How “transparent” are you on invoices?
I’m starting this thread because I was reading the “email too harsh” thread and it raised the question, how transparent should one be on the final bill invoices?
See I sorta do the same thing as far as transparency. Example: I’m tiling a floor, job cost is $650 with materials. I’ll put a line item on the invoice for my labor such as “Install 6×6 floor tile, 58 sq ft” and bill it as $625. If I incur a materials cost which is always the case, say for example 3 backer boards I’ll add a line item that says “3 cement backer boards $25” or whatever the amount is.
I always thought this kind of transparency was a good thing because I “feared” the HO would go out to a big box and price out the 3 backer boards and figure that cost, deduct it mentally from the final invoice price and realize I made “more” than they thought because I marked up the boards or something. I mean, this may be a bad example, but I” just illustrating why I thought this was a good idea to itemize.
Another reason I’m itemizing is because it seems like every customer I get either A) Wants to go get the materials themselves (stealing my markup potential) or B) wants me to get the materials and give them the receipt and they reimburse me, again stealing my markup. It forces me to try and “hide” my markup in my labor cost which then looks to the HO that I”m charging way more than I should.
I”m still learning as I go, been doing this 3 yrs full time and know I have much to learn still.
I am not transparent at all. My invoices read with each separate item identified and then a grand total price at the end.
My experience is if you show how much you are charging for a 2 x 4, the customer is going to want to go by them on their own to save the .46 cents you are making on each one of them. Numbers made up but you get my drift.
I am not selling a car or anything negotiable. I am selling my service which is a fixed cost as a complete package. Its not "a la carte" where they can pick and chose based on the numbers they like.
You're nuts if you give them the receipt after you buy the materials. And you will open yourself up to delays and problems if you let them supply the material. Unless it is a special one of a kind item. Otherwiose tell thenm it is a turn-key job for a fixed price.
"Put your creed in your deed." Emerson
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
I agree, I already know I"m nuts to give them the receipt. I give it to them because they think they're saving something by buying the material for me. And they are actually, my markup. I seem to encounter a lot of HO's that are like that. It's like they know the game, that the contractor charges more for matl's and they're trying to beat it and I don't know how to properly counteract it without POing them off. I give them the receipts to go with the flow so to speak to avoid a bad situation. Now when i say I encounter these people a lot I mean like every few jobs, it's not all the time.If at first you don't succeed, try using a hammer next time...everything needs some extra persuasion from time to time. -ME
I have done some T&M work before and I occasionally still do. Usually on smaller jobs where it is easier to say "I'll bill you when I am done, within XX price range" rather than write a formal proposal for a $500-750 job. I get a verbal OK and go to work.
Those invoices show something like "Labor and materials to install XX as per our discussion on 5-5-08. Total = $653.00"
I don't break it out for them. IMO, they got the project we discussed within the budget we discussed and it really doesn't matter what the breakdown is.
I "feared" the HO would go out to a big box and price out the 3 backer boards and figure that cost, deduct it mentally from the final invoice price and realize I made "more" than they thought because I marked up the boards or something.
I used to think this same way. One thing that changed for me is realizing I don't want the clients who will price shop me against the BB's. I can't compete with those prices, nor do I care to (anymore). I want the clients who value the skillset I bring to the table to complete their project.
Now if you are talking about a large T&M project or cost plus, say 50K, then you have an obligation to show the mat'l costs. But costs and markup should be defined in advance with a good contract so there is negotiation when you present the invoice.
I"m glad to hear you say you can't work for the prices Lowes is charging. I keep feeling that way myself and kept wondering if those prices are realistic for the independent person like myself. I kept thinking they're not but then thinking they have to be. Because Lowes goes out and hires crew to do their installs, and Lowes must be marking up the cost to get their cut, which means the contractor doing the installatoin must be making his cut also....and I'd banter that arouind my head time and time again all the while feeling like I can't make any money installling a vanity (for example) for $200 when I need to charge say maybe $300. I started another tread called "not very profitable" and you answered one of my concerns when you said about you dont' even try to match the BB prices anynmore. I feel a bit liberated from doing that now that I hear you did the same mistake I was making.
