Contractor Payment Schedule: Deposit, Milestones, Final Balance
A contractor payment schedule is the list of dates or milestones at which the client pays, and how much at each one. A good schedule does three things: the deposit covers the materials you buy before day one, each milestone payment lands before you spend the money for the next stage, and the final balance is small enough that a slow last payment does not hurt. For most jobs that means a deposit of 25% to 50%, one or more milestone payments tied to work the client can see, and a final 5% to 10% due upon completion. Write the schedule on the quote, so the client agrees to it when they accept. In CRMb, each payment in the schedule is an invoice on the job, the client pays from a share link, and every payment is recorded against the invoice it belongs to, so the balance due is always the real one.
Most payment problems in the trades are schedule problems. The contractor who waits for one payment at the end has paid for the materials, the crew, and the fuel out of their own pocket for weeks. The contractor who asks for 80% up front loses the job to someone who looks less risky. The schedule sits between those two, and it is worth ten minutes to set on purpose.
What a payment schedule has to cover
Every job spends money in a pattern. Materials are bought early. Labor is paid every week or two. Subcontractors bill when their part is done. The payment schedule should follow that pattern closely enough that the client's money, not yours, is paying for the client's job.
Three questions set the schedule:
- What do I spend before work starts? Special-order materials, permits, and anything non-returnable. The deposit covers this at a minimum.
- When are my big spending points? A second material delivery, a subcontractor's stage, a heavy labor week. A milestone payment should arrive before each one.
- How much am I willing to wait for at the end? The final payment is the one most likely to be late or disputed. Keep it small.
If you know your labor cost per job and your material list, the schedule falls out of the numbers.
The parts of a payment schedule
The deposit
The deposit is paid when the client accepts the quote, before you order materials or put the job on the calendar. A common range is 25% to 50% of the total, sized to your upfront material cost. A labor-heavy job needs less. A job with custom cabinets or special-order equipment needs more.
Some states limit how much a contractor may take up front on residential work. California, for example, caps the down payment on a home improvement contract at $1,000 or 10% of the price, whichever is less. Check the rule where you work before you set a standard percentage. For the full method, see how to collect a deposit before work.
Milestone payments
A milestone payment is due when a stage of the work is finished. Tie each one to something the client can see and agree is done: demolition complete, rough plumbing inspected, cabinets installed, final coat on. Avoid milestones only you can judge, such as "50% complete". Nobody argues about whether the cabinets are on the wall.
Milestones can also be dates ("the 1st and 15th of each month") on long jobs where stages overlap. That is closer to formal progress billing, where each invoice bills the measured work to date.
The final balance
The final payment is due when the work is complete. Keep it between 5% and 10% of the total on larger jobs. It gives the client confidence that you will finish the punch list, and it limits what you carry if they are slow to pay.
Do not confuse a small final payment with retainage. Retainage is a percentage held back from every progress payment under a construction contract, released after completion. If a commercial client asks for it, read how retainage works in construction first.
Sample payment schedules by job size
| Job | Deposit | Milestones | Final |
|---|---|---|---|
| Under $2,500, one or two days | None, or 50% | None | Balance on completion |
| $2,500 to $15,000, one to two weeks | 30% to 50% | One payment at the midpoint (25% to 40%) | 10% to 25% |
| $15,000 to $75,000, several weeks | 25% to 30% | Two or three payments at named stages | 5% to 10% |
| Over $75,000, months | 10% to 20% | Monthly or by stage, billed on measured progress | 5% to 10% |
These are starting points. The right split for a job is the one that matches when that job spends money.
A worked example
A bathroom remodel is quoted at $24,000. The contractor's costs run like this:
- Before work starts: $6,200 for the vanity, tile, and fixtures, all special order.
- Week one: demolition and rough plumbing, about $3,400 in labor and a $2,100 plumber's invoice.
- Week two: tile and drywall, about $4,600 in labor and materials.
- Week three: fixtures, paint, and trim, about $2,300.
A schedule that follows the spending:
| Payment | When | Amount | Share |
|---|---|---|---|
| Deposit | On acceptance of the quote | $7,200 | 30% |
| Second payment | Rough plumbing passes inspection | $7,200 | 30% |
| Third payment | Tile complete | $7,200 | 30% |
| Final balance | Upon completion of the walkthrough | $2,400 | 10% |
The deposit covers the $6,200 of materials with a little room. The second payment arrives as the plumber's invoice comes due. By the time the tile is finished, the contractor has collected $21,600 against roughly $16,300 spent. The last $2,400 is close to the profit on the final week, so a client who takes two weeks to pay it is an annoyance and not a cash problem.
