A progress payment schedule splits a contract into staged draws, each tied to a defined milestone. That much every article agrees on. The part that decides whether yours works is narrower: at no point in the job should you be financing the customer, and at no point should you have been paid for something you have not built.
Most published schedules fail the first half of that test. They also assume you are free to take 20 or 30 percent up front, which in five states is illegal on a remodel and in California is off by a factor of sixty on a large job.
This is the version for a residential contractor running jobs between $5,000 and $150,000, where there is no owner's rep, no schedule of values, and no lender releasing draws.
Rule 1: Find your legal ceiling before you pick a number
Start here, because everything else is built underneath it.
Eight states cap what a residential contractor can collect before work begins, and the caps are project-type rules rather than blanket residential rules. California's is the one most people quote wrong. Under Business and Professions Code section 7159.5, a home improvement down payment cannot exceed $1,000 or 10 percent of the contract price, whichever is less. The Contractors State License Board states it without qualification: "There are no exceptions for special-order materials." On a $200,000 kitchen you can collect one thousand dollars.
The same state sets no deposit cap at all on building a new single-family home, which falls under a different section entirely.
| Jurisdiction | Limit before work begins | Scope |
|---|---|---|
| California | $1,000 or 10%, whichever is less | Home improvement only. New builds exempt. |
| Massachusetts | One third, or cost of special-order items, whichever is greater | Contracts over $1,000, pre-existing owner-occupied 1 to 4 units |
| Maryland | One third | Excludes new homes. No payment at all before signing. |
| Pennsylvania | One third, plus designated special-order materials | HICPA. Deposit rule applies at $5,000. |
| Tennessee | One third | Unless bonded at 1% of annual home improvement sales |
| Ohio | 10% | Home construction service over $25,000, new builds included |
| Maine | One third | Home construction contracts over $3,000, new builds included |
| Nevada | $1,000 or 10%, whichever is less | Completed, owner-occupied single-family. Since October 2023. |
| New York | No cap, but escrow | Lien Law 71-a(4): funds into escrow within five business days |
| Florida | No cap, but a clock | Over 10%: 30 days to apply for permits, 90 days from permit to start |
Two numbers that circulate as law are not law. Virginia's DPOR consumer guide suggests homeowners "consider an initial deposit of no more than 10% down or $1,000, whichever is less." That is word-for-word California's binding statute, published by a Virginia agency as advice, and the guide's own verb is "consider." Connecticut's DCP similarly tells homeowners a legitimate contractor will not ask for more than a third. Neither state's code contains a cap. This distinction is laid out well in Back Office Blueprint's state-by-state survey, which is the most careful public accounting of the statutes I found.
Contractors living under the strictest caps have already solved this. As one California GC put it on r/Contractor: "In California we aren't allowed to take more than $1000 for a deposit. Also we bill time and materials which makes cash flow difficult, because we pay for materials/labor/subs first, then invoice the client for all of the above every two weeks."
Watch out
The vendor blogs currently ranking for this keyword recommend a 20 to 30 percent deposit as a default. Following that advice on a California remodel, a Nevada owner-occupied repair, or an Ohio job over $25,000 puts you outside the statute. The number is not universal, and neither is the exposure.
Rule 2: Run the break-even draw test
Here is the test, and it takes ten minutes with a calculator.
Lay your draws and your actual costs on the same timeline, week by week, and track the running difference. The schedule passes if the line never goes meaningfully negative, and if by the second-to-last draw your cumulative collections cover 100 percent of job cost plus overhead. When that holds, the only money still on the table at the end is profit.
Take a $48,000 bathroom remodel over six weeks. Assume job costs of $31,200, overhead of $9,600, and profit of $7,200. Total cash leaving your account across the job: $40,800, landing roughly $12,000 in week one, $8,000 in week two, $12,000 across weeks three and four, and $8,800 across weeks five and six.
Schedule A, the classic thirds. $16,000 at signing, $16,000 at the midpoint, $16,000 on completion.
| End of week | Collected | Spent | Position |
|---|---|---|---|
| 0 | $16,000 | $0 | +$16,000 |
| 1 | $16,000 | $12,000 | +$4,000 |
| 2 | $16,000 | $20,000 | -$4,000 |
| 3 | $32,000 | $26,000 | +$6,000 |
| 4 | $32,000 | $32,000 | $0 |
| 5 | $32,000 | $36,400 | -$4,400 |
| 6 | $32,000 | $40,800 | -$8,800 |
You finish the job $8,800 out of pocket while the customer holds $16,000 and all the leverage. This is exactly the failure Michael Stone at Markup and Profit describes: "Before the second payment is made, you've already spent more than 1/3 of your job costs, which means you are working out of your pocket."