If at first you don't succeed, try using a hammer next time...everything needs some extra persuasion from time to time. -ME
I was in Lowe's this last week, they have a sign that says $199 install new carpet in your entire house. Including removal of old, new pad and probably a few other things.
That is clearly a loss leader for them. They want to sell some carpet or gain some market share, I don't know. But I will tell you that my carpet guys couldn't and wouldn't even come close to that price!
It's tough, because that is what a lot of people/consumers use as the basis for comparing your bid.
I don't have all the answers, but I will tell you that when I started out (a little over 4 years ago) and I used the BB pricing as the benchmark to set my rates, I lost money big time! Won't make that mistake again. It raises a red flag if a potential client started quoting Lowe's or HD as the basis for work they could get done.
Yeah I saw the $199 price also and laughed. I had a client call me last fall, they wanted to know if I installed carpet. I don't but have a sub that does. Lowes had this teaser deal that if you buy x sq/yd of carpet you could get it at a certain price and installed. The HO that called me got Lowes to come out and price the job. They priced the job at $5K. By the time they called me they wanted another quote from me. I gave them one for $3K. it wasn't until after I gave them my $3k price that they said Lowes wanted $5K. I coulda kicked myself and made it $4K and made more.If at first you don't succeed, try using a hammer next time...everything needs some extra persuasion from time to time. -ME
'I was in Lowe's this last week, they have a sign that says $199 install new carpet in your entire house. Including removal of old, new pad and probably a few other things.'
If any customers bring that up, I'd suggest you ask them to go in to Lowe's, and say, 'Hey, I want you to install carpet in my house, I'll supply the carpet that I bought somewhere else, you do the install. That's only 199, right?' See what happens.
I don't try to compete with this. My point to the OP was that BB stores can do all kinds of marketing and loss leaders to attract people to buy from them. Lowe's or HD or Menards has a very different business model than that of the small, independent contractor/
The unfortunate part is that alot of consumers use these "special deals" to try and chisel independent contractors.
I don't think that everyone is trying to beat you down, I just think that alot of consumers need somewhere to start, and this is what they see on their trip to the local HD on a Saturday morning.
As I said, I don't even try to compete with this work. It is not the type of work I want to do, nor is it work that is likely to be profitable for me.
The Big Box prices are very deceiving. One , the price given reflects an "ideal", basic, installation. We know how many installations are ideal. Anything more is an up-charge. They make money on the item sold, on the install, and again on the financing if the customer goes with the store credit card. And remember- they work on a much lower mark-up than you or I could even consider, because of the volume they do. They also beat up their installers mercilessly. I've known three guys who tried to install for Big Boxes, and they all cried uncle and gave up after a few months. I've heard rumors that there are installers who have worked for them for years, but have yet to meet one.Maybe there is someone on this board who has had a better experience with them?John Svenson, builder, remodeler, NE Ohio
I know a guy locally that has installed doors for them for at least 5 years. He says he has to install a door an hour to make it work and that includes travel time. (storm door that is) He gets $55 of the $115 they charge. We charge the same $115 and can make money even if we take 2 hours. He works his tail off though. DanT
If he knows you're making the $115 in full vs. him getting only $55 of Lowe's $115, then why does he still work for them?If at first you don't succeed, try using a hammer next time...everything needs some extra persuasion from time to time. -ME
I have no idea. DanT
So they get a 100% mark-up on labor. Interesting. I thought it would have been less.And $55.00 is WAY too cheap. He must use it as fill time? Obviously he works alone.Amazing what some guys will do to avoid sales and collections.John Svenson, builder, remodeler, NE Ohio
I was surprised too. And that is just what I thought was the reason, avoiding selling and collection. He does stay busy though and says he does alright overall. He hates to find out he has less than 4-6 stops a day.
