Collect a Deposit Before Starting Work: 5 Rules

A contractor posted on r/Contractor that he had done everything right. Before every job he sent a detailed document explaining that he needed 25 to 50 percent of the payment on arrival. He had a policy, in writing, sent in advance.

He was still standing on a customer's property with his equipment unloaded and no money, asking Reddit how to bring it up politely.

The top reply was not a script. It was a diagnosis, from a contractor called ApprehensivePie1195: "You're breaking your policy. When I set start dates, I set a down-payment date as well."

That is the entire problem in two sentences. Nearly every guide on this topic answers "how much" and "what do I say." Both are downstream. The deposit fails because it has no due date of its own. A quote has a price and a scope, the calendar has a start date, and nothing in between says when the money arrives, so the ask lands by default on the morning of day one, in a driveway, with the truck loaded, the crew on the clock, and every other job for that day turned away. That is the weakest negotiating position in the trade, and it is self-inflicted.

The short answer

Collect the deposit by putting it in the quote, invoicing it the moment the quote is accepted, and giving it a due date three to five business days before the start date, with a stated consequence: the slot is released. Size it to cover everything you spend before work begins. Check your jurisdiction's cap before you write the number, because in some places the common advice is a criminal offence.

Five rules follow. The first one is the one nobody writes about.

Rule 1: Give the deposit its own due date

A start date is not a payment trigger. Left alone, it becomes one by accident, and always at the worst moment.

The fix is mechanical. When you set the start date, set a deposit due date in the same motion, three to five business days earlier, as a separate entry with its own reminder. One contractor in that thread, MarketingManiac208, laid out why the gap matters:

"Require that you are to receive it a minimum of 3 days before deployment. That way when they haven't paid 3 days ahead you can call them to reschedule... Otherwise you've bought yourself 2 days to swap other jobs into their time slot so you're not idle or scrambling."

The gap is not politeness. It is inventory management for the only thing you actually sell, which is crew days. A deposit that arrives on the morning of day one gives you no options. A deposit that is late three days out gives you two working days to fill the slot, which converts a lost day into a moved day. The goal, as the same commenter put it, is a process that engineers the customer's failures to comply out of existence.

Attach a consequence and say it once, warmly, in the quote: work is scheduled on receipt of the deposit, and the date is held for you until then. That is not a threat. It is how booked-out trades actually operate, and customers already understand it from every other reservation in their life.

Rule 2: Size the deposit to your cash position, not to a percentage

Every guide on this topic publishes a percentage table: 30 to 50 percent under $10,000, 10 to 20 percent over $50,000. The tables are not wrong, but they answer a question that does not determine whether you get hurt.

The question that does is simpler. At every moment of this job, has the customer paid in more than you have paid out?

A contractor in a separate r/Contractor thread on deposits, MoveResponsible4275, put the principle plainly: best practice as a contractor is to be slightly over-billed, meaning whatever I invest into the project, the client has already paid for. His reasoning was not greed, it was enforcement reality: "our legal protections are real, but relatively useless. The amount of work and money it will take to get anything back if a customer stiffs me for $50k is crazy."

That gives you the floor. There is also a ceiling, and Nevada wrote it into statute. Under NRS 624.940, a residential payment schedule must not let a contractor receive payments "in excess of 100 percent of the value of the work performed on the project at any time," excluding the authorised deposit.

So the correct target is a band, not a number:

• Floor: money collected is at least what you have spent on the job.
• Ceiling: money collected is no more than the value of work performed, plus your lawful deposit.

Inside the band, you are neither financing the customer nor holding money you have not earned. The framing survives every jurisdiction, because the floor is your own solvency and the ceiling is roughly what the regulated states already require. It also gives you the percentage without a lookup table: on a job where you buy $4,000 of equipment before day one, the deposit covers at least $4,000, whatever fraction of the contract that happens to be.

The corollary is unpopular and correct. If you need this customer's deposit to pay for the last customer's materials, a bigger deposit just moves the shortfall forward one job. That is a margin or cycle problem, worked through in contractor cash flow: why profit isn't money.

