| # | Milestone | % | Amount | ||||
|---|---|---|---|---|---|---|---|
| 1 | $5,000 | ||||||
| 2 | $7,500 | ||||||
| 3 | $12,500 | ||||||
| 4 | $7,500 | ||||||
| 5 | $10,000 | ||||||
| 6 | $7,500 | ||||||
| Total (6 milestones) | 100% | $50,000 |
Standard Payment Terms
- Payment Schedule. Payments are due as outlined in the milestone table above. Each payment becomes due when the corresponding milestone is completed and the contractor notifies the owner in writing.
- Payment Due Date. Unless otherwise specified, each milestone payment is due within 7 business days of written notification that the milestone is complete.
- Late Payment. Invoices not paid within 7 days of the due date are subject to a late fee of 1.5% per month on the outstanding balance. The contractor reserves the right to suspend work if any payment is more than 14 days past due.
- Change Orders. Any change to the original scope of work must be documented in a signed change order before the work is performed. Change order amounts will be added to the next scheduled milestone payment or billed separately.
- Final Payment. The final payment is due upon completion of all work including the punch list. The owner shall have 5 business days from the final walk-through to submit punch list items. Final payment is not contingent on items outside the scope of the contract.
- Retainage. If retainage applies, it will be stated in the contract and released within 30 days of substantial completion and acceptance of all work.
- Accepted Payment Methods. Check, ACH/bank transfer, or credit card. Credit card payments may be subject to a processing fee of up to 3%.
Payment Schedule Structures by Project Size
Standard payment structures based on project scope and contract amount.
| Project Size | Typical Structure |
|---|---|
| Under $5,000 | 50% deposit / 50% completion |
| $5,000 - $15,000 | 33/33/34 milestone billing |
| $15,000 - $50,000 | 4-6 milestone draws |
| $50,000 - $150,000 | 5-8 milestone draws |
| $150,000+ | Monthly progress billing |
| Service / repair | Due on receipt |
12,800+ estimates calculated this month
Last updated: 2026-02-25
Quick Answer: How Do Contractor Payment Schedules Work?
A contractor payment schedule breaks a project's total cost into milestone-based draws tied to completed phases of work. The standard structure is a 10% deposit at signing, then progress payments at rough-in, drywall, finishes, and final completion. Each payment is triggered when the contractor completes and verifies the milestone, not by a calendar date. This keeps cash flow steady for the contractor and protects the homeowner from paying for unfinished work.
Need to go from estimate to invoice to payment automatically? Try EstimationPro free to build estimates, send proposals, and set up automated follow-up sequences so you win more of the bids you already send.
Inputs you will need
- Total contract amount (including all labor, materials, and overhead)
- Number of milestones (based on project size and duration)
- Percentage for each milestone draw
- Description of what work triggers each payment
- Payment terms (due date, late fee, accepted methods)
Payment Schedule Structures by Project Size
| Contract Amount | Recommended Structure | # of Draws | Typical Split |
|---|---|---|---|
| Under $5,000 | 50/50 or due on receipt | 1-2 | 50% deposit, 50% completion |
| $5,000 - $15,000 | Three-draw milestone | 3 | 33% / 33% / 34% |
| $15,000 - $50,000 | Phase-based milestones | 4-6 | 10% deposit + phase draws |
| $50,000 - $150,000 | Detailed milestone billing | 5-8 | 10% deposit + milestone draws |
| $150,000+ | Monthly progress billing | Monthly | Schedule of values with 5-10% retainage |
Worked Examples: Real Payment Schedules
Example A: Kitchen remodel, $45,000 contract
- Draw 1 (Deposit, 10%): $4,500 at contract signing
- Draw 2 (Mobilization, 15%): $6,750 before demo starts
- Draw 3 (Rough-in, 25%): $11,250 after plumbing/electrical rough inspection
- Draw 4 (Drywall, 15%): $6,750 after drywall and primer complete
- Draw 5 (Finishes, 20%): $9,000 after cabinets, countertops, flooring installed
- Draw 6 (Final, 15%): $6,750 after punch list and final walk-through
- Total: $45,000 across 6 milestones
Example B: Bathroom remodel, $12,000 contract
- Draw 1 (Deposit, 33%): $3,960 at contract signing
- Draw 2 (Rough-in, 33%): $3,960 after plumbing/tile prep complete
- Draw 3 (Final, 34%): $4,080 after tile, fixtures, and cleanup
- Total: $12,000 across 3 milestones
Example C: Fence installation, $4,200 contract
- Draw 1 (Deposit, 50%): $2,100 at contract signing for materials
- Draw 2 (Completion, 50%): $2,100 at project completion
- Total: $4,200 across 2 milestones
Need to create the estimate before setting up the payment schedule? Use the contractor estimate template to build a professional bid. For invoicing each milestone, the contractor invoice template creates itemized invoices. For tracking material selections that affect the contract, use the allowance schedule template.