Actually I use that as part of my sales pitch. I point out that he has to pay for the same truck, insurance, fuel, etc. and has to do it on $55 a stop. So I ask the client "if he has to do some time consuming adjustment do you think he will do them? Nope. Because he can't afford to."
And it is true. I have seen his work that looked great but if he gets into a twisted door frame or something he hustles through it and bails. Cause he can't afford to starve. DanT
You're nuts. I agree.
I haven't done the "give the customers an invoice since my very early years."
My invoices say Materials for building deck $100, Labor $200, Total $300. That's it.
I have some jobs that have 20 or 30 invoices and I may have 10 to 15 items per invoice. You guys are nuts if you spend your evenings figuring out how many 2x4s were used and how many returned x the cost of a 2x4.
We do remodeling and repair. Most jobs are $1,000 to $10,000. We live in a rural town of 10,000. And I have spent 25 years building my reputation.
An old lumber yard manager told me not to give the customer so much information, when I was in your position. Since that time I have had alot fewer problems.
I'm sorry if you already do these things, but I would do the following;
- Have a clean vechile, I've driven my share of $800 pickups. Just make it look as professional as you can afford.
- Wear clean work clothes with your company name printed on the pocket. Printed T-shirts cost me about $9 each. I'm not saying we don't get dirty, but we start out clean, and we keep our hair cut.
- Keep your radio on decent station and at a quiet level. You may like country or grunge or classical but that doesn't mean they do.
- For fancy ladies I listen to classical, when I am working at the truckstop then I listen to country.
- Give the HO a computer printed estimate. Enough detail to protect yourself, but not enough to hang yourself or give them #s to go shopping with, like the # of sq for their roof.
- No swearing. Period. I have had homeowners thank me at the end of the job because they didn't hear any foul language.
- Look, act and behave as a professional, then HOs will treat you as a professional.
Below I posted a Invoice I did last year. The Bid looked the same, I just added the extras and changed the heading to say Bill Statement. Most of my invoices are hand written, on company statements.
If some one wants to buy the materials, I don't quibble about it. I tell them to get an account at the lumber yard and we're good to go. If they ask me my rates then I tell them honestly and say that any materials run thru my account will be marked up 20%. But I don't volunteer this information
I have at least on customer who always has me put the materials on his account, but he writes me a check before I drive out of the farm yard and he has me back several times a year. It's farm country here 1/4 of the people have an account at the yard.
Relax, you are entitled to make a decent living, have health insurance and an IRA. If they don't like that then they can have someone else do the work.
Be honest with people, but don't give the ammo to pick your bill or your estimate apart. Remember they can't read a tape measure or run a calculator so most of them can't figure the materials for any given job. Without your materials list they would be lost at the lumber yard.
Oh man, you're killing me. Hillary roof Bill? As in Hillary and Bill, Clinton? Anyways...let me clarify. I do NOT itemize to the detail of saying 14 2x4. When I say itemize most often it's general in that I say: "Materials: faucet, faucet supply hoses, Ptrap, misc PVC ftgs.....$135". When I return something I usually don't figure in the return as the HO doesn't know. I have company logo T shirts, front and back, wear every day I"m working. I'm clean cut. I useq Quickbooks and print off proposals, statements and invoices all with company logo for the finished professial appearance. My truck is clean, always told it's cleaner than most contractors' work vans. I listen to music and do keep it quiet. I never swear. I'm professional in all my doings. but....I'm still making some mistakes as I"m finding as I go on.If at first you don't succeed, try using a hammer next time...everything needs some extra persuasion from time to time. -ME
Maybe it is time to go to the library and get some books on selling.
They will help.
