When homeowners have scrimped and saved (or, perhaps begged and borrowed) to finally afford their remodel, they want to know they’re getting their money’s worth. On the front end, scrutinizing product selections and narrowing scope of work helps maximize value. During construction, remodeler Keith Steier, owner of Knockout Renovation, in New York, keeps his clients feeling secure in how their money is being spent.
“After the initial labor deposit of 30% and a 50% products deposit after the selections phase, we invoice clients weekly based on work accomplished during that week,” Steier says. He adapted the format from an American Institute of Architects billing practice and says that the majority of his clients appreciate the setup.
“It’s really a selling point for us,” he says. “The benefits are that [clients] aren’t making three or four large payments at questionable points in the project. For instance, I’m not asking them to make their two-thirds payment when the job doesn’t look halfway done. Instead, it breaks down the payments into smaller chunks and they have the assurance that they’re not paying way ahead of progress.”
To make progress invoicing accurate but not overly complex, the process is broken down by trade with line items for demolition, plumbing, electrical, flooring, etc. “We had to strike a balance between making it timely and making it understandable,” Steier points out. “Clients are billed for the percentage of progress of each trade at the end of the week.”
On Fridays, the design/project manager compares the week’s progress to the scope of work and sends a recap to the bookkeeper. The information is converted into an invoice sent to the client who is asked to pay upon receipt.
Progress invoicing also helps steady Knockout’s cash flow. Steier says the company isn’t receiving giant checks from clients, but instead receives regular checks. The same goes for the company’s trades who are also paid more frequently as payments come in from homeowners.
“We started using progress invoicing right around 2000, and at first it was a really big change for us,” Steier says. “We had to change the language in our contract and also had to figure out how we were going to calculate the incremental payments accurately. But, we’ve gotten such a good response from it over the years that now we’re working on setting up a biweekly payment structure for clients who feel like weekly is too frequent.”