State Deposit Limits for Contractors
Many states cap how much a contractor can collect as a deposit. Here are common limits. Always check your state contractor license board for current rules - these change and penalties for violations are severe.
| State | Maximum Deposit | Notes |
|---|---|---|
| California | 10% or $1,000 (whichever is less) | CSLB enforced, violations can suspend license |
| Maryland | 33% of contract | Home improvement contracts only |
| Nevada | 10% of contract | Residential construction |
| Washington | No statutory limit | Industry standard: 10-15% |
| Most other states | Varies or no limit | Check your state contractor board |
Pro Tips From the Field
- Never start work without a signed payment schedule. A handshake deal on a $30,000 remodel is asking for trouble. Both parties sign, both parties keep a copy. It takes 5 minutes and prevents months of headaches.
- Invoice the same day the milestone is complete. If the rough-in passes inspection on Tuesday, send the invoice Tuesday. Waiting signals to the client that payment is not a priority. Speed of invoicing directly affects speed of payment.
- Use percentage-based milestones, not fixed amounts. If a change order increases the contract from $45,000 to $52,000, percentage milestones adjust automatically. Fixed amounts require manual recalculation.
- Keep the deposit reasonable. A 10% deposit on a $50,000 job is $5,000. That covers permits and initial materials. A 50% deposit on the same job is $25,000, and most homeowners will not agree to that, and in some states it is illegal.
- Tie milestones to inspections when possible. "Payment due after rough-in inspection passes" is verifiable and hard to dispute. "Payment due at 40% completion" is subjective and leads to arguments.
- Follow up on every late payment. A friendly reminder within 3 days of the due date recovers most late payments. Letting it slide trains the client to pay late on every draw.
Common Mistakes to Avoid
- Front-loading the schedule. Collecting 50% before any work starts is a red flag for homeowners and illegal in many states. Keep the deposit at 10-15% and weight the draws toward the middle of the project where the most work happens.
- Not defining what triggers each milestone. "Rough-in complete" needs to mean something specific: framing done, plumbing rough passed inspection, electrical rough passed inspection, HVAC rough installed. Vague milestones lead to disagreements about when payment is owed.
- Skipping the final walk-through. The final payment should not be released until both parties walk the project and agree on a punch list. Paying before the walk-through removes the contractor's incentive to finish the details.
- No late payment terms. Without a written late fee and work suspension clause, you have no leverage when a payment is late. Put it in writing even if you hope you never need it.
- Mixing allowance overages into milestone payments. Allowance overages should be billed as change orders, not absorbed into the next draw. Mixing them makes the accounting messy and creates confusion at the end of the project.
Ready to handle estimates, proposals, invoicing, and follow-up from one platform? Try EstimationPro free to build professional estimates, send proposals automatically, and set up follow-up sequences that win more bids. EstimationPro handles the entire workflow from estimate to proposal to follow-up to invoice to payment, so you spend less time on paperwork and more time building.
Contractor Payment Schedule Guide
Everything contractors need to know about milestone billing, payment structures, deposit limits, and late payment terms.
What Is a Contractor Payment Schedule?
A contractor payment schedule is a written agreement that defines when and how much a client pays the contractor at each stage of a project. Instead of paying the full amount upfront or at the end, payments are tied to completed milestones like deposit, rough-in, drywall, finishes, and final completion.
Payment schedules protect both parties. The contractor gets steady cash flow to cover materials and labor. The homeowner avoids paying for work that has not been completed yet. Every remodeling contract over $5,000 should include a written payment schedule.
