Hello everyone.

Id like to adjust my currant invoice payment options. Id like to give my costomers a 1% discount on early payment in full. 10 days or less. Im hoping it will bring in the payments faster?

I also want to charge a late payment fee of 10% after 30 days.

Do any of you contractors do this?

Currantly I have a verbal contract with a large home builder. They hold back 10% for 30 days. Id like to charge interest on that money!

What are your thoughts on this matter?

Is it worth the 1% to you to get the money earlier? If so, go for it. I don't do a large amount of business, so I didn't find that it would help me.

If you and your builder have an agreement, albeit verbal, you would probably want to make a new "agreement" before you start charging for late payments, especially if you have been accepting the final 10% after 30 days all this time.

Instead of getting into a discussion over late fees and holdbacks, why not just add a little more into your estimate to make up for what you're losing? For instance, if they hold back $1000.00 for 30 days, figure the interest on that and add it in to the estimate. It doesn't have to be itemized as such, you could raise your square foot rate 10 cents or whatever it takes to make up for what you're losing.

Even better, do only 90% of the job and tell him you want 90% of the money now and you'll come back and do the other 10% in 30 days. See how he likes that.

10% is usually the standard late fee. At least that's what I've heard. Most of us wealthy tile installers have never had to pay a late fee in our lives.

One percent is not really sufficient incentive. Say it's a 2000 dollar bill, that's $20. Normally in construction you give your clients 30 days to pay, so if your builder is giving you 90% right away he's actually paying you early.

for large jobs I usually ask for a deposit on materials (in full up front) I have yet to have anyone refuse. That way you're not stuck carrying materials costs for the builder.

If you're working for a large builder and they're giving you 90% of your invoice on completion, you should consider yourself fortunate. Be happy you're not waiting 30 days for any of it.

For private jobs for a homeowner, yes it's payment in full when the job is done is expected. Work for builders or contracting companies usually means payment on a schedule. That schedule may be every week, every 2 weeks, once a month, 30 days, or even 45 days. You need to understand the payment schedule when you agree to take on the account. That's part of doing business.

If you want to offer an incentive, that's your choice. I know someone that offers 2% if paid within 10 days and some accounts payable departments want that 2% and pay right away. Some don't care about the 2% and pay in 30 days. I think it depends on how much the invoice is for.

If you want to pressure this builder for quicker payment, that's your choice too. You just have to be confident that you're the one and only guy that he wants laying his tile, because if he doesn't like your expected payment schedule there may be no more payments to come. Can you replace his account as easily as he can replace your tile crew?

If it's bothering you that much, I would sit down and talk with your contact at this home building company and see if you can come to a new agreement that works for both of you.