A contractor who collects all payment at completion is financing the client's project with their own cash. A contractor who collects nothing upfront is taking all the client's risk. Here's the payment structure that balances both.

The standard three-payment structure

Deposit (33%): Due on contract signing. Covers material procurement and your first week of labor. Non-refundable after materials are ordered.
Progress payment (33%): Due at a defined milestone (e.g., rough-in complete, halfway through project). Tied to measurable work completed.
Final payment (33%): Due at substantial completion and client walkthrough. Not before — use the walkthrough as the trigger.

Adjusting for job size

Under $5,000: 50% deposit, 50% on completion. Simple, standard for small jobs.
$5,000–$25,000: 33%/33%/33% or 40%/30%/30%. Three payments works well.
$25,000–$100,000: Monthly billing tied to % of work completed. Bill every 2–4 weeks based on a schedule of values.
Over $100,000: AIA-style schedule of values with monthly draws. Get an attorney to review your contract.

Why milestone payments beat date-based payments

Date-based: "25% on the 15th." Problem: if the project runs behind, you get paid before the work is done — or after the work is done. Milestone-based: "25% when subfloor is complete." You control the trigger by completing the milestone. No milestone = no payment request.

What to include in your payment terms

Specific deposit amount in dollars (not just percentage)
Exact milestone trigger for each progress payment
Payment method (check, card, ACH) — specify who pays processing fees if card
Payment due date from invoice (Net 7, Net 15 — not Net 30 for residential)
Late payment fee: "1.5% per month after [due date]" — include it, enforce it selectively

The deposit conversation

If a client pushes back on a deposit: "The deposit covers the cost of materials before I can start. I order your specific materials from the supplier when the contract is signed — I can't do that without the deposit." This is factual, reasonable, and ends the negotiation.

How to collect faster

Include an online payment link in every invoice — card and ACH both accepted
Send the invoice the day the milestone is reached, not at the end of the week
Follow up on unpaid invoices at 3 days overdue with a friendly reminder, 7 days with a call

ConstruMate generates invoices from your approved estimate in one click — with online payment via Stripe built in. Try it free.

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Contractor Payment Terms: How to Structure Your Schedule (2026)