- Have a clean vechile, I've driven my share of $800 pickups. Just make it look as professional as you can afford.- Wear clean work clothes with your company name printed on the pocket. Printed T-shirts cost me about $9 each. I'm not saying we don't get dirty, but we start out clean, and we keep our hair cut.- Keep your radio on decent station and at a quiet level. You may like country or grunge or classical but that doesn't mean they do.- For fancy ladies I listen to classical, when I am working at the truckstop then I listen to country.- Give the HO a computer printed estimate. Enough detail to protect yourself, but not enough to hang yourself or give them #s to go shopping with, like the # of sq for their roof.- No swearing. Period. I have had homeowners thank me at the end of the job because they didn't hear any foul language.- Look, act and behave as a professional, then HOs will treat you as a professional.Cargin,I have given that same advise to many of the young guys in my shop. You get treated like you act, that includes getting the job and for how much. Your invoice is the same model I use and suggest. Keith
Willie said I was killing him.
Sounds like he is already doing it.
He'll make it. He'll just have to figure it out by doing it. And doing it. And doing it.
I read your example of one of your bills. I understand where you are coming from, but as a "Consumer", I have to know by name the EXACT 30yr shingle you would install... Tar paper weight, I'd request in writing, but many years ago one roofing company sent the shingle order ahead of their crew. It came came with 15lb, so the company came out and exchanged to 30lb. ONLY, years later on another hail damage re-roofing, the adjuster peeled up the old shingle to show me the company installed 15lb ANYWAY...which meant that's what the adjuster had to pay for...
Once, I ran out of time to finish my small storage barn. I was given the name of company to install half of the side metal, and all of the U-panel roofing and trim on a 2-story, 14'x21' barn. The vendor bid $500 labor, plus materials. He said he would show me the list of materials from Metal Mart. Only, when he gave me the copy of the Metal Mart bill, made by the fellow behind the counter, nothing seem to add up on the bottom line. I went to Metal Mart as asked for a copy of the original bill from the actual owner....Lo and Behold, the employee had folded the bill when it was copied. The fold covered the line where the installer purchased a $160.00 screw gun....
Yesterday, I got a bid of $23,000 for two re-roofings on two metal roofs and two asphalt shingle roofs. I specifically requested 30lb paper, which was listed, and Elk 40 yr shingles. No estimate data on which kind of Elk 40 yr. shingle was given and a lower 30yr shingle was bid on the second building's roof..... Presently, both metal R-panel roofs are white. His bid listed Galvalume... One metal roof has the brown wide sculptured painted gutter that currently match the rake trim. The other has the same gutter, but 14 years ago when it was installed, that installer used the same color, but plain rake trims where it didn't match and cost much less. When writing his contract, I specifically asked for matching rake trim, but after it was up and called to his attention, "it wasn't listed" so the cheaper trim was used...
Through "trail by fire", I've learned....If I don't get a better detail on the written estimates, they won't get the job. Do you blame me?
Edited 5/13/2008 12:42 am ET by BilljustBill
You are right. This was the bill for a job and not the Bid.
Hillary has been my friend for 25-30 years, she is close to 80 and I had spent a bunch of time at her kitchen table with brochures showing here what I would do.
Again you are right about being specific on the major products.
I do many of the similar items you listed plus one. My clients usually open up their own account at the lumberyard I deal with and let me order on it. I'm not in the business of financing somebody elses house. If they can't take care of their own bills they probably can't pay me timely.
Have a good day
Good to hear from you again.
Most materials go thru my account.
20 years ago it was pretty standard practice that the HO either had an account or the yard just sent a bill to them.
The upside to running it thru my account is i mark up materials 20%.
Week did a shingleing job for a 1.5 weeks and the materials were around 5k.
The down side is when people are slow to pay. Rich
One ( of many) reason I don't buy much at HD or Lowe's is that I get a discount at my regular yard, that doesn't show up until I get my monthly statement.
That way, on the rare occasion I do show a material invoice to a customer, I still get my material mark-up.
I usually dont upcharge materials but i do figure into labor, the cost of getting the material.
Customers dont get receipts, I do. If a cust every asks about a certain material cost or says I charged too much for something (okay sometimes I do mark up material) I would have no problem explaining to them the simple economics of my time and gas.
As far as a direct answer to your question, estimates have one price, the bottom line.
