pro-forma payments
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Discussion

s,one

Original Poster:

4,612 posts

269 months

Monday 17th November 2008
quotequote all
I have a subcontractor (not nominated) who is demanding 100% payment (160k) upfront for supply and installation of toilet cubicles vanity units for a contract we have on at the minute.
Now I do sympathise with there position as we a new company (8months) and as such have no trading record, but I have asked for a compramise at 50% upfront 25% on delivery and 25% on completion.
Am I being unreasonable?. The funding isn't a problem we have the cash to pay out but I feel thats not the point.
I was wondering could I ask my bank to act as guarantor to the subcontractor if I allocate the funds which in turn could be released by the project c/a.

Any thoughts appreciated.

cheers

Steve

Plotloss

67,280 posts

301 months

Monday 17th November 2008
quotequote all
How are you being paid?

If you're upfront then he should be.

If you're on staged, then so should he.

Etc.

Boosted LS1

21,200 posts

291 months

Monday 17th November 2008
quotequote all
He wants you to take all the risk. Supposing you pay him and his business folds where would you be then?

s,one

Original Poster:

4,612 posts

269 months

Monday 17th November 2008
quotequote all
Plotloss said:
How are you being paid?

If you're upfront then he should be.

If you're on staged, then so should he.

Etc.
We will be paid upfront but they don't knpw that and I wont tell them.

s,one

Original Poster:

4,612 posts

269 months

Monday 17th November 2008
quotequote all
Boosted LS1 said:
He wants you to take all the risk. Supposing you pay him and his business folds where would you be then?
My concern exactly. 12 week manufacture time so the way things are a lot can happen, hence my suggestion with the bank.

Plotloss

67,280 posts

301 months

Monday 17th November 2008
quotequote all
How about supply up front, labour staged?

All this said, I suppose there is no shortage of people willing to fulfil this contract for you at the moment...

sleep envy

62,260 posts

280 months

Tuesday 18th November 2008
quotequote all
£160k for cubicles and vanity units!!! what are you fitting out, a stadium?

it's not armitage venesta is it?

if so www.yell.co.uk

sleep envy

62,260 posts

280 months

Tuesday 18th November 2008
quotequote all
BTW what sub-contract are you using?

s,one

Original Poster:

4,612 posts

269 months

Tuesday 18th November 2008
quotequote all
sleep envy said:
£160k for cubicles and vanity units!!! what are you fitting out, a stadium?

it's not armitage venesta is it?

if so www.yell.co.uk
4000sq ft shopping centre facility, Obviously a high spec but it does seem a lot of money to me. Not AV my experience with these people is poor I,ve been involved with at least three projects (not directly) and not one of them has passed without incident.

s,one

Original Poster:

4,612 posts

269 months

Tuesday 18th November 2008
quotequote all
sleep envy said:
BTW what sub-contract are you using?
I assume you mean what form of subcontract, we are D and B and will hold them as a domestic sc pretty much under the same terms. That said the I expect more drama at that stage.


JustinP1

13,363 posts

261 months

Tuesday 18th November 2008
quotequote all
[quote=s,one]
sleep envy said:
£160k for cubicles and vanity units!!! what are you fitting out, a stadium?

it's not armitage venesta is it?

if so www.yell.co.uk
4000sq ft shopping centre facility, Obviously a high spec but it does seem a lot of money to me. Not AV my experience with these people is poor I,ve been involved with at least three projects (not directly) and not one of them has passed without incident.
Well that answers your question.

Three projects already have had issues and they want £160k up front.

Put it this way, if you were a director of a Ltd Co which is on the rocks winding up is a hassle. Being £160,000 just 'absorbed' into the Ltd Co when you wind up might make it sweeter...

I am not suggesting that they are the kind of company who would do that, what I am saying is that if you see that whole £160k again, will that scupper your business?

What are your other options? If you have them, tell them *your* payment terms. I don't think any constructor is going to turn away money at the moment. Having it in full on completion is better than not at all.

sleep envy

62,260 posts

280 months

Tuesday 18th November 2008
quotequote all
surely they've seen the payment terms when they submitted a quote

unclegrouch

388 posts

220 months

Wednesday 19th November 2008
quotequote all
maybe dealing at a small business level it's all different but i had to read this 3 times to make sure i wasn't missing something !

As a small supplier/ installer (blinds) i find it hard enough sometimes to get 33% deposit & a balance paid within 2 or 3 weeks !

why would anybody need 100% in advance if they have suitable working capital ?

Hobo

6,653 posts

277 months

Wednesday 19th November 2008
quotequote all
In the current climate, especially in the construction industry we are refusing to pay any contractors pro-forma purely due to the fact of the number of companies folding at the moment.

If he's not nominated surely there's an alternative who will work on at least 30 days from end of month. Whilst you may have to pay slightly more, to me it would be worth it for the peace of mind.

Alternatively could you request some form of personal guarantee from the company MD covering you in case the worst did happen ?

Who is the order with out of interest (just being nosey) ?

Neil135

197 posts

249 months

Wednesday 19th November 2008
quotequote all
I insist on payment upfront from companies i have not trading history with as we make to order and if people cancel why should i be left with all the costs

2 sMoKiN bArReLs

32,039 posts

266 months

Wednesday 19th November 2008
quotequote all
If possible avoid it like the plague.

If not possible at least make sure it's a commercial & not a pro forma invoice. (at least you can claim the vat etc)

edb49

1,652 posts

236 months

Wednesday 19th November 2008
quotequote all
Difficult to say really, I would get a few quotes elsewhere - if someone comes up with £160k but better payment terms, then choose them. If someone comes up with £200k and better payment terms, at least you know where you stand.

ytrebil

792 posts

217 months

Wednesday 19th November 2008
quotequote all
We don't deal with anyone who we can't get good credit ratings on (50k+). Anything below and they're pro forma or at a push 1 in 1 out (anything over around 30k). That is a no compromise either.

With the current climate we've had loads of our limits pulled, cut etc by our credit insurers. Also, most applications are being referred to underwriters and it's taking a bloody age for a decision to be made. Not good when you have orders from said companies sitting on the table waiting to be passed through.

Can you not file any accounts whatsoever? Ask the details for the credit insurers your supplier is using and speak to them and find out what information they need.

s,one

Original Poster:

4,612 posts

269 months

Wednesday 19th November 2008
quotequote all
We can submit management accounts for the year to date. I'm looking at the possibility of setting up a performance bond between our two comapnies. (if I can get my bank can get their fingers from up the jacksy).

Exigeowner

873 posts

232 months

Wednesday 19th November 2008
quotequote all
You should be able to do something like CAD or a Letter of credit through the bank.

If you have the funds in place the bank will allocate the funds so you can touch them and give your supplier a guarantee that if he meets all the criteria ( quality, schedule ) that you have both agreed on then he gets paid and you get the goods.

Any kinda payments terms can be written into the agreement, In theory you should both be safe.