Deposit dilemma....

[jay]

Hi Guys, This is a first for me in 26 years in Business and can't get my head round it. Firstly, I almost never take a deposit, prefer to be paid on completion.... this has rarely been an issue in all these years, but if I did, I would invoice job, minus deposit paid, and there's the balance due.... simples! However, I have just secured ongoing work for a local Estate and have an initial deposit of 2.5k so I can buy materials to make a start. I have a significant number of pieces in my workshop which I will complete throughout the year, in-between other work.... with more to come. Here's the bit that confuses me.... how do I invoice the work in small batches, taking the deposit into consideration? I have done this once before, but slightly different circumstances where the customer paid £300 deposit for 10 pencil portraits of their grandchildren, spanning over several years (this was to enable me to buy sufficient moulding to ensure it wasn't disco'd before completion) In this instance it was simple.... as I completed each portrait I took a £30 deposit off the total to cover the £300 over the 10 works.... this obviously doesn't work in my current situation. At this stage I have no idea of the total number of works, but have 38 pieces in house thus far. If I complete say 6 pieces, how do I charge? When I begin work, I will have spent around 2k of the deposit on materials if that makes a difference? Having total brain freeze, but likely overthinking this as this is a trait of mine?! Tia for any sage advice.

[Gesso&Bole]

I would invoice the full amount on each frame completed, keeping the deposit in hand until the last of the work comes in, and credit it against that.

[NTG999]

I would just deduct each job from the £2.5k, in the months you did jobs I would send a statement of the balance remaining, if it goes well and the balance gets towards zero ask for a top up

[JFeig]

In the general world of business, you invoice what you have on the books, the 38 prints.

Any additions are considered new orders and should be billed as they are ordered. Easy-peasy.
Another way of saying this is writing a "job change authorization".

[jay]

Thanks for your suggestions.... interesting to see differing ideas!

NTG999.... I will already have spent, probably 2k of the deposit on materials, so not much left from which to deduct work as and when it's done. I cannot afford to wait until I've invoiced 2.5k worth of work as that could take a while. I need to be bringing money in, but I could totally see it from their point of view if they felt, having forked out 2.5k, they wouldn't expect to be pay full price for each piece as and when I complete (as per Gesso&Bole's idea).... doesn't seem to be an easy answer here.

JFrieg... surely invoicing for the work I have in hand would mean them paying up front for them, not a deposit?
I have given them an estimate of the likely cost of each different job type, but because some of them are more involved pieces, I'm not sure yet of additional sewing time etc on 18 different sized fabric pieces, hence why I prefer, as a general rule, being paid after the job is complete.

Had hoped there would be a simple solution I had missed, but clearly not!

[NTG999]

Hi, you mention that you generally like to be paid at the end so you fund all the materials and are reimbursed on collection and that works fine for you as you have the cash or credit to do that.
This job you have received £2.5k and have currently spent £2k on materials so are £500 better off at this moment, I appreciate that the time spent on the 38 jobs won't give you individual margins but you aren't worse off, the tipping point is as you progress you aren't spending.
As mentioned I would press on with the 38 and deduct the invoice value from the £2.5k the main thing IMO is not to overcomplicate it with the customer and they think - 'this is hard work' If the pricing is right I would love a job like that; well done getting it

[Tudor Rose]

Just to get it straight in my head: You have 38 jobs in-house already - and the customer has paid you a deposit of £2.5k to set against them. But you don't want to do all 38 at once and you can't list them all on one invoice at the moment because there are unknown variables around the pricing of 18 of them (the fabric pieces).

So this is what we would do.

Think of them as batches - and create an invoice for each batch as you finish them. Then allocate £65.79 per item from the £2.5k to the invoice. That's just £2.5k divided by 38 and allows you to drip feed their deposit onto each batch invoice. Leaving them to pay the balance of each batch invoice when they collect/take delivery. This allows them to feel the benefit of the deposit they have paid you, and you get some funds coming in as the work progresses. So on your planned batch of 6 for the first invoice - you allocate £394.74 from the deposit they have paid you.

Keep a tally of the 38 - and the funds you are drawing down from the £2.5k - on an Excel spreadsheet and I would be providing a copy of that running total with each batch invoice you send them. That way all parties are clear on where things stand.

I would be clear with them that the £2.5k deposit is allocated ONLY against those 38, and that when future items are added to the list, then a further deposit would be due. Again, that helps with cashflow and can be of a value you think appropriate based on the likely cost of the items coming in - ideally I'd be looking at 50%.

Doing that ringfences all the funds against those 38 - because as much as I'm sure the customer will bring other work in as they've discussed with you, their plans may have to change without much, or any notice to you. After the chaos of the Covid years, we all know how easily future plans have to be upended. So these days we tend to work based on the jobs on the bench in front of us, not a theoretical number that the customer "may" bring in to us in the future.

We use this method regularly without any issue. In fact, we had an order of 81 painting for an artist's exhibition go out this week - paid over three invoices when he brought the work in during December, January and February. He paid 50% deposit against each invoice at time of order (good for our cashflow) and the balance of each invoice when he collected them (even better for our cashflow as the balance on all three came due at the same time!).