Invoices have a subtotal, and an itemization for any additional work.
or B) wants me to get the materials and give them the receipt and they reimburse me, again stealing my markup.
I hope that if they're reimbursing you for the material then they're paying you for your time to go get said material? If not then you're giving away more then you think!
I do cost plus exclusively so I feel the customer deserves a detailed weekly accounting of what the costs are for their improvements. I typically work in a 50k-500k dollar range and I work by myself. I feel that for this kind of arrangemet it is really imperative that I be as transparent as I possibly can. I can't even count the number of HO's rants I've listend to about how they felt they were ripped off by contractors who just handed them a bill with a total at the bottom and no documentation of costs to justify the invoice.
I also copy the receipt for each expense on the back of each PO and give them a timecard for the weeks work. I have recieved noting but glowing praise and appreciation from HO's for my system. I want to build their confidence and their trust and partner with them not only for this remodel but any future improvements too.
bjr... if your rate is high enough , then it doesn't matter what you mark up
and you can be as transparent as you want
if the rate is too low, then your markup has to be higher and the quibbling from the customer starts
in the other thread the guy was doing fixed price contract and still being transparent ..... why ?Mike Smith Rhode Island : Design / Build / Repair / Restore
Just posted on your other thread.
With regards to this one, here is how I've been doing it and it seems to work.
Mark up material 30%, covers the cost of shopping, driving, etc.
If customer asks, I tell them the truth.
If customer wants to get own material, sign a waiver that says material must be exactly what I tell them to get, has to be my specs, and there is no warranty unless they do as stated. And no, they can't borrow my truck.
Most say," OK, you get it."
Sigh. I mean, am I being too much of a nice guy? Sometimes, like now, I"m finishing up a tile bathroom floor job. HO wants to get two new toilets since they love the new look I just gave them. Happy for the add'l work I offered to go get them. My fee to install each is $160. Installing a toilet is like nothing, can do two in an hour and make $320. But, I didn't consider charging for my time to go get them or anything, I was just happy for the $320 more I'm getting for something that's a breeze. That's like $320 per HOUR, man.If at first you don't succeed, try using a hammer next time...everything needs some extra persuasion from time to time. -ME
I've been doing T & M work in a very rural area for 15 years now. This is what my proposals and invoices have evolved into. I tell them exactly what I'm doing, what I'm charging for my rate and any other labor. I tell them that everything gets marked up 20%. I summarize the materials by receipt from when and where I bought them, and put my marked up number for each receipt on the invoice.
I've never had anyone question any part of any invoice. They are often very impressed with the professionalism of my proposal and explanation of my business model. This particular job has ballooned to well over 100K as we've wound up doing a lot more work than initially planned on.
Note that the business changed names between the proposal date and the recent invoice.
Whoa, you're charging $20 for one can of spray foam? Man I KNOW I'm doing something wrong :)I liked your proposals and invoice. I'm starting to wonder if the software I use, Quickbooks, is the right software to use to create my proposals. It limits me to one page, yours spans several enabling you to show the detail that gives you the better refined look.If at first you don't succeed, try using a hammer next time...everything needs some extra persuasion from time to time. -ME
Willie,That can cost me 16 dollars and something. It's for a professional spray gun, not the foam bombs you buy at the Despot.But see, that's the danger of being specific on invoices. HO sees that and says "whoa! he's charging me 20 bucks for a can of foam?" I usually don't break out individual items, but sometimes have to when I take something out of inventory rather than when it's part of a receipt with a bunch of other stuff. But as I said, I've never been called to task for anything on an invoice. They know they are paying 20% markup.I did a kitchen about ten years ago where the HO wanted me to keep a record of what I did each day for him to see because the job was at that stage where nothing much visible happened for a while. I got mad and wrote down everything I did for a day--every board cut, every piece measured. It took up a whole page. He backed off the next day and said never mind. They are now friends and I still do the occasional job for them.Steve
In general, my invoice will list the job done, and the price. Period.
