Payment Schedules for Contractors: Templates, Deposits, and Best Practices

A strong payment schedule does two things:

protects your cash flow so you can run the job properly
sets clear expectations so clients don’t feel surprised

A weak payment schedule does the opposite: you end up floating labor and materials, and then “negotiating” every invoice.

This guide gives you practical templates and rules of thumb you can use immediately.

The 3 payment schedule styles contractors use

1) Deposit + final (simple)

Best for small jobs with low duration.

Example: 50% deposit, 50% at completion.

2) Deposit + milestone payments (best for remodels)

Best for medium projects where you want payment to track progress.

Example: 30% deposit, 40% mid-project, 30% final.

3) Monthly progress billing (best for longer jobs)

Best for longer or ongoing work.

Example: invoice every 2 weeks or monthly based on progress.

How big should the deposit be?

This is regional and sometimes regulated, but practically:

Small jobs: 30–50%
Remodels: 20–35%
Large custom: 10–25% + milestones

A deposit is not “profit.” It’s job funding.

It covers:

mobilization
materials ordering
early labor
scheduling risk

Payment schedule templates (copy/paste)

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Template A: 50/50 (small jobs)

50% deposit due at contract signing
50% final payment due at substantial completion

Template B: 30/40/30 (common remodel template)

30% deposit due at contract signing
40% progress payment due after rough-in / mid-project milestone
30% final payment due at substantial completion

Template C: 25/25/25/25 (more milestones)

25% deposit
25% after demo + rough complete
25% after finishes begin
25% final

Template D: Materials-heavy projects

deposit covers early labor
materials deposit covers special orders

Example:

20% labor deposit
materials deposit due before ordering (actual cost + handling)
progress payments thereafter

Best practices that prevent payment friction

Tie payments to clear milestones

Avoid fuzzy language like “midway.” Use:

demo complete
rough plumbing/electrical passed
tile installed
cabinets set
paint complete

Put “what counts as complete” in writing

Clients get nervous at the end. Define substantial completion:

all major work complete
punch list is minor
project is usable

Include a change order policy

Change orders should:

be written
be priced
be approved before work

Use a late payment clause (and enforce it)

Even if you never use it, it signals seriousness.

A simple schedule that protects cash flow (recommended)

For most remodel contractors, this structure is stable:

Stage	Payment
Contract signing	30%
Rough complete	30%
Finishes underway	30%
Substantial completion	10%

That leaves a small holdback for punch list, but you’re not floating the job.

How to explain payment schedules to clients

Use plain language:

“This keeps the project funded so we can keep momentum.”
“You’re paying for progress, not promises.”
“The final payment is due when the project is substantially complete.”

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FAQs

Are deposits legal everywhere?

Rules vary by state. Check local regulations and adjust deposit amounts accordingly.

Should I offer financing?

Sometimes, but be careful—financing can delay your payment and add complexity.

What’s the best schedule for a 6–8 week remodel?

Deposit + milestone payments (30/40/30 or 30/30/30/10) is a solid default.

How do I handle material price increases?

Use allowances or a materials clause that allows price adjustment if supplier costs change.

Should I do retainage like commercial jobs?

For residential, retainage often creates friction. If you use it, keep it small and define completion clearly.