Rule 3: Check your cap before you quote, because the standard advice is illegal in four states

This is where the published guidance on this topic gets actively dangerous, and it is worth being blunt about it.

Four states cap what a residential contractor may take before work begins. All four numbers below come from the statutes themselves, not from summaries:

California's is the one that catches people, because the cap does not scale. Business and Professions Code 7159.5 states that a downpayment "shall not exceed one thousand dollars ($1,000) or 10 percent of the contract amount, whichever amount is less." On a $6,000 job the cap is $600. On a $200,000 job the cap is still $1,000. A violation is a misdemeanour, punishable by a fine of "not less than one hundred dollars ($100) nor more than five thousand dollars ($5,000), or by imprisonment in a county jail not exceeding one year, or by both." In areas under a declared state of emergency, the statute says the court "shall impose the maximum fine."

Now compare that to what a contractor searching this topic is currently being told. Joist's contractor deposit guide, which ranks on the first page for this query, tells readers that in California a deposit "can't be more than 10% of the total job cost or $10,000, whichever is less."

The statute says $1,000. The guide says $10,000. A California contractor who follows that sentence on a $150,000 remodel takes ten times the lawful maximum and commits a misdemeanour while believing they researched it.

Maryland's rule has a second half that also gets missed. Business Regulation 8-617 caps the deposit at one third, and separately provides that "a person may not demand or receive any payment for a home improvement before the home improvement contract is signed." Taking a cheque at the kitchen table to hold a slot, before paper is signed, is its own violation regardless of amount.

The workaround in a capped state is legal and obvious

Contractors in California and Nevada often conclude they simply cannot protect themselves. That is a misreading of the cap.

The cap restricts the payment you take before work starts. It does not restrict payment for work performed and materials actually delivered. So you restructure:

1. Take the lawful deposit at signing. In California that is $1,000 or 10 percent, whichever is less.
2. Make the first progress payment due on delivery of materials to the site, or at a defined early milestone such as demolition complete or rough-in inspection passed.
3. Keep every later payment tied to an observable event, never to a date on the calendar.

That keeps you inside the band from Rule 2 while staying compliant. It is also, not coincidentally, what informed homeowners in those states expect. In a thread about a $40,000 Southern California bathroom, a homeowner posted a schedule with a $1,000 deposit followed by roughly 99 percent of the contract due on the first day of work. The contractors in the replies flagged the deposit as fine and the rest as unlawful. One, a Northern California contractor, summarised the rule in a sentence: "$1,000 or 10%, what is lower is max by law upon signing. Then pay for work in place. Don't pay ahead of work."

Rule 4: In Canada, your non-refundable clause has a 10-day hole in it

Every US guide on this topic skips this, and for an Ontario trade it is the single most expensive thing to not know.

If you negotiate and sign an agreement somewhere other than your own place of business, typically at the customer's home, Ontario treats it as a direct agreement under the Consumer Protection Act. The customer may cancel it for any reason within 10 days of receiving a written copy. That right exists regardless of what your contract says about deposits being non-refundable, and it covers exactly the work most trades sell: renovations, water heaters, roofing, HVAC replacements, lawn and snow contracts.

Two further points from Ontario's own guidance that bear directly on deposits:

• Most agreements for a product or service over $50 must be in writing. A verbal deposit arrangement on a renovation is not a contract you can rely on.
• The final price cannot exceed the estimate by more than 10 percent unless the customer agrees to a new price and signs a change to the contract. A deposit does not lock in a price you can later drift past, which makes disciplined change orders essential rather than optional. The mechanics are in change orders without losing money.

The practical consequence for the first 10 days: do not spend it. Hold a kitchen-table deposit rather than committing it to non-returnable orders until the cancellation window closes or the customer expressly asks you to start inside it. One contractor in the deposit threads described exactly that discipline, parking deposits in a separate account until the job was underway, "save for custom, non-refundable orders."

If you want the window to close sooner, sign at your office or fully remotely. The rules are triggered by where the deal was struck, not by what the job is.