Key Takeaways
- Payments tied to completed milestones, not calendar dates
- Protects both contractor cash flow and homeowner investment
- Required for any project over $5,000
How to Structure Milestone Payments
The standard approach is percentage-based milestones tied to completed phases of work. Here is a typical breakdown for a residential remodel:
- Deposit (10%): Due at contract signing. Covers permits, initial materials ordering, and scheduling.
- Mobilization (15%): Due before work starts. Covers site prep, demolition, and bulk material delivery.
- Rough-in (25%): Due after framing, plumbing, electrical, and HVAC rough inspections pass. This is the largest milestone because it covers the most labor-intensive phase.
- Drywall and insulation (15%): Due after insulation, drywall, and primer are complete.
- Finishes (20%): Due after cabinets, countertops, flooring, tile, paint, and trim are installed.
- Final (15%): Due after final walk-through, punch list completion, and cleanup.
The deposit should never exceed 10-15% of the contract. Most states limit how much a contractor can collect upfront. Check your state's contractor license board for specific limits.
Key Takeaways
- Typical structure: 10% deposit, then 4-5 progress draws
- Rough-in is usually the largest milestone (20-25%)
- Most states limit deposit amounts - check local laws
Payment Schedule by Project Size
Smaller projects need simpler schedules. Here is how to match the payment structure to the job size:
- Under $5,000: 50/50 split (deposit and completion) or due on receipt for service work.
- $5,000-$15,000: Three payments (33/33/34). Deposit, rough-in, final.
- $15,000-$50,000: Four to six milestones. Each tied to a completed phase of work.
- $50,000-$150,000: Five to eight milestones. More granular because the project runs longer and involves more trades.
- $150,000+: Monthly progress billing based on a schedule of values. Common on commercial and large residential projects.
The more money involved, the more milestones you need. But do not create so many milestones that you spend more time invoicing than building.
Key Takeaways
- Under $5K: 50/50 or due on receipt
- $5K-$15K: 33/33/34 three-draw schedule
- $50K+: 5-8 milestone draws or monthly progress billing
Late Payment Terms and Enforcement
Every payment schedule needs late payment terms in writing. Standard contractor terms include:
- Late fee: 1.5% per month on unpaid balances (18% annual). This is the industry standard and legal in most states.
- Payment due date: 7 business days from milestone completion notification. Some contractors use Net 10 or Net 15.
- Work suspension: Contractor may pause work if payment is more than 14 days past due. This must be stated in the contract.
- Lien rights: In most states, contractors who are not paid can file a mechanic's lien against the property. Filing deadlines vary by state (typically 60-90 days from last work performed).
Put the late fee on every invoice and in the contract. Even if you never enforce it, having it in writing encourages on-time payment. Consistent follow-up within 3 days of a missed due date recovers over 90% of late payments.
Key Takeaways
- Standard late fee: 1.5% per month (18% annual)
- Payment due within 7 business days of milestone completion
- Work suspension rights must be stated in the contract
How to Use This Calculator
Enter project and contract details
Fill in the project name, client name, contractor name, contract date, and total contract amount. This information prints on the payment schedule for a professional document.
Choose a payment structure
Select a preset template (50/50, 33/33/34, remodel milestones, or monthly billing) or customize your own. Each preset matches a common project size and billing approach.
Adjust milestones and percentages
Click any row to edit the milestone name, description, percentage, and due date. Add or remove milestones to match your project phases. Percentages should total 100%.
Print or share the schedule
Review the payment terms section, then click Print for a clean hardcopy to attach as an exhibit to your contract. Both parties should sign and date the schedule.
Free to Embed on Your Website
Add this calculator to your blog, resource page, or client portal — just copy one line of code. Your visitors get a useful tool, you get more engagement.
EstimationPro AI For Contractors, By Contractors Go Beyond Templates With AI-Powered Estimates
Templates are a start. EstimationPro generates complete, customized estimates from your project details.
Frequently Asked Questions
What is a contractor payment schedule?
A contractor payment schedule defines when and how much a client pays at each phase of a construction or remodeling project. Instead of a single lump sum, payments are tied to completed milestones like rough-in, drywall, finishes, and final completion. This protects both the contractor (steady cash flow) and the homeowner (they only pay for completed work).
How many milestones should a payment schedule have?
