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Keith Steier, president of Knockout Renovation Services, Inc., in New York City, sends his clients invoices each week — and they like it. He calls it "progress billing," and it does away with the lump-sum, percentage payments that some clients find confusing and sometimes dispute.
Unless quantified by a benchmark, such as "installation of cabinets," for example, it may be hard for a homeowner to agree that a job is, say, 70 percent complete.
Knockout Renovation does ask for an initial 30 percent labor deposit, and materials are paid for on a 50/50 basis—half on ordering and half on delivery. The remaining 70 percnet of the labor, however, is invoiced weekly to the client by e-mail based on what progress has occurred on the project during the previous week.
Knockout's contracts are totaled by trade category, Steier explains, a factor that makes the weekly billing arrangement feasible. The weekly invoices are calculated by the firm's bookkeeper based on input from the project manager at the beginning of each new week as to what was accomplished in the previous week.
In the development of the work scope, which ultimately becomes the contract, the designer itemizes each task of the project, with a trade category assigned to each of those tasks, Steier explains.
Steier's bookkeeper says that he uses a mainstream spreadsheet program to accomplish the task. While it took some basic spreadsheet knowledge and a math background to develop, it is not beyond the capabilities of an experienced bookkeeper, he says.
In the beginning there is some additional work, creating individual files and entering data, he admits, but once the job starts, it's practically no work whatsoever. The updates are mostly automatic.
Steier notes that Knockout is not the only remodeling company using progress billing, but he thinks that it's not common, either. The basic reason is that lump-sum payments have been traditional, and many remodelers are reluctant to change. In addition, if they don't have a bookkeeper on staff to set up and administer the billing system, they'll be unlikely to opt for the system, he says.
After four years of using the progress billing system, Steier reports few complaints. A few clients who travelled extensively found keeping track of the weekly invoices to be difficult, he noted, and accommodations were made in those cases.
"From the clients' perspective all that's happening is that they're receiving a weekly invoice instead of a request for a lump sum payments. Although the payments are more frequent they're also inherently smaller and more directly tied to the progress of the project," he says.
"It's more digestible; [the clients] are more in control," he adds.
Aside from making clients happy, the weekly billing keeps Knockout's cash flow steadier, and there are fewer questions from customers who question the percentage of completion of a project.
Steier does caution that the procedure probably isn't suited to smaller jobs. Knockout Renovation works exclusively in Manhattan and Brooklyn, and its average job can come in at about $80,000 and go up to $300,000. A firm doing smaller jobs and repairs in the $5,000-$20,000 range might not benefit from the arrangement, he says.
A typical client is a busy, white-collar professional with a growing family or one that is merely upgrading his living arrangement. Most of the jobs are co-ops and condominiums typical to the area.
Steier also notes that Knockout is an all-in-one remodeling service that designs, sells products, and produces the job. The service also may include securing approvals from the management of co-ops and condos. We're a one-stop shop, he says, that offers a fully integrated approach.
Our progress billing just one more selling point to potential clients, he adds.
author: By Kenneth W. Betz