Getting Deposits on Jobs

In this article I want to talk about getting deposits, to tell what I do.

   I usually ask for about 50% of the job, enough to cover the fabrics and any supplies. If the labor is a lot more than the fabric I might not ask for quite half, sometimes it may be closer to a third. I usually add up the retail price of any fabrics and other supplies, such as new foam for the cushions, and then round that amount off, perhaps to the nearest $50 or or hundred dollars.

    However,  if they have their own fabric, and if there an no other special supplies being used, I may not ask for a deposit, or may must ask for a minimal. I figure that them supplying their own fabric is kind of a deposit (money that they've already paid out for the job.

    I see the deposit as a kind of guarantee (not exactly the right word) or a commitment from the client that they will come back. In years past, when I was working with my dad, we sometimes had people come into our shop, write up the order (no deposit was taken) and then when the job was finished, and we tried to contact them, we never heard back from them. we were stuck with the furniture. We usually wouldn't be able to sell the piece for what the client was going to pay.

    If we take a deposit up front, then the client is more likely to come back and pay the rest, and, if the client doesn't come back to get the furniture (which rarely happens when we take a deposit) we don't loose as much money on the job trying to sell it for costs.

    Another practice that we use, is that we don't deposit or cash the client's check until we have confirmed that the fabric is indeed in stock and is shipping. If the fabric is back ordered, we contact the client and tell them the status of the fabric before we order it. If the client is willing to wait, then we cash the check and order the fabric. Another thing to consider is that when a client's fabric is back ordered, there really is no certainty that we actually will ever get it. Although it doesn't happen too often, sometimes it may take two to three times as long, or longer, to actually get the fabric. If the wholesale supplier doesn't have the fabric in stock, there is no guarantee as to when and if you will get the fabric.

     I don't spend any money of the client's until the fabric is a certainty, that we have it in hand, or have it ordered and know it is actually coming.

     Whenever there is a problem or a delay with the client's fabric or supplies, we hold off spending the client's deposit. It's not ours to spend until all the pieces of the order come together.

     We keep all of our records in QuickBooks (an accounting software). I create my estimates and work orders in it, as well as the purchase orders, checking account, etc. Whenever there is all, or a portion, of the client's money that we can't spend, We have set up, what we call, a "holding account"  that we hold the client's deposit into until the proper time.

    For example, when a client pays for the whole job in advance, I don't want to spend all of their money before I even do the work. So, when  client pays in advance, and we have confirmed stock on all the fabric, we deposit the whole about into our bank account. Then I enter about 60% (more or less) of that amount into the "holding account" (with the client's name attached to it) in the bank register in QuickBooks. This way it is very much like just receiving the deposit at the beginning, and then, when the job is finished, we take the money out of the holding account. It's like getting paid for the balance of the job when it is finished. If there is a problem with the client's order or fabric, and we do, or did, deposit the client's check into the bank, we'll put the whole amount into the "holding account" until the problem gets cleared up. We figure that the money is not ours to spend until any job or fabric issues are resolved.

    In the past, I use to decline accepting full payment on a job at the beginning. If we did that, we'd more likely spend all the money before I even did the job, and then I'd have to do that job knowing that I wouldn't get any money when the job was done. Getting paid the balance at the end is a good motivation to get any job finished. Having money in that holding account is both a guarantee that we will get paid (because we have already been paid) and a reminder not to spend the money before the job is finished.