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Payment Terms for building works - My first post!

Discussion in 'General Business Forum' started by cliveporter, Jul 17, 2008.

  1. cliveporter

    cliveporter UKBF Newcomer Free Member

    Posts: 2 Likes: 0
    Hello everyone!

    Ive been working for a large civil engineering firm for a number of years managing a variety of subcontracts but my wife and I are setting up our own business which requires some building and fit out works.

    I dont particularly agree with the way my current company holds small contractors over a barrel with regards to payment terms (in particular paying late!) and understand the problems this puts with those contractors.

    However, as a start up business (without the same buying power/history) and with a very tight cashflow I need to ensure that we get reasonable terms for our building works, electrical, plumbing and decorative fit out totalling around £40k. These trades are different to those I am used to dealing with so Id like some advice on what to expect. How much up front, materials on site, substantial completion, retention ect in terms of percentages.

    Any help is much appreciated!
    Posted: Jul 17, 2008 By: cliveporter Member since: Jul 6, 2008
  2. Anthony Reeves

    Anthony Reeves UKBF Newcomer Full Member

    Posts: 250 Likes: 68
    Would be willing to assist (for a reasonable fee) in drafting effective terms and conditions.

    Anthony Reeves
    Pinniger Finch & Co, Solicitors
    Posted: Jul 22, 2008 By: Anthony Reeves Member since: May 1, 2008
  3. Lime One

    Lime One UKBF Newcomer Free Member

    Posts: 1,033 Likes: 281
  4. CKG

    CKG UKBF Ace Free Member

    Posts: 1,686 Likes: 457
    On every subby job for a builder I've ever done I invoice for the work done once a month and expect payment within 2 weeks of invoice.

    Though it rarely ever materialises on time.

    As a result it gives me massive cash flow problems meaning I have to pull lads off site to earn some quick cash to pay the bills and avoid a staff mutiny...then your job runs late cos I have to put food on my table. I get moaned at by the builder and eventually fall out with him - Though to be fair the builder is in the same boat as me trying to squeeze money from his client who is not paying his bill 'cos his new garage door is not quite the correct shade of white.

    Now all of a sudden I'm a crap plumber and he's a rouge builder....

    The building industry. Dontcha just love it...!
    Posted: Jul 22, 2008 By: CKG Member since: May 26, 2007
  5. Estimator

    Estimator UKBF Regular Free Member

    Posts: 471 Likes: 98
    Hello Clive, I have worked in construction for many years so I can tell you what I know.
    Most building contracts are under the JCT standard form of contract which you can buy at good book shops - an enjoyable read. :DThey also publish a simpler small works version for lightweights! :D
    Work is usually valued monthly, or at key stages, and payment is due within 28 days of agreement of this. But 40K is not a big project, surely it's only a few weeks, do you need interim valuations?
    A contract drawn up by a solicitor would probably scare a lot of builders away, or would lead to them inflating their price.
    A letter covering the basics is normally OK for both parties. This should cover start date, finish date, contract price (plus vat) based on what drawings and spec etc., insurances, description of the work covered etc.
    A retention system is in place on building contracts whereby 5% is held back until practical completion,this reduces to 2.5% for a 12 month maintenance period. Also damages apply for late completion.
    Fine if the client is Tesco and will lose thousands per day if the job is late, but imposing it on a small builder will only cause friction, and it works both ways, better to have a bit of trust, although I wouldn't extend that to any payment up front.
    Posted: Jul 22, 2008 By: Estimator Member since: Feb 22, 2008