Compare that with "50% down, 50% on completion". The contractor collects $12,000, spends about $18,600 before the end, and floats $6,600 of the client's bathroom for the last week and however long the final check takes.
Balance due upon completion: say what completion means
"Balance due upon completion" is the most common final term on a quote, and the most argued about. The trouble is the word completion. The client may think it means every item on a punch list they have not written yet. You may think it means the day the crew leaves.
Define it on the quote:
- Name the event. "Completion means the work in this scope is finished and a walkthrough has been done with the client."
- Separate the punch list. "Minor punch list items found at the walkthrough will be finished within 10 days and do not delay the final payment," or hold a small, stated amount for them.
- Give it a deadline. "The balance is due upon completion and no later than 7 days after the final invoice date." Without a date, a late fee has nothing to count from.
A clear scope of work makes completion easy to prove, because completion is simply the scope, done. For how "due upon completion" differs from due on receipt, see due upon receipt invoice terms.
Wording to put on the quote
Put the schedule on the quote as plain lines, so accepting the quote is agreeing to the schedule:
Payment schedule 30% deposit ($7,200) due on acceptance, to order materials and schedule the work. 30% ($7,200) due when rough plumbing passes inspection. 30% ($7,200) due when tile is complete. 10% ($2,400) due upon completion of the walkthrough, and no later than 7 days after the final invoice. Work on the next stage begins when the payment for the finished stage is received.
That last line matters. It turns a late milestone payment into a pause instead of a debt. Add your late fee term beside it if you charge one; invoice late fees for contractors has the wording.
When the job changes
A change order changes the price, so it changes the schedule. Decide on the change order itself when the extra is paid: in full before the extra work starts, or added to the next milestone. Leaving every change to the final invoice turns a 10% final payment into a 25% one, and the final payment is the one you least want to grow. See how to handle change orders on a job.
Mistakes to avoid
- A final payment that is too large. Anything over about a quarter of the job is leverage for the client and risk for you.
- Milestones nobody can verify. "Halfway done" starts an argument. "Drywall hung" does not.
- No dates anywhere. A milestone with no payment deadline is a suggestion.
- Starting the next stage unpaid. Each stage you start on credit makes the next conversation harder.
- Recording payments loosely. A deposit filed as general income, with no invoice behind it, will be missed on the final bill. Record each payment against its invoice, including partial payments.
FAQ
What is a typical payment schedule for a contractor?
For a mid-size residential job: a 25% to 50% deposit on acceptance, one to three milestone payments tied to finished stages, and a final 5% to 10% due upon completion. Small one-day jobs are usually paid in full on completion, sometimes with half down.
How much deposit should a contractor ask for?
Enough to cover what you spend before work starts, usually 25% to 50%. Some states cap deposits on residential work, so check your state's rule before you set a standard figure.
What does balance due upon completion mean?
The remaining amount is owed when the work is finished, not on a calendar date. Because "finished" can be argued, define completion on the quote and add a deadline, such as 7 days after the final invoice.
Should milestone payments be tied to dates or to stages?
Stages, on most jobs. A stage payment is earned when visible work is done, which protects both sides if the job runs late. Dates suit long jobs with overlapping stages, where each invoice bills the measured work to date.
What if the client misses a milestone payment?
Stop before the next stage, as the quote says you will. Send the invoice again with the due date, call once, and resume when the payment arrives. If it goes on, see what to do when a client won't pay an invoice.
Is a payment schedule the same as payment terms?
No. The schedule says when each payment is triggered and how much it is. The terms say how long the client has to pay once an invoice is sent, such as due on receipt or net 30. A complete quote has both.
Getting started with CRMb
Take your next quote over a few thousand dollars and write the schedule on it: a deposit that covers your materials, a payment before each big spending point, and a small final balance with completion defined.
CRMb keeps the schedule honest once the job is running. The client accepts the quote from a share link. Each payment in the schedule goes out as its own invoice on the job, and Receive payment records any amount against it, so the balance due is always current. Reports shows who owes what and how overdue it is, and job margin is figured on your crew's real punched hours, so you can see whether the schedule kept pace with the spending. It runs on the web, iPhone, iPad, and Mac. Start your 14-day free trial and set up your next job to pay for itself as it goes.