Crafting a Robust Schedule of Values and Negotiating Monthly Billings on Long-term Contracts

In the bustling construction and contracting world, a well-structured Schedule of Values (SoV) isn't just a luxury—it's a necessity. At Flynn CPA, LLC, headquartered in the vibrant city of Denver, Colorado, we've observed the paramount importance of a strong SoV. Combined with strategic negotiations on monthly billings for long-term contracts, it can set the trajectory for successful project execution and sustained profitability. Here's how to ace it:



1. Crafting a Robust Schedule of Values (SoV)

The Schedule of Values is a detailed statement listing the various components of a project and their respective values. It serves as a foundation for billing and tracking project financials.

Steps to Create a Strong SoV:

• Detail-Oriented Breakdown: Begin by meticulously breaking down the project into smaller tasks or components. The more detailed, the better. This ensures clarity in billing and progress tracking.
• Assign Realistic Values: Allocate costs to each task based on accurate and current market prices, labor rates, and material costs. This requires a blend of experience and market research.
• Factor in Contingencies: Always include a contingency line item. Projects often face unforeseen expenses, and having a provision for this in your SoV ensures you’re not caught off-guard financially.
• Consistent Formatting: Ensure that the SoV is presented in a consistent and easily understandable format. Standardizing it makes it easier for all stakeholders to read and interpret.

2. Negotiating Monthly Billings for Long-Term Contracts

For long-term contracts, monthly billings become a lifeline for maintaining healthy cash flow. The trick lies in how you negotiate these terms.

Strategies for Successful Monthly Billing Negotiations:

• Research & Preparation: Before entering negotiations, understand your client's payment history, their financial health, and market norms. This will give you a vantage point during discussions.
• Align Billings with Milestones: Wherever possible, tie your monthly billings to project milestones. This ensures you get paid for measurable progress, reducing disputes.
• Flexible Payment Terms: Be prepared to offer flexibility, like early payment discounts or slightly extended payment durations, in exchange for favorable monthly billing amounts.
• Transparent Communication: Clearly communicate the basis of your billing, referencing the SoV. When clients understand the rationale behind the numbers, they're more likely to agree to your terms.
• Retainage Clauses: For long-term contracts, it's common to hold a percentage of the total contract amount (often 5-10%) until project completion to ensure quality work. Negotiate a reasonable retainage percentage that protects both parties.

Conclusion

The Schedule of Values, combined with strategic monthly billing negotiations, can significantly impact a company’s financial health and project success. At Flynn CPA, LLC in Denver, we assist businesses in navigating these complex terrains, ensuring transparency, profitability, and smooth project execution. When you’re gearing up for your next long-term contract, remember the power of a robust SoV and skillful negotiation. Your financial stability depends on it.