Rule 5: Define cleared funds, and offer one way to pay

The last mile is where deposits quietly die. Three specifics:

Say what "paid" means. A cheque handed over is not cleared funds. Write into the terms which of deposited-and-settled cheque, settled e-transfer or captured card payment counts, and log the date the money landed next to the promised start date. The contractors in those threads were unanimous on the operational version: do not unload before it clears.

Offer one method, not a menu. Five payment options is a decision, and decisions create delay. Name the default and keep one alternative in reserve. With e-transfer and ACH there is no longer a plausible reason a deposit cannot be paid the day it is asked for.

Send the invoice while the yes is warm. The gap between "we're going ahead" and the deposit request is where jobs go cold and customers resume shopping. Put deposit terms in the quote template so they go out automatically, and the conversation stops being a conversation: it becomes a line item they already agreed to, which is the same principle behind how to write a quote that wins.

What to say

The scripts matter less than the structure, but they are not nothing. Three situations, three sentences.

The ask, in the quote: A deposit of $X is due on [date] to hold your start date of [date]. It covers material procurement and reserves the crew. The balance of $Y is due at completion. Dollar amounts, not percentages. A specific date, not "on acceptance."

The objection, "why do you need it?": state cause and effect, not policy. I order your equipment before we start, and I need the deposit before I place that order. Policy invites negotiation because policies have exceptions. Cause and effect does not, because ordering genuinely does precede starting.

The refusal: do not negotiate toward zero, and do not take the job on a promise. Keep one reframe ready, because customers rarely consider it: your licence, insurance, bond and review history are all publicly checkable, and their payment history is not. As one contractor put it in the deposit thread, if you are hiring a reputable contractor, you are the bigger risk in the transaction, not them.

If they still refuse on a materials-heavy job, decline it without heat. A customer who will not fund the order is showing you the final invoice conversation in advance, and the collection version of that conversation is far more expensive, as in what to do when a customer won't pay.

When not to ask for a deposit

Asking on the wrong job creates friction that costs you work for no protection in return.

Service and diagnostic calls: no deposit. The service call fee already covers the trip and the time whether or not the repair is approved. You are not buying anything specific to that customer before you arrive, so there is nothing to protect.

Stock-material work you can redeploy: usually no. If everything you would buy goes to the next job anyway, the deposit is doing commitment work, not cash work. Handle that with a firm slot and a cancellation window instead.

Equipment installs and special orders: always. The moment you order a specific furnace, panel or cabinet run for a specific address, that item is effectively theirs and your leverage is gone. Collect before the order goes in, not before the job starts. Those are different days, and the distinction is the whole game.

Long lead times: split it. A modest deposit at signing plus a second payment when materials land keeps you from holding a slot for free through an eight-week permit gap.

The one-afternoon setup

1. Look up your jurisdiction's cap on your licensing board's site. Write the number on your quote template.
2. Add a deposit block to the quote template: dollar amount, what it covers, due date, balance.
3. Add the second calendar entry. Deposit due date, three to five business days before every start date.
4. Write the consequence into the terms. The slot is held until the due date, then released.
5. Define cleared funds and name one payment method.
6. Set the trigger. Deposit invoice goes out the moment the quote is accepted, not the next morning.
7. Decide your service-call exception so the crew is not asking for deposits on diagnostic visits.

Step three is the one that actually changes outcomes, and the one most likely to get skipped because it does not feel like a policy. It is a calendar entry. That is precisely why it works: the contractor in that original thread did not lack a policy, he lacked a date, and a policy without a date is a preference.

If the deposit conversation keeps going badly across many jobs, the problem may be upstream of the conversation. That is the argument in how many leads is my business losing, and the work we do at Pavado.

Sources

• California Business and Professions Code 7159.5, downpayment cap and penalty
• Nevada Revised Statutes 624.940, payment schedule and 100 percent of work performed limit
• Maryland Business Regulation 8-617 and the Maryland Home Improvement Commission
• Massachusetts General Laws c.142A s.2, advance deposit limit
• Ontario, your rights when signing or cancelling a contract, direct agreements and the 10-day cancellation right
• Rabbet 2025 Construction Payments Report, n=125 US contractors, September 2025
• r/Contractor threads on asking for payment, contractor deposits and a capped-state payment schedule