Deposits and Progress Billing: Make the Customer's Money Pay for the Job
A deposit isn't a courtesy — it's who finances the job's front-loaded costs. The coverage test, milestone design, and what retention quietly does to your cash.
Every job has a moment when the money is flowing out faster than it's flowing in: the materials order, the dump trailer, the crew mobilized before the first dollar arrives. Who finances that moment is not a detail — it's the difference between a job that pays you and a job you lent money to.
The coverage test
A $12,000 flooring job at a 35% margin costs $7,800 to deliver, and its materials — 45% of the price — are spent up front. A 30% deposit is $3,600: it does not reach the $5,400 of materials. The $1,800 shortfall is your float, financed by your credit line, for the customer's job, for free.
| Line | Calculation | Amount |
|---|---|---|
| Deposit at signing | $12,000 × 30% | $3,600.00 |
| Front-loaded materials | $12,000 × 45% | $5,400.00 |
| Float you finance | $5,400 − $3,600 | $1,800.00 |
| Exposure after deposit | $7,800 − $3,600 | $4,200.00 |
| Final payment | $12,000 − $3,600 | $8,400.00 |
A 45% deposit closes the gap — or a materials invoice passed through at signing does. The principle survives either mechanism: the customer's money pays the customer's job's front-loaded costs, never your working capital.
Designing the milestones
- Each payment arrives before the costs it funds — money before materials, not after.
- Milestones attach to completed, visible stages: mobilization, rough-in, finish, completion.
- The final payment is big enough to matter but never the only profit in the job.
- Retention, if the contract has it, is scheduled with a release date, not left as 'when the customer is happy'.
The customer's side of the table
Deposit resistance is usually a story about contractors who vanished — which makes transparency the answer. A deposit explained as 'materials for your job, ordered the day you sign' reads as competent staging. An unexplained 50% reads as a red flag, and in fairness, it is one when there's no explanation. Itemize what the deposit buys and most resistance dissolves; the customers it doesn't dissolve it for are declining to finance their own job, which is useful to know early.
Test your schedule with the deposit calculator →
Frequently asked questions
How much deposit should a contractor take?
Enough to cover the job's front-loaded costs — materials plus mobilization — commonly 25–50% for material-heavy trades. Check local law first: many jurisdictions cap residential deposits by statute (California caps them at $1,000 or 10%, whichever is less).
What's the difference between a deposit and progress billing?
A deposit is the first piece of the schedule. Progress billing invoices the job in stages — rough-in, finish, completion — with each payment sized to arrive before the costs it funds. The same coverage test applies at every milestone.
What is retention and how should I treat it?
A percentage of each payment withheld until completion — 5–10% on commercial work, rare residentially. It's deferred cash you finance, so price it consciously: know your exposure with the retention still held, and negotiate the release schedule, not just the percentage.
Tools for this
Ready to run the numbers?
Open the Deposit & Progress Billing Calculator and apply this guide with your own figures.
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