Ask a roomful of contractors when they first discuss payment terms with a client, and most will answer honestly: when I send the invoice. That is where the trouble starts. An invoice that arrives carrying terms the client never agreed to is not a bill - it is an opening offer. And you are negotiating it at the exact moment you have the least leverage, because the work is done, the crew has moved on, and the only thing the client still controls is when you get paid.
Contractors who get paid on time are not better at collections. They are better at sequencing. They set the whole payment schedule - deposit, milestones, due dates, late terms, and how to pay - before anyone swings a hammer. After that, the invoices are just executing a deal that already exists.
How much deposit to ask for
Deposit size runs inverse to job size. On small, quick jobs - a $600 gutter repair, a one-day service call with parts - asking for a third to half up front is normal and often smart: it covers materials, confirms the appointment is real, and filters out the customers who were never going to pay. On mid-size projects, 20-30% is common. On large builds, the norm drops to roughly 10%, because a six-figure contract with a 40% deposit rightly makes clients nervous and sometimes makes regulators interested.
The deposit is not profit collected early. It is mobilization money: it should roughly cover the materials you have to order and the schedule slot you are reserving. Price it that way and it is easy to defend when a client asks why.
Tie milestones to events anyone can verify
Between the deposit and the final check, milestone payments keep cash flowing through the job instead of piling up into one scary final invoice. The rule that makes them work: every milestone is triggered by a defined, verifiable event - something that is either done or not done, visible to a person standing in the room. Here is what that looks like on a $40,000 kitchen remodel:
- 10% at signing. The deposit that books the slot and orders long-lead materials. It can sit below the 20-30% mid-size norm because the next payment arrives at demo, not months out.
- 25% when demo is complete. The old kitchen is gone. Anyone can see it.
- 25% when rough-in passes inspection. The inspector's sign-off is the trigger - not your opinion, not the client's.
- 25% when cabinets are delivered and set. Boxes in the room, boxes on the wall.
- 15% at the punch-list walkthrough. Small enough that a disputed doorknob cannot hold your whole margin hostage.
Notice what is not on that list: dates. 'Payment 2 due March 15' invites an argument the moment the job slips a week. 'Payment 2 due when demo is complete' cannot slip, because it moves with the work. And a client who has been paying every ten days as visible things happen never gets the sticker shock that turns final invoices into ninety-day standoffs.
Net 30 is a loan you did not mean to make
Every invoice needs a specific calendar date. 'Due by June 4' gets paid. 'Net 30' gets interpreted - and clients reliably interpret it as a 30-day interest-free loan with an option to extend. A date is a commitment; a term is a suggestion.
Then put a late-fee clause behind the date. The common norm is 1.5% per month on balances past due, stated plainly in the contract and repeated on the invoice. Most contractors who add the clause never charge it once - and that is fine, because the clause is not there to generate fee revenue. It is there to change which pile your invoice lands in. Accounts payable pays the invoices that cost money to ignore first.
Make paying easier than stalling
A meaningful share of slow payers are not short on cash; they are short on friction tolerance. If paying you means finding a checkbook, an envelope, and a spare evening, you will wait for that evening. Put card and ACH payment directly on the invoice - one link, thirty seconds on a phone - and time-to-paid shortens measurably. Analyses of small-business invoicing consistently find that invoices payable online settle dramatically faster than those that are not, often in less than half the time. A practical split: ACH for the five-figure milestones so card fees do not eat a point of margin, card for the small deposits where speed matters more than the fee.
The same link works even harder at booking. Text the deposit request the moment a job is scheduled: "You're on the calendar for Tuesday - here's the link for the $300 deposit that locks it in." That deposit-by-text link does two jobs at once. It starts the project funded, and it works as a commitment device: a homeowner who has put real money down does not cancel Friday afternoon for a competitor's quote. And the rare client who refuses a routine deposit is showing you, cheaply and early, exactly how the final invoice was going to go.
Set the whole schedule before work starts
The most common payment mistake in this trade is not a soft deposit or a missing late fee - it is timing. Terms get negotiated after the first invoice is already late, which means they get negotiated from a hole. The entire schedule - deposit, milestones, due dates, late fee, payment methods - belongs in the estimate, agreed and signed before mobilization.
The conversation is shorter than most contractors fear: "Here's how payment works on a job like this. Ten percent to get on the schedule, three payments tied to demo, inspection, and cabinet delivery, then the balance at the final walkthrough - each due within five days, payable by card or bank transfer straight from the invoice. Sound good?" Said before signing, that is boring housekeeping, and clients agree in one breath. Said after a late invoice, the exact same terms sound like an accusation.
Write the policy once
None of this needs to be re-decided per job. Write one page: your deposit rule by job size, checked against your state's cap; your milestone template per job type; your due-date language; your 1.5% clause; your accepted payment methods. Paste it into every estimate, and the schedule gets agreed at signature as a matter of course instead of argued at invoice time.
Then watch one number: median days from invoice sent to invoice paid. Contractors who move from invoice-and-hope to an agreed schedule with payable links routinely watch that number fall from weeks into days - not because their clients got nicer, but because for the first time, paying on time was the path of least resistance.
Frequently asked questions
It scales inversely with job size: a third to half up front is normal on small, quick jobs, 20-30% on mid-size projects, and roughly 10% on large builds. Size the deposit to cover materials and mobilization, not profit. Several states cap deposits - California limits home improvement deposits to 10% or $1,000, whichever is less - so verify your state's rule before setting yours.
Generally yes, when the rate is reasonable, disclosed in the signed contract, and repeated on the invoice - though some states cap the rate, so confirm yours with an attorney. The common norm is 1.5% per month past the due date. In practice the clause earns its keep even if never charged, because invoices that cost money to ignore get paid first.
It splits the contract price into payments triggered by defined, verifiable events - demo complete, rough-in inspection passed, cabinets delivered - rather than calendar dates. Cash flows through the job as visible progress happens, and the final payment stays small enough that a punch-list dispute cannot hold the whole margin hostage.
Four things, in order of impact: a schedule agreed before work starts, a specific due date instead of a bare Net 30, a late-fee clause behind that date, and a card or ACH link on the invoice itself so paying takes thirty seconds. Each one removes an excuse; together they routinely cut time-to-paid from weeks to days.