It depends on the project size. Under $5,000: 2 payments (50/50 split). $5,000 to $15,000: 3 payments (33/33/34). $15,000 to $50,000: 4-6 milestones. Over $50,000: 5-8 milestones or monthly progress billing. The goal is enough milestones to manage cash flow without creating invoicing overhead that slows down the project.
How much deposit can a contractor collect?
Most states limit contractor deposits to 10-33% of the contract price or $1,000, whichever is less, for home improvement projects. California limits deposits to 10% or $1,000. Check your state contractor license board for exact limits. Collecting more than the legal limit can result in license discipline and makes the deposit unenforceable. For projects over $25,000, a 10% deposit is standard practice.
What should be in the payment terms?
Payment terms should specify: when each payment is due (e.g., 7 days after milestone completion), late fee percentage (typically 1.5% per month), accepted payment methods (check, ACH, credit card), work suspension rights if payment is late, and change order billing (how scope changes affect the schedule). Put these terms in the contract and reference them on every invoice.
Should payment milestones be based on percentages or fixed amounts?
Use percentages. If the contract amount changes due to change orders, percentage-based milestones automatically adjust. A $50,000 kitchen remodel with a 10% deposit means $5,000. If a change order increases the contract to $55,000, the remaining milestones recalculate proportionally. Fixed-amount milestones require manual adjustment every time the contract total changes.
What is retainage and when should I use it?
Retainage is a percentage (typically 5-10%) withheld from each progress payment until the project is substantially complete. It is common on commercial projects and large residential jobs over $100,000. The retained amount is released 30-60 days after substantial completion. Retainage gives the owner leverage to ensure the contractor finishes punch list items. For standard residential remodels under $100,000, retainage is less common because the final milestone payment serves the same purpose.
What happens if a homeowner does not pay on time?
Follow up within 3 days of the missed due date with a written reminder. If payment is 7+ days late, send a formal demand letter referencing the late fee terms in the contract. If payment is 14+ days late, you may suspend work (if the contract allows it). After 30 days, consult a construction attorney about mechanic's lien rights in your state. Most states require filing within 60-90 days of last work performed. Consistent follow-up recovers over 90% of late payments before it gets to that point.
How do I handle change orders with a payment schedule?
Change order amounts should be added to the next milestone payment or billed as a separate invoice. Never absorb change order costs into existing milestones because it makes the paperwork confusing. Document every change order with a description, cost, and both signatures before the work is performed. Use a change order template to keep it professional.
Is a payment schedule legally binding?
Yes, when it is included as part of a signed contract. The payment schedule should be referenced in the contract body and attached as an exhibit. Both the contractor and client should sign and date the schedule. If a dispute arises, the signed payment schedule is the primary document a court will reference to determine what was agreed upon. Never rely on verbal agreements for payment terms.
Why Contractors Choose EstimationPro AI
Estimates in 60 Seconds
AI generates detailed, line-item estimates from basic project details. No more hours on spreadsheets.
Accurate Pricing Data
Built on real contractor pricing and industry cost databases, updated for 2026 market conditions.
Professional Proposals
Send polished PDF estimates with your branding. Clients see a professional contractor they can trust.
Get Paid Faster
Built-in invoicing and Stripe payments. Collect deposits and progress payments directly from estimates.
Related Free Tools
Bid Template
Generate a professional construction bid template. Fill in your project details, line items, and terms to create a downloadable bid document.
Plumbing Template
Generate a professional plumbing estimate template. Add fixtures, pipe runs, labor hours, and materials for a complete plumbing bid.
Electrical Template
Generate a professional electrical estimate template. Add circuits, outlets, fixtures, and labor for a complete electrical bid document.
Change Order
Generate a professional construction change order. Document scope changes, cost adjustments, and schedule impacts with a standardized template.
Estimate Template
Generate a professional contractor estimate template. Add line items, materials, labor, and terms for a complete estimate document.
Estimate Template
Generate a detailed construction estimate template with categories for materials, labor, equipment, subcontractors, and overhead.
Pre-Construction
Interactive pre-construction checklist for general contractors. 43 items across 8 categories: permits, insurance, contracts, site prep, utilities, safety, materials, and scheduling.
Invoice Template
Generate a professional contractor invoice with itemized line items, tax calculation, and payment terms. Fill in your details, copy or print.