Schedule B, built under a 10 percent ceiling. $4,800 at signing, $9,500 on material delivery, $11,000 on passed rough inspection, $12,000 at tile and drywall complete, $8,200 at finishes set, $2,500 on punch-list sign-off.
| End of week | Collected | Spent | Position |
|---|---|---|---|
| 0 | $4,800 | $0 | +$4,800 |
| 1 | $14,300 | $12,000 | +$2,300 |
| 2 | $25,300 | $20,000 | +$5,300 |
| 3 | $25,300 | $26,000 | -$700 |
| 4 | $37,300 | $32,000 | +$5,300 |
| 5 | $45,500 | $36,400 | +$9,100 |
| 6 | $45,500 | $40,800 | +$4,700 |
Worst point across the whole job: $700 down, for one week. Money still at risk when the customer's mood becomes relevant: $2,500, which is 5.2 percent of the contract and a third of the profit rather than all of it.
By the numbers
The state with the tightest deposit cap in the country pushed this schedule into a better shape than the unrestricted one. Collecting less up front and billing more often beat collecting a third and going quiet for three weeks. The deposit was never the tool. The draw cadence was.
Rule 3: Size the final payment to your walk-away number
The last payment is the one that gets disputed. Two threads from r/Contractor make the cost concrete.
A painter in Ontario finished a $4,000 condo job, took a $1,900 deposit, returned once to address every item the owner raised, and then received an email saying the owner's realtor had found "deficiencies" and would be paying $1,000 of the $2,100 balance. A contractor in Washington installed seven windows and two doors on a 50/25/25 schedule, and the customer, unhappy that the work went too quickly, simply did not pay the final 25 percent, then hired someone else to fit the last window.
In both cases the schedule, not the customer, decided the size of the loss. The Ontario painter had 52.5 percent of the contract sitting on the back end.
Working contractors converge on a small final number:
- "We make sure the deposit covers all of the special order materials, and the final payment isn't more than $5k or $6k." (a GC running $50,000 to $100,000 projects)
- "Heavily weight the beginning items. Final payment should be tiny."
- "Learned the hard way in the past to not leave big payments for the end."
- "I was taught very early in my career to never be at a point in a project where you can't walk away unscathed." (a 24-year GC running a 25-person company)
Markup and Profit puts the reasoning plainly: keep the final payment small enough that "if needed you can walk away without being financially hurt, rather than wasting time and money on litigation." Note the cap is a dollar figure, not a percentage. Ten percent of a $300,000 job is $30,000, which is not a walk-away number for anyone.
Most contractors do not have a payment schedule problem, they have a tracking problem: nobody knows which draw is due on which job today. We build custom CRMs for local service businesses that hold the draw schedule against the job, flag the trigger when the milestone is hit, and chase the draw without anyone remembering to.
Rule 4: Trigger each draw with a document, not a date
"Payment due August 15" invites the reply that the work is not there yet. "Payment due on passed rough plumbing inspection" does not, because a third party issued the card.
Ranked by how hard they are to argue with:
- A passed inspection. Municipal, third party, dated. The strongest trigger available on residential work.
- A signed delivery ticket. Material is on site and countable. This also keeps you compliant with the rule California wrote into statute and most states apply in practice, that payment should not exceed the value of work performed or material delivered.
- A photographed phase completion, timestamped and sent the same day.
- A calendar date. Weakest, and fine only on time-and-materials work billed against real hours.
The trigger everyone forgets is the last one. A contractor in the Ontario thread got the advice that matters after the fact: "have a document signed by customer that all punch list items were addressed to their satisfaction." That signature is the trigger for the final draw. Without it, "substantially complete" is whatever the customer decides it is on the day you ask for money.
Massachusetts writes this asymmetry directly into the sample contract: "The law forbids demanding full payment until contract is completed to both party's satisfaction." If satisfaction is the legal standard, get it recorded.
Rule 5: Bill on a cadence your costs can survive
Two weeks is the number that keeps appearing, from independent sources that are not quoting each other.
