Buying materials early can make a long price hold more expensive
Assess early procurement as a response to a long fixed-price hold, including physical storage and funding costs.
Corporate Recovery Partners
01 / 06
A purchase price is only one part
A builder wants your price held for eighteen months. Buying the materials now might seem to remove the uncertainty. Before making that offer, work out what happens between purchase and installation. Materials need somewhere to go, somebody to handle them and money to fund them while the job is still waiting.
Write down the proposed delivery location, storage period and eventual move to site. Check dimensions, loading access and handling requirements with the people doing the work. If the programme changes, identify whether the goods can stay where they are. A vague plan to put them in the shed can become an expensive second delivery.
Business.gov.au's pricing guidance says to include relevant supply costs in pricing. Apply that principle to early purchasing: obtain actual storage, freight and handling estimates rather than adding a comforting round allowance. Ask about responsibility for damage and insurance with the relevant provider. A lower material invoice is not the same as a lower completed-job cost.
Imagine a hypothetical contractor expecting a $3,000 saving from buying stock early. Storage is quoted at $1,800 and additional delivery at $900. Those two items alone leave $300 before handling, funding and other risks are considered. The example does not predict future prices; it shows why the headline saving needs a complete comparison.
An early purchase may require payment months before the builder pays you. Put that movement into the cash forecast on the expected date. Do not assume an early customer payment is available unless it is actually agreed and appropriate. If the purchase would crowd out ordinary bills, the proposal needs more work even if the final margin looks positive.
Take the builder a specific proposal covering identified materials, timing and the assumptions needing agreement. Have the contract implications reviewed before committing. If the storage plan or funding is unresolved, describe it as unresolved. A long price hold should rest on a workable procurement plan, not on stock bought in a hurry to make the quote feel safer.
