Deposit, progress, and final payment schedules that protect you

The principle: never be the bank

At every point in the job, the money you have collected should be at least equal to the money you have spent plus the hours you have worked. If you are ever significantly behind that line, you are financing the customer's project with your own account.

Deposits

A deposit does two things: it covers your up-front material outlay, and it confirms the customer is serious enough to reserve your calendar. Common structures:

• Small jobs (under ~$2,000): often no deposit, paid in full on completion.
• Mid-size jobs: 25–33% at signing.
• Material-heavy jobs: cost of materials up front, plus a portion of labor.
• Custom or special-order items: 100% of the special-order cost, non-refundable, stated plainly.

Important: several states and provinces cap residential deposits by law — some at 10%, some at a fixed dollar amount, some tied to a licence class. Check your local contractor licensing rules before you set a standard, because an unlawful deposit clause can void your ability to enforce the contract.

Progress payments

For anything longer than a week, break the contract into milestones tied to visible completion, not to dates. Dates slip for weather and supplier delays; milestones are objective.

Keep the final payment small enough that the customer is not tempted to hold it hostage over a touch-up, but large enough that you are motivated to finish the punch list quickly. Five to ten percent is the usual balance.

Write the terms in the contract, in plain words

Include all of it, not just the amounts:

• The amount and trigger for each payment.
• How long the customer has to pay — "due on presentation" or "net 7".
• What happens if they do not: a late fee, and the right to suspend work.
• Accepted payment methods, and any card processing surcharge.
• Whether the final payment is contingent on a signed completion sheet.

A clause allowing you to pause work on non-payment is the single most useful sentence in a small contractor's agreement. You almost never have to use it; having it changes behaviour.

Invoice the same day the milestone is hit

The most common cause of slow payment is slow invoicing. Send it from the driveway. An invoice that arrives while the customer is standing in a finished room gets paid far faster than one that arrives nine days later when the excitement has faded.

Make paying easy

Every extra step is a delay. Offer bank transfer, and a card option even if you pass on the fee. Include the total, the due date, and the payment link in the first line of the message — not buried in an attachment they will open on a laptop later.

When a payment is late

1. Day 1 after due: friendly text. Assume an oversight, because usually it is.
2. Day 3: phone call. Ask directly whether there is a problem with the work or with the timing.
3. Day 7: written notice referencing the contract clause, stating that work will pause.
4. Day 10+: pause work. Continuing to build increases your exposure every hour.

Escalate on a schedule, not on a mood. A predictable sequence is professional; sporadic angry messages are not, and they weaken your position if it ever goes further.

Know what a lien is before you need one

Most jurisdictions give contractors a mechanic's or construction lien right — a claim against the property for unpaid work. The deadlines are strict and often short, and some places require a preliminary notice at the start of the job to preserve the right at all. Spend an hour learning your local rules now. It is a form of insurance that costs nothing.

Screening beats collecting

The cheapest bad debt is the one you never take on. Warning signs at the estimate stage: pressure to skip a written contract, a story about the last contractor being terrible, reluctance to pay any deposit, or an urgent job with a vague budget. None of these is proof of anything on its own. Two together is a reason to price carefully and hold your terms firmly.

Build the schedule into your bid

Payment terms are part of pricing, not an afterthought. Once you know your total from the bid calculator, split it into milestones right there in the proposal, so the customer approves the price and the payment plan with the same signature.