Any of you guys in this line of work?

Basically we’re upgrading our system. New server and new software. Whats the usual terms of payment.. We’re being asked to pay 50% of total project up front & then 6 monthly installments regardless of completion dates etc. I would have thought it more reasonable to pay for the server and installation on delivery and then say the balance up to about 90% on handover with the balance on retention to encourage gremlin resolving/teething issues.

Is there a formula for this type of thing?

Is the company you are dealing with bigger or smaller than you?

We’re being asked to pay 50% of total project up front & then 6 monthly installments regardless of completion dates etc.

Regardless a massing [expletive deleted] to that one. Contracts are there to be negotiated, put in specific clauses and send it back to them. (chances are if they are too big it will just get signed their end)

Find someone else to deal with. Warning bells at this stage should be listened to

We’re being asked to pay 50% of total project up front & then 6 monthly installments regardless of completion dates etc.

Paying part up front doesn’t seem too bad (assuming it’s for the hardware), but the “regardless of completion dates”?

My projects (software, not hardware) usually have staged payments depending on defined deliveries – maybe 40/40/20% for a two module project, the final 20% is on acceptance BY THE CLIENT. ie. only very minor bug fixes, for example misspellins and the like. Emphasis on minor.

Dont know the details of your company but that seems unusual.

Edit after Mogrims reply:

Paying part up front doesn’t seem too bad (assuming it’s for the hardware)

I wouldnt pay up front for hardware.

Other than the provision of hardware and software what other services are they offering?

My projects (software, not hardware) usually have staged payments depending on defined deliveries – maybe 40/40/20% for a two module project, the final 20% is on acceptance BY THE CLIENT. ie. only very minor bug fixes, for example misspellins and the like. Emphasis on minor

Thanx mogrim…so that’s 40 on order 40 at delivery and 20% when the delivered system is “working” as it should be ?

I wouldnt pay up front for hardware.

Other than the provision of hardware and software what other services are they offering?

Thanx surfer. They are our existing providers . We are moving to their new windows based system from the old DOS one we currently use. So its Data conversion into the new system, training & support.

6 monthly installments regardless of completion dates etc

No way.
Set milestones on the contract if they want paying in this way.

When you say ‘upfront’, do you mean before delivery or when invoiced or when delivered and invoiced?

And what terms, 30/60/90 days etc.

As its your current supplier you’ve a relationship, good or bad?

And the other piece is really just buying labour, so invoice per month would be correct.

If you are an existing customer all the more reason that there should be no upfront payments.
Is the software in use with other companies or are they developing it/parts of it for you.
Mogrim is right but as an occasional purchaser of bespoke software i would withhold more than 20%

How big is your company and do you have an IT manager?

I wouldnt pay up front for hardware.

Fair enough, I’m happy to admit I don’t have any experience with IT hardware procurement, so I’m not sure what current practice is there!

Thanx mogrim…so that’s 40 on order 40 at delivery and 20% when the delivered system is “working” as it should be ?

No, that’s 40% on delivery of the first (software) module – with a certain leeway on the bug front. 40% for the second module, and the remaining 20% when all bugs have been fixed and the system is ready for production.

In your case I’d be thinking 40% for delivery and installation of hardware, 40% for all data migration and systems, and 20% once training has taken place. Don’t forget to include some kind of (year long?) guarantee, I’ve also seen places hold back 5% for the first 3 months after going live to cover this.

(40/40/20 would depend on the values of what you’re asking for, if hardware is really only 20% of the project value you’ll want to change this of course!)

Mogrim is right but as an occasional purchaser of bespoke software i would withhold more than 20%

The more you can hold back the better!