How do I review a fabrication shop’s customer contracts and project invoices?

Start with the customer list and sort it by size and repeat business. A few large accounts can carry a shop, so ask how long each has been a customer and how the work was won. Request the contract or quote for each major job, and read the terms about scope, changes, delays, warranties and who owns drawings or tooling. Your lawyer should read anything that could pass to you.

Next, compare contracts with invoices. Did the invoices follow the agreed stages? Were change orders documented and billed? Look for jobs where the final bill differs a lot from the quote, and ask why. Check how long customers take to pay, and ask about disputes, rework or unpaid balances. Late payment patterns tell you how much cash the shop must carry.

Then ask about open work. What jobs are in progress, what has been billed and what is still to come? Ask about deposits held, warranty claims outstanding and promises made but not written. Have your accountant tie the invoices to the books, so you know that the shop’s records agree with each other. Ask also whether any customer has a purchase arrangement or standing order that could end when ownership changes.

Key takeaways

• Sort customers by size and repeat business, and ask how each was won.
• Compare quotes, change orders and final invoices on the larger jobs.
• Ask about open work, deposits held and warranty claims still outstanding.