Progress Billing for Construction Sample for Administration Made Simple

Progress billing for construction sample for Administration

So…you wanna own a rental property? My name is Garret Wong, owner of Upper Edge Property Management. Today we’re continuing our mini-series on renovations and speaking about Progress Payments. What is a progress payment? A progress payment is a partial payment made to a business or contractor after the completion of a pre-defined stage of work. These payments replace your typical single, lump sum payment at the end of a project, or maybe a “half upfront, half at the end” type of arrangement. So when should you implement a Progress Payment? Well, typically, we see them on larger jobs. Larger jobs are more intricate and involve more materials, complexities and contractors are normally reluctant to accept a large payment at the end of the job because they have to pay their workers throughout a longer time period. Or they might not have the means to purchase a large amount of materials ahead of time. Another benefit: progress payments encourage project momentum. The more work completed towards the next milestone in the project, the closer that contractor gets to the next progress payment. Another great reason to use progress payments, is when you are obtaining funding through a financial institution. Let’s say you have a home you purchased, then you obtained an “as is” appraisal and an “as improved” appraisal. This means the financial institution will loan you money, in stages, to renovate your rental property. But they won’t just take your word for it! They will apply the Progress Payment principle to the project, and the loan or project officer will typically perform a site inspection before they release the funds to you, so you can pay your subcontractors. What are some good examples? Basically, you want to identify any stages in your project that has a sharp, defined ending before you start another stage. Some good examples of this: Demolition, Insulation and vapour barrier, Installation of Drywall, Taping and prepping wall surfaces for paint, Painting complete, Kitchen cabinets complete, Installation of flooring , Installation of finishing materials, such as baseboards or casings…Now - how much money should the contractor get paid for each stage? I’m out of time, this is kind of a big subject! Next week we’re going to be talking about how much money a contractor should get for those stages. Thanks for watching!