I have a client I’ve worked with for years who’s always payed me after my inspections have been completed. For the most part he’s paid on time (as mutually agreed upon) but now he owes me a small amount. I want to revise my system for how I charge him as well as my other clients. Is it standard practice to ask for a deposit and if so how much percent of the total project fee? For my business, I provide the inspection report in 2 phases. Perhaps one way to to do it is to split the project fee between these two deliverables?
Welcome Kristijan! Our member of the year, Brian Cawhern @bcawhern1 deals a lot with commercial inspections and may give you some insight on how his company handles this. Of course, others will chime in too.
My first question would be… what type of Commercial Inspections are we talking about?
What size?
What typical dollar amounts (total fee)?
Without going into too much Confidential information:
In 2022, my Commercial fee’s have run between $750 to $20,000 each.
ALL Fee’s at or below $1,000 are required Paid-in-Full in advance.
ALL Fee’s above $1,000 absolutely pay a DEPOSIT of 40% to 60% based on multiple factors, the largest factor being Manpower costs.
Deposit is due 7 days prior to the inspection scheduled start time.
Final payment is due 3 Days NET from last day of inspection, and the Report is NEVER released or discussed until full payment is made.
A typical Team I assemble for the larger jobs include 3+ trades and 1-3 assistant inspectors, plus myself.
My goal is to NEVER be “out-of-pocket” if I get ‘stiffed’ on the Final Payment.
Note: On larger jobs, you can actually invest weeks or months of your time just getting everything together. I do not work for free. I trust no one, not even God!!
I do.
You are in a position where you do not live with fear of not putting food on the table or paying the bills.
I know there is a lot more to it than that, but you get my point.
Are you asking specifically about commercial jobs, or all jobs in general?
Way back when, I used to ask for a 50% deposit and then the remaining balance upon report delivery. Often it felt like I was chasing down clients to collect that remaining balance.
So about 12 years ago, I changed the policy to payment due at time of the site completion OR invoice for pre-payment if the client/rep is not on-site.
No issues with this policy and getting paid this way is moral boost. Keeps things moving quickly.
With that said, I will make a case by case exception. Some repeat clients that I trust, I will invoice once the report is delivered. But these are exceptions and not the rule.
I have never required deposits. In 2019 I started requiring payment by 10:00 PM via Square the night before the inspection. It has eliminated so many excuses and broken promises.
I don’t take anything upfront for jobs under $3000, those clients pay in full at the beginning of the inspection some decide to pay earlier. Jobs over $3000 pay 50% at the scheduling point.
If someone is doing a Phase I inspection along with the building assessment, I will collect that fee up front.
I don’t require a deposit, but do require full payment prior to commencement of the inspection. 20 Years in business and never had a problem with this policy.
Hey Jeff, thanks for the response. My commercial jobs are typically over 50,000 square feet. As far as price goes I’ve worked on jobs as low paying as $3,000 per project but lately they’ve been 5 figure projects. I like your structure, I think something like this could work for me especially when dealing with larger paying projects.
My work has been in the commercial industry but I will be adding residential to my services. For the time being, I want to focus on payment structure for commercial jobs because of the larger fees associated. My situation revolves around one client in particular that I’ve been close to for years. You mentioned the exact problem I’m having and that’s having to hunt people down for payment. I want to avoid this in the future. I’ve made an exception to this particular client because of my familiarity with him but it’s still not the right way to do business so I need to draw a line somewhere and change a few things around. Thanks for describing your system, it helps to have that perspective.
I have occasionally charged 50% for a big job like a 100+ unit apartment building but it’s rare. Ever since ISN that holds reports until the contract is signed and the fee paid I’ve really not had any problems collecting.
Previously we’d get a few “checks in the mail” folks and I found a 10-day demand letter threatening all collection fees added to the bill would get their attention.