Collect Upfront, Not After: Why Your Deposit Structure Is Bleeding Cash
Your customer is most motivated the moment they sign. That's when you should collect the most—not the least.
Here's how most contractors structure their payments:
10% deposit. Progress payments. Final 30-40% on completion.
And then they wonder why they're always chasing money at the end of jobs.
The problem isn't that customers are deadbeats. The problem is you're collecting the least money when motivation is highest, and the most money when motivation is lowest.
The Psychology You're Fighting
When someone signs a contract with you, they're in pain. Their AC is dying. Their roof is leaking. Their electrical panel is a fire hazard. They want the problem solved now.
That's peak motivation. That's when they'll pay anything to make the pain stop.
Fast forward six weeks. The job is done. The pain is gone. Now you're asking for $15,000 and they're suddenly finding reasons to delay. Punch list items. "Concerns." Suddenly they're not returning calls.
You collected 10% when they were desperate and 40% when they were comfortable. That's backwards.
The Better Structure: Heavy Head, Light Tail
Flip it. Collect more upfront when motivation peaks. Make the final payment small enough that it's not worth fighting over.
Here's what works for contractors in the $3M-$8M range:
Instead of 10% / 50% / 40%:
- 50% at contract signing — Materials + mobilization
- 40% at rough-in or midpoint — Labor through substantial completion
- 10% at final walkthrough — Small enough to not be worth delaying
That final 10%? If they drag their feet, it's annoying but not fatal. You've already collected 90% of the money.
Why This Works Better
1. You offset your costs immediately. Materials, permits, labor mobilization—you're not floating that. The customer is. Your line of credit stays untouched.
2. Customers are more invested. Someone who's paid $25,000 upfront doesn't ghost you over punch list items. They want this done as much as you do. They show up for the walkthrough. They make decisions faster.
3. You screen out bad customers. People willing to pay 50% upfront are serious. They have the money. They're not hoping to finance this on your back. The tire-kickers self-select out.
4. Collection becomes a non-issue. When the final payment is 10%, nobody's lawyers up over it. Nobody's playing games. It's easier to just pay and move on.
"But My Customers Won't Go For That"
That's what everyone says. And then they try it and realize: customers who trust you enough to hire you will trust your payment terms.
The key is framing. You're not asking for more money. You're asking for money sooner. The total price is the same.
Frame it around their benefit:
"We collect 50% at signing so we can order your materials immediately and lock in your installation date. This gets you on the schedule faster than contractors who wait for progress payments to order."
You're selling speed and certainty. Not asking for a favor.
The Math on a $50,000 Job
Old structure (10/50/40):
- Day 1: $5,000 collected
- Day 30: $25,000 collected
- Day 60: Still waiting on $20,000
- Day 90: Maybe you get it. Maybe it's Day 120.
New structure (50/40/10):
- Day 1: $25,000 collected
- Day 30: $20,000 collected ($45K total)
- Day 60: $5,000 remaining. Easy to collect.
Same job. Same price. Completely different cash position. You've got $25,000 working for you on Day 1 instead of floating materials on your line of credit.
Start With New Customers
You don't have to change terms on existing relationships overnight. Start with new customers. Test it for 90 days. Watch what happens to your cash flow and your collection headaches.
Most contractors who try this never go back.
Want to Fix Your Payment Structure?
The Contractor Cash Flow Assessment identifies exactly where your payment terms are costing you. In one week, you'll know the gaps—and how to close them.