Markup and Profit: "Progress payments should be scheduled about every two weeks." A GC on r/Contractor: "we divide the cost of the project by estimated weeks of duration divided by 2. That's a check due every other week when we have our biweekly client meeting." Another: "We break out the milestones so we are getting paid appx. every 1 1/2 weeks, and we are paid in advance for the next phase."
The reason is not preference. It is that payroll runs every two weeks and supplier terms run 30 days. A billing cadence slower than your own outflow cadence guarantees a gap you fund yourself.
Real splits from working contractors, by job size:
| Contract value | Structure seen in practice |
|---|---|
| Under $5,000 | 50 / 50, or balance on completion |
| $5,000 to $20,000 | 40 / 40 / 20 |
| $10,000 to $50,000 | Thirds, or 45 / 45 / 10 on short jobs |
| $50,000 to $100,000 | 30 / 30 / 30 / 10, milestone-triggered |
| $100,000 to $300,000 | 20 and 30 percent increments, 10 percent final |
| $300,000 and up | 10 to 15 percent increments |
Note the direction: as the job grows, the increments shrink and multiply. That is the whole idea. Bigger job, more draws, smaller final.
For small jobs Markup and Profit recommends 45 / 45 / 10 and a minimum of three payments: a down payment with the contract, one the day work starts, and a small balance on completion. On a four-day roof that feels like a lot of cheques. It is also the difference between losing a margin and losing a job.
Rule 6: An unenforced schedule is the customer's schedule
This is where most of the damage happens, and no vendor blog says it out loud.
Markup and Profit does: "if you set a payment schedule but don't enforce it, by default you are agreeing to whatever new payment schedule your client might decide to use." Their rule is 24 hours from a missed draw, then the job stops.
Enforcement has to be written before it is needed. Most contracts require notice and a cure period, typically 7 to 14 days, before you can lawfully suspend work, and walking off without following that language can expose you to a termination claim. So put the stop-work provision in the contract, and when a draw is missed, send the notice that the contract describes rather than an angry text.
Behind the stop-work clause sits the lien, and lien clocks are short and unforgiving. Ontario's Construction Act gives 60 days from last supply to preserve a lien and 90 days to perfect it. Every US state has its own deadlines and its own preliminary notice requirements. Find yours now, while nobody owes you anything, and put the date in the job record on the day you finish. Our guide to what to do when a customer will not pay covers the escalation sequence once a balance is already overdue.
If you are a subcontractor, the numbers are worse
Everything above assumes you contract directly with the homeowner. Working under a general contractor changes the arithmetic.
Billd's 2025 National Subcontractor Market Report, which surveyed more than 800 subcontractors, GCs and suppliers, found that general contractors believed payment landed about 30 days after a pay application while subcontractors actually waited an average of 56 days. Sixty-four percent reported being slow-paid. Eighty-one percent have supplier terms shorter than the time it takes them to get paid, and one in three pulls from personal or retirement savings to cover the gap.
Rabbet's 2025 Construction Payments Report estimated that slow and inconsistent payment cost US construction roughly $299 billion in 2025, functioning as a hidden 14 percent tax. Industry-wide days payable outstanding now sits near 83 days, up from 71 in 2020.
The useful finding in the Billd data is the last one: subcontractors who priced the cost of working capital into their bids reported a 41 percent profitability advantage over those who did not. If your average collection is 56 days and your supplier terms are 30, that 26-day gap is a real cost. Either price it in or shorten it. Ignoring it is the same as discounting every bid by an amount you never chose.
The checklist
Before the next contract goes out:
- Look up your deposit cap. Your state board, not a chart. Confirm whether your project type is even covered.
- Write out your cost timeline for a typical job. When does material get paid for, when does payroll hit, when do subs invoice.
- Lay the draws on top of it and run the running balance. Fix any week that goes materially negative.
- Check the break-even draw. By the second-to-last payment, have you collected cost plus overhead? If not, move money forward.
- Set the final payment in dollars, at your walk-away number.
- Give every draw a trigger document. Inspection card, delivery ticket, dated photos, signed punch list.
- Add the stop-work language with its notice period, and a written change-order clause, since scope creep is how a good schedule quietly goes bad.
- Record your lien deadline on the day of last supply, every job, without exception.
None of this is complicated. It is arithmetic and a calendar. What makes it hard is that it has to happen before the job, when you are busy selling, and its payoff shows up six weeks later as an argument that never happened.
A schedule you built from a template and never checked against your own cost curve is a guess. One that passes the break-even test is a plan, and it will survive a customer having a bad month.