[JFeig]

Not knowing the actual billing and payment terms from your client and the time necessary to complete the task leaves us in a bind regarding suggestions. My first assumption was that there is a lead time between the billing and the receiving of a payment. Second, you are just now adding a variable that you did not state from the beginning, all the specifications are yet to be received.

This is evolving into a not good business practice on your part. When large companies get engaged with this type of scenario, there are pre-defined payment schedules and most likely, a lot of modifications to the original quote (job changes and job change authorizations). This is just like a construction company would handle this situation with either a home, business, high-rise, or industrial complex.

[jay]

Evening all,
I very much appreciate those taking the time and effort to help me navigate my way through this.
Apologies if I missed some information initially, but I was trying to be succinct, and it still ended up an essay!

To be a little clearer... the work I have in, and the pieces still to come, will be hung in a number of cottages currently being renovated as holiday homes. Renovation work on some hasn't begun yet, so will all be for next season.
This is why the owners are in no hurry for the framing, but realise as a "one man band" I will need to get started to have them completed "over the course of the year" as per their request.
They are still purchasing artworks for the walls, hence why there is no firm number in the pipeline.
I will be doing these pieces alongside my other customers orders, so it will, no doubt, take me a while.

I am working with the "middle man" who is dealing directly with the owners and interior designers (another reason the specs change and we have had some delays on decisions)

Perhaps it is evolving into a "not good business practice" on my part, but I'm dealing with a situation, on a scale I've not encountered before, and is precisely why I have come here to ask for help from those with greater experience in this area.
Most importantly, I do want whatever solution I settle with to be clear to whoever may be keeping tabs on their finances.

I'm veering towards Tudor Roses suggestion of dividing the deposit by number of pieces and deduct from each invoice. This is what I did with the x10 pencil portraits cited in my first post, but didn't initially see it working in this instance.
It will mean I still have money coming in with each invoice, and I will repeat as/when they bring another batch of work.

Thanks again!

[JFeig]

Thank you Jay for the added info.

With that being the case, I would treat each and every frame job as a separate order with accompanying invoice, just like every other client. That is how, years ago, I did a significant business with a major home builder until their system changed to being internal. I used to work with an internal decorator who together we would do 20-35 model homes a year. Each model home would result in 20-30 framed pieces.

The process was for the decorator to take home several print catalogues and select the prints/posters that would be used in each home and create a list of what was to be ordered. He would then come back in and select 5-10 moulding samples and a similar number of mount colors to be used for the house. After he left it was my job to coordinate the art, frame, and mounts into a group of orders for that model. Each order received a reference to the model. All the orders for that house were then processed into a single invoice referencing the model and submitted to their AP for 30 day payment terms. We then proceeded to assemble the frames, within a 2 week window, and label them with the name of the model. There were times then we would deliver to the new estate framed art for 2-3 models in one shipment.

[JKX]

I never took deposits either, well, I would, but didn't ask for them ...... most of the time, and I'm not sure I would in this situation (if I've understood it properly) either.

If a large job had to be done in batches - and assuming I didn't have to order a load of stock many months in advance and store it all, I'd order the stock per batch, get the work done and be paid for it before my own invoices are due.

[jay]

Thank you JFreig, that was most helpful.

JKX.... This wouldn't work for me in this instance as I have 7 "oversize" fabric pieces, so need to order a pack of 10 Jumbo foam core boards. Similarly, Jumbo mount board and back board. Acrylic glazing I can order as and when I need them. That's a lotta dosh going out before the pieces are likely to be completed, given that I'll be doing these in between my other customers jobs.
My situation is not helped by one of my Suppliers deciding to withdraw my credit account because I don't order enough from them, so Jumbo mount board likely to have to be paid for up front, which I can't afford to do.
Anyhoo, I have the deposit, so will work it out.

[JKX]

Is it Larson Juhl?

It's funny, I've been retired two and a half years and can still log in to every account I had and see discounted prices up to 35%, bar Larson Juhl.

It's hard to give advice on this sort of situation without knowing a good bit about someone's business, what amount of consumables can be afforded to be held etc etc - and there's nothing in your profile at all so people mainly advise based on what they would do. E.g. - I'd order packs of 10 jumbo foamboard just to top an order up, as I used so much of the stuff (etc).

I suppose you'd have to ask for sort of "top up deposits" or something as you go along.

[jay]

JKX

Nielsen

I'm a Sole Trader in rural Scotland. Delivery is costly, so cannot order "little and often", yet I have limited storage space. Delivery takes a minimum of 2 days, with moulding damage not uncommon. Recently had 5 breaks (all finger joints) in a replacement stick - the original length was broken in 2, along with another 4 damaged lengths in the bundle!

Still rather be doing this than commuting to the city every day!

[JKX]

Nielsen

It’s Nielsen who gave me 35% discount , on wood length.
25% on mountboard bar one colour (igloo) which was 30

I’ve just checked and it’s all still there but it looks like they’ve stopped my credit terms though!

If I was closer we could split the discounts!