This is modified by special circumstances. For example, often things like permits and equipment rental are over and above the agreed price. These are listed separately, without mark-up.
Another example is the way the invoice is prepared. For example, a certain customer of mine is allowed to pay out for 'repairs,' but not 'maintenance.'
customers get a price for whole gig or significant parts are broke out if I think they might ask.
have you ever figured out what your hourly costs are? Compared that to what your hourly pricing and add to that what you want to make for yourself & profit? And then compare that to your competetion?
Not that you should do T&M but you need to have an understanding of how your work week breaks down to start figuring accordingly.
It's good to be a nice guy but you're not a charity.
A couple of my customers have been burned by contractors, and I give them all the receipts (no mark ups)and a separate labor bill, so they feel that they have some control over the process.
Other customers aren't worried about transparency and don't want to be bothered looking at receipts.
I charge a materials delivery fee, but could never find justification for mark-ups.
"but could never find justification for mark-ups."If you have a wife and kids, the justification is that you need to make enough money so you aren't a burden on them in your old age. If your retirement, including health benefits are already funded, then carry on...you are doing well! Bob's next test date: 12/10/07
I lump sum price only. I will do X and you will pay me Y to do it.
No cost over runs... no additional charges.
You want to get the materials fine... get em... if they are wrong I expect you to get them right PDQ and if I yell at you, don't take it personal.... you are my supplier and you aren't doing your job.
You had better read her profile. LOL
I don't do profiles. Bob's next test date: 12/10/07
I am in my 29th year, I never itemize a bill. I advise the HO that the big box stores are for DO IT YOURSELFERS and that I am furnishing a professionally installed product that I have to stand behind. I will put up with an occaisional purchase which they purchase and deliver and they return if faulty. If I quote a door, or window, or bathtub or whatever Iquote it as a totally installed job and if they are comparing various models I will give a difference in the two but never itemize unless absolutely forced. If I have to I give them the unit price after my markup with tax.
I agree with Cargin and how he does it. Our jobs are similar to what he does. I want the customer on a " needs to know basis" too much info seems to create too many questions and time wasted answering them what seems like an up front approach becomes a PITA
As for losing the mark-up if the customer wants to buy at the BB I try to get them to buy a prepaid credit (gift)card and let me get what we need for the job I give them the receipts but charge for my shopping time. I also tell the customer if you buy it and it's wrong when I get to job site I add waiting time to the cost of the project while and you go get the right stuff sometimes that works and they let me buy the materials.
Customers who want to steal the small mark-up you make on materials or "verify" your prices at the big box are not worth having.
Whoever posted the comment that if the project was done within the budget and to the customer's satisfaction then no further information is necessary is exactly right.
Start by preparing the most complete estimate you can for your customer. You can list the square footage of tile, or carpet, or whatever, and be specific about the exact type of tile or backer, etc., you are providing or any other info you feel helps to clarify the job requirements. Then give a total for the job and leave it at that.
If, in the course of the job, the scope changes to include another area or a more expensive tile, then you price out this "change of scope" just as you did the estimate and have the customer approve (sign) it.
Your final bill, then, is just a reiteration of info the customer already has and expects.
You can waste lots of time on people who want a list of every nail and 2x4 to begin with. If they're that suspicious and nit-picky in the beginning, it's not going to get any better. And trying to hide the markup you are entitled to is going to catch up with you along the way in costly mistakes.
Don't feel you have to justify making a living.
Personally, I try to cover my overhead and profit in my labour rates. As a specialty trim contractor, who works mostly alone, this seems to be the fairest way.
So when working T&M, the estimate will specify that labour will be billed at $X/hr, and materials will be charged at my cost.
If it's a fixed-price job, nothing is specified, not even separate labour and materials totals. The only exception is where materials allowances are used for items yet to be selected.
I will usually give the client a choice between T&M or fixed price, explaining the pros & cons of each. I am open about the fact that when I commit to a fixed price, I am assuming an additional level of risk, and charge accordingly.