic at the moment. I think the 40-50-10 makes sense because it is a very personalised system and changes and tweaks to it will always be made a few weeks after the install so the last 10% keeps the customer happy that I will be back, usually this is about 4 weeks after install.
I will work on the contract as you have mentioned above and hopefully ready to launch on a large scale as soon as that's sorted