Align payments with progress.
Milestones navigate development.
Development starts with a low initial deposit followed by clear
incremental payments as key milestones are achieved. Details below.
An Illustrated Example of an Incremental
Payment Structure
Using the example of a $1 mil USD contract for 20K units of an Android Custom Phone we are going to illustrate what a fair and incremental payment structure looks like.
We've made it simple, very visual and clear for you to understand at a glance how this structure works.
$50
Quoted price per unit
The price per device includes the sum of its costs and depends on the quantity ordered.
20K
Ordered quantity
The quantity is determined by the customer based on his sales forecast
$ 1 mil
Amount of the contract
The contract value will be the unit cost multiplied by the quantity ordered.
(Development costs are amortized into the unit cost)
The contract is paid as and when development progresses. There are payments of several deposits at different stages of the project. Each milestone corresponds to the achievement of one of the steps of the Custom Android Phone development and production in compliance with the agreed deadlines.
Deposit 1
10%
Deposit 2
10%
Deposit 3
10%
Deposit 4
40%
Deposit 5
30%
Deposit 1
$ 100K
$ 100 K - Total paid by the client
$ 900 K - Remaining amount to be paid
Following the acceptance of the contract deposit #1 triggers the prototype development.
$ 200 K - Total paid by the client
$ 800 K - Remaining amount to be paid
Following the production of the first prototype, deposit #2 triggers its delivery for feedback and modification requests from the client.
Deposit 2
$ 100K
Deposit 3
$ 100K
$ 300 K - Total paid by the client
$ 700 K - Remaining amount to be paid
After validation of the prototype a third deposit triggers the production of the mold.
$ 700 K - Total paid by the client
$ 300 K - Remaining amount to be paid
After validating the mold and testing it in hand made working sample it's time for trial mass production. The fourth deposit triggers the trial and final mass production.
Deposit 4
$ 400K
Deposit 5
$ 300K
$ 300 K - Total paid by the client
$ 700 K - Remaining amount to be paid
When mass production is complete the payment of the balance triggers the delivery of the Custom Android Phones.
At this point the contract has been honoured incrementally by the customer with the payment of $1 mil in five deposits.
The manufacturer has produced and sent the Custom Phones to their destination.
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