When you hire a contractor to work on a project, there are several methods that you can agree upon to facilitate payment. One payment plan to consider is using milestone payments. A milestone payment structure is when you pay the contractor upon the completion of several tasks or phases within the project. An example would include paying 20% upfront, 30% for each of two intermediate steps, and then the final 20% after the project is finished.
Here are some reasons you should consider milestone payments as your compensation method of choice:
You have more time to get money together
When you and your contractor agree on milestone payments as the method of compensation, you are both more likely to fulfill your obligations in regard to completing the project. Milestone payments give you a bit more time to acquire the funds needed to pay your contractor, which can be harder to do if you have to make payments in larger sums or pay consistently every week.
Crews are more motivated to meet deadlines
Completing a large project by a certain deadline can be overwhelming for your contractor and crew. As a result, your project’s progress can take longer than necessary. The incentive of getting paid for completing small tasks at a time will help keep your project team focused and working diligently. As a result, crew members are more likely to stick to the scheduled milestones stated in the contract. As a milestone payment plan usually requires completion and client satisfaction, they are also more likely to provide the highest quality service possible to ensure that they secure each scheduled payment on time.
Assures you that progress is being made
Often, a contractor will promise that a project will be completed without providing the client with any guidelines to track the progress of work being done. It can be difficult to determine on your own if your project is on the right path towards completion if you don’t have any experience with construction or home remodeling. With the milestone payment structure, you can be sure that each time an installment is due, you’re one step closer to the finished product.
You’ll get a structured timeline of your project
Delays are a common occurrence during most construction projects. While many of the causes are unavoidable, delays can often be the result of a contractor’s poor scheduling in obtaining proper permits or ordering required materials. Most contracts have a start and end date for the total project while leaving everything in between vague. If you and your contractor agree to milestone payments, your contractor is essentially forced to map out every step of the process to ensure that the project stays on track with the established timeline.
Minimizes risk of losing money
There are many stories out there about a homeowner hiring a contractor and paying all or a large sum of the total price upfront, only for the contractor to run away with the money and not finish the project. Agreeing to pay in accordance with completed parts of a project will reduce the risk of a contractor scamming you out of all of your money. This also protects the contractor from unpaid services, in the event that you suddenly cancel the project.
Even within the milestone payment structure, there are many aspects that can vary depending what type and the amount of work you’re having done. Remember that all payment plans should be negotiable. Consider it a red flag if your contractor is not willing to budge on their payment structure. Before beginning your home remodeling project, be sure that you and your contractor have established a method works best for the both of you.