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Is Payment in Advance Ever Justified?

Discussion in 'General Business Forum' started by Silky, May 10, 2012.

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  1. Silky

    Silky UKBF Ace Full Member

    1,170 210
    We've worked with a supplier for a while and because of his size, we have paid upfront for work commissioned. The work we've received has been shoddy to say the least and there's not one project that has been completed correctly, in the end we have simply given up nagging over the snagging... a good 5-6 months after the project finished.

    We've tried, boy have we tried, but eventually we've learned the lesson (and probably an obvious one really), and won't be going that route again.

    Is it ever justified to ask for full payment in advance of a project, or would I be cynical to suggest it's simply a charter for crap suppliers to hand over incomplete projects with no incentive to do the snagging?

    Call me a cynic.....
    Posted: May 10, 2012 By: Silky Member since: Oct 29, 2007
  2. altwebdesign

    altwebdesign UKBF Enthusiast Full Member

    828 114
    I dont know many that take 100% up front - usually some sort of milestone agreement.
    Posted: May 10, 2012 By: altwebdesign Member since: Dec 3, 2009
  3. Silky

    Silky UKBF Ace Full Member

    1,170 210
    Much fairer in my opinion.

    100% up front leaves no incentive to complete the work. Ironically this is something I've stuck to rigidly on a personal level when working with builders etc, somehow we must have had a bit of a blind moment on the work front...
    Posted: May 11, 2012 By: Silky Member since: Oct 29, 2007
  4. Ding Dang Doo

    Ding Dang Doo UKBF Newcomer Free Member

    151 32
    I ask for payment upfront for the first three projects I do for a customer.

    If they don't want to pay, I don't want to do the work.

    The first few jobs are usually smallish, so the amounts have never been more than a grand or two. They can then sample the workmanship and time commitment I offer, and I can see they have some money to their name.

    Posted: May 11, 2012 By: Ding Dang Doo Member since: Mar 22, 2012
  5. JandJC

    JandJC UKBF Regular Free Member

    500 60
    You need to think "SMART" Strategic Measurable Achievable Realistic Targets is imperative to any project that is commissioned.

    Rule 1 - Never pay the full amount in advance
    Rule 2 - Ensure you deliver a performance based contract - include penalties if project isn't akin to plan.
    Rule 3 - Only pay 10 to 20% upfront and the outstanding on completion!
    Posted: May 11, 2012 By: JandJC Member since: Feb 10, 2012
  6. Silky

    Silky UKBF Ace Full Member

    1,170 210
    Isn't the contract one-sided where commitment is concerned? You get everything up front, they have no guarantee that you're going to deliver on time, to spec, or indeed at all. THEY might have money to their name, but do you have the capability and professionalism to complete the project? It's a two way exchange.

    We've only ever come across the one supplier who has wanted 100% up front and he's a very small operation (and likely to stay as such too). Larger and more professional suppliers pretty much working to the format mentioned by JandJC.

    Anyway, lesson learned - and we really, really should have known better...
    Posted: May 11, 2012 By: Silky Member since: Oct 29, 2007
  7. JandJC

    JandJC UKBF Regular Free Member

    500 60
    So what you are saying, is that you refuse business based on your clients to pay the full amount prior to project engagement; no scope for negotiation?

    I'm not putting you down, because I understand your reasoning, especially down to the current economic position of the country, as a whole!

    But you have to also understand and demonstrate some empathy towards your potential clients; for example if I was to engage in your services based on a contract which is based on the cost of £100K; would you turn me down if I implemented a performance based contract that if terms and conditions were met. Would you turn down my business - the reason I ask this because your aforementioned response suggest that you "will".
    Posted: May 12, 2012 By: JandJC Member since: Feb 10, 2012
  8. Ding Dang Doo

    Ding Dang Doo UKBF Newcomer Free Member

    151 32
    Perhaps I was a little flippant with my reply.
    I should have read the OP before making the statement I did.

    However, if someone walked in off the street, who I didn't know, and they wanted me to manufacture something for them, and the amounts involved were not massive, and there was no way of checking their financials etc, then I would still ask for payment upfront. If however a process of tender had been undertaken, then the onus would be on my company to ensure that the potential client was financially viable, before we agreed to tender. There are exceptions to this again, Local Authorities, NHS etc. have and should always been good customers for me, and they pay, on time (usually), so I would be happy to do work for them.
    Posted: May 12, 2012 By: Ding Dang Doo Member since: Mar 22, 2012
  9. TCCuk

    TCCuk UKBF Newcomer Free Member

    80 8
    It's because now they have the money they try to get the work done as quick as possible, time is money at the end of the day so the quicker they complete the job, the cheaper it is, and they will cut corners to make it cheaper. Once you have paid in advance they have you by the balls.

    Next time you should write up a contract with them and pay when targets are meet to the standard you asked for, this way if they don't produce the goods they don't get paid
    Posted: May 12, 2012 By: TCCuk Member since: Jan 30, 2012
  10. Abujerome

    Abujerome UKBF Newcomer Free Member

    15 0
    30% deposit
    30% 1st installment
    30% 2nd installment
    10% snagging
    Posted: May 28, 2012 By: Abujerome Member since: Apr 27, 2012
  11. Safe_Collections

    Safe_Collections UKBF Newcomer Free Member

    34 13
    If you are in web or app design or similar industries the above would be our suggestion on a charging structure.

    Have the installments connected to major milestones in the development time frame and monitor payment closely to ensure you don't start the next stage without receiving the cleared funds for the last.
    Posted: May 29, 2012 By: Safe_Collections Member since: Nov 8, 2010
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