One of the most common questions we get asked is, should I give my builder money up front?
It’s a question that is worth looking at and it all comes down to risk
What are the risks?
There are risks to both parties. Firstly the risk to the client is that they pay up front for work that doesn’t get done. Then there is the risk to the builder that they do work they don’t get paid for. Naturally neither side want to take all the risks. So it would seem fair to share the risks
What are the risks as a client?
As a rule of thumb most builders are making a 20% profit. Therefore if you give them 20% up front, they have all the profit before they start. So from then on they are just doing the job for cost. There may be delays and problems once the job starts. It may come to a stage where it is actually costing them money to finish your job. If they have other jobs to start, your project will slip down their priority list. This means you could have a problem getting them to finish
Why does the builder want money up front dont they have accounts?
Most builders will have trade accounts. But that doesn’t mean they can fund your job up front. They may have several projects on the go at once. As a result of this they may not have any credit left. So it would seem reasonable that if you want your job done you will give them money to get it started
But if the builder can’t fund his own business he is basically insolvent. You then have to ask yourself if you want to do business with someone like this?
However it might be the builders business model that they require money up front. If that’s the case you don’t really have any option if you want them to deliver your project. All we can say is any money you agree to pay up front you must be prepared to lose if things go wrong
How can both parties be protected from risk?
The best way is by having a signed contract before you start. There are many reasons why you should use a contract on any project . It is going to detail all the financial elements of the job. The contract is going to have a payment schedule attached. It will have a specification document with it. This will list the exact materials to be used so everyone is aware of the cost before they start. It will detail how to agree the cost of any unexpected works that may occur.
And crucially it will detail how you are going to settle any disputes that may happen. Money is one of the biggest things that cause disputes. If you can’t resolve this it could end up with the builder pulling off site. That situation is not to anyones benefit
Both the builder and the client have to plan their cashflow throught the duration of the project. Cash flow in construction is a vital element of any successful project. Neither party wants any unexpected financial problems
We offer a wide range of services to help with projects of any size
Please contact us us to see how we can help you
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