A payment schedule that keeps you out of the hole

If you've ever bought a client's tile on your own card and waited three weeks to get it back, this is for you. A good payment schedule ties every payment to something both of you can see. It goes in the proposal, before anyone signs.

Most remodel schedules have three parts: a deposit, progress payments during the job, and a final payment at the walk-through. The details are where contractors win or lose.

The three parts

The deposit pays for getting started: materials you have to order, permits, and your spot on the calendar. It's due when the client signs.

Progress payments come as the job moves. On a short job there may be none. On a bigger one there are a few, each tied to a stage of the work.

The final payment comes at the walk-through, when the work is done and the punch list is closed.

That's it. The rest is how big each one is and what triggers it.

How big a deposit?

There's no single right number, and published guides don't agree. Consumer guides, like this one from Angi, are written for homeowners. Use them as a check, not a rule.

What we'd look at instead:

• What you have to buy before you start. If the client picked a special-order tile or a custom vanity, the deposit should cover it. You shouldn't finance their choices.
• How long until the next payment. A long gap means you're carrying more.
• The client's comfort. A deposit that scares off a good client is too big. Explain what it pays for and most people get it.

Before you set one, check whether your state limits deposits on home improvement work.

Tie progress payments to milestones, not dates

A payment due "on the 15th" comes due whether the work is there or not. A payment due "when the tile is set" comes due when the client can walk in and see it. That's fair to both sides, and it's hard to argue with.

Good milestones are things anyone can see:

• Demo done and haul-off gone
• Rough plumbing or electrical inspected
• Cement board and waterproofing in
• Tile set and grouted
• Cabinets set
• Punch list closed

An old Pro Remodeler piece (1999) still holds up: it describes a remodeler who keeps a few draw schedules, picks one to fit the client, stays a little ahead of his costs and ties later payments to clear milestones (Pro Remodeler).

One caution: a milestone tied to something you don't control, like an inspector's calendar, can leave you waiting. Pick stages your crew finishes.

The final payment

Tie it to the walk-through, not "completion". Completion is a word people argue about. A walk-through is a day on the calendar where you both look at the work.

Keep the punch list short and written. When it's done, the final is due. If you've done your progress payments right, the final isn't the biggest check of the job. That's on purpose. The bigger the final, the more leverage you lose at the end.

Change orders: paid before the work

A change order is a new mini-job inside the job. Price it in writing, get it approved, and get paid for it before you do it, or at approval. Don't roll it into the final. That's how a $600 change turns into a $600 argument. More on that in change orders.

In Texas: what travels with each payment

On a Texas residential job, payments come with paperwork. This isn't legal advice, but it's worth knowing before you set the schedule:

• Every time you ask for money, you owe the owner a disbursement statement naming the direct subs you'll pay from it (Property Code 53.258). Owners and lenders also expect a lien waiver (53.284).
• At final payment, you give the owner a bills-paid affidavit (53.259). The statute makes it a condition of final payment.
• The owner's 10%. Texas law has the owner reserve 10% of the contract price, or 10% of the value of the work done, while the work goes on and for 30 days after it's complete (53.101). The reserved money secures payment to subs and suppliers (53.102). If an owner or lender holds it, plan your cash for it.

The full list, in job order, is in Texas residential construction paperwork.

When a lender is paying

If a bank or a renovation loan is paying, the lender sets the draw rules. They usually want an invoice, proof of the work, and a lien waiver with each draw before they fund it. Ask for their draw schedule before you write yours, and match it.

Three sample schedules

These are examples to start from, not rules. Change them to fit the job, the client and your state.

A short job, a few days (a tile backsplash, a small floor)

• 30% at signing
• 70% at the walk-through

A bathroom remodel, two to three weeks

• 25% at signing
• 25% at start of work
• 25% when tile is set
• 25% at the walk-through

A bigger remodel, a month or more

• 20% at signing
• Progress payments at three or four stages from the milestone list above
• The final at the walk-through, kept to 10% to 15%

Whatever you pick, write the trigger next to each payment. "25% when tile is set" beats "25% week 2".

Sources

• Angi, on remodeling deposits (consumer guide): angi.com
• Pro Remodeler, "Customize Your Draw Schedules" (1999): proremodeler.com
• Texas Property Code, chapter 53, sections 53.101, 53.102, 53.258, 53.259 and 53.284: statutes.capitol.texas.gov

The Texas notes explain the Property Code in plain terms. They are not legal advice. For a specific job or dispute, talk to a Texas construction attorney.