Size the deposit to the money you have to spend before the job starts, then split the rest of the price into stages that each match work the customer can see and check, with the last payment due at completion. On jobs that count as domestic or residential building work, your state sets rules that override your preferences: how large a deposit can be, when it can be taken, when a written contract is required, and sometimes how progress payments must line up with completed work. Those rules differ from state to state and are revised from time to time, so check them with your state's building or fair trading body before you set your terms, not after a customer queries them.
Why stages beat one bill at the end
On a two-week job paid at completion, you fund the whole thing: materials on your supplier account, wages, subcontractors, fuel. If the customer pays late, or disputes a small item to hold back the lot, your money is stuck with theirs. On a job paid in stages, neither side is ever far ahead of the other. The customer pays for work they can see, and you are never carrying more than about one stage of cost.
Stages also make disputes smaller. A disagreement about the tiling holds up the tiling payment, not the whole job.
Size the deposit from what you spend up front
A deposit is easiest to justify, to the customer and to yourself, when it matches a real cost. Add up what you must pay out before or in the first days of the job: materials ordered in, deposits you pay to suppliers for made-to-order items, skip bins, hire equipment, permits. That figure is the case for your deposit.
Where the state's cap on deposits is lower than your up-front spend, do not try to get around the cap. Make your first progress payment fall early instead, at a stage reached in the first week, so the gap between what you have spent and what you have been paid stays small.
The rules to check in your state
For domestic building work, ask your state's body these questions. In New South Wales that is NSW Fair Trading; in Victoria, Consumer Affairs Victoria; in Queensland, the QBCC. Other states and territories have their own building or consumer affairs office.
- Does my kind of work count as domestic or residential building work, and from what job value? Some trades are surprised to find that theirs does.
- What is the largest deposit I can ask for, and does it depend on the contract price?
- Can I take the deposit before home warranty insurance, if it is required, is in place?
- When must the contract be in writing, and what must it contain?
- Are there rules on how progress payments relate to work completed, or set stages for my kind of contract?
Write the answers down and keep them with your quote template. They change rarely, but they do change.
Designing the stages
Good stages have three things in common. Each one is a point anyone can recognise on site: rough-in done, waterproofing complete, frame up, decking laid. Each one is sized to roughly the value of the work it pays for. And none of them asks for money ahead of the work, which customers resent and which some states do not allow on domestic jobs.
Keep the final payment large enough to matter to you and small enough not to sink you if a customer delays it. For most trade jobs, somewhere between 10 and 20 per cent of the price sits well, and it falls due at practical completion, not at the end of a long list of touch-ups.
A worked example
Oxbow Renovations, a fictional small renovation business, quotes $28,600 to renovate a bathroom. Before quoting its terms, it checks its state's rules for a job of that size. The schedule it sends is:
- Deposit on acceptance, 5 per cent: $1,430
- Strip-out finished and plumbing and electrical rough-in done, 25 per cent: $7,150
- Waterproofing complete, 20 per cent: $5,720
- Wall and floor tiling complete, 30 per cent: $8,580
- Practical completion, with fixtures fitted and the room usable, 20 per cent: $5,720
The stages add to 100 per cent and $28,600. The strip-out and rough-in are done in the first week, so the 25 per cent stage arrives quickly after a small deposit. By the end of that week Oxbow has spent about $4,900 on the skip, the strip-out labour and the plumber and electrician. The deposit covers $1,430 of it, so Oxbow is $3,470 out of pocket for a few days, then ahead once the second payment lands. At no point does it carry the cost of the tiles and the tiler unpaid.
The note on the quote sets out the five stages with their percentages and dollar figures, says each stage is invoiced the day it is reached and is due within three days, and lists how to pay. Quote Desk takes no payments, so the note is where the schedule lives, and the customer accepts it with the price when they press the button; the builders page shows payment terms in a note.
Collecting each stage
Invoice each stage on the day it is reached, with a photo of the stage attached to your email so the customer can see what they are paying for. A stage invoice that arrives a week late teaches the customer that the schedule is flexible.
Before the job, decide what you will do if a stage is not paid. Your contract should say whether work pauses until it is, and on domestic building work, check your state's rules before you stop work, because stopping without the right notice can put you in the wrong. The guide to getting paid on time covers reminders and what to do when money does not arrive.
Mistakes to avoid
- Copying a deposit percentage from another trade or another state without checking the rules where you work.
- Tying stages to dates rather than work, so a payment falls due before the work it pays for.
- Front-loading the schedule, with most of the money due before most of the work.
- Leaving too much to the final payment, so one small defect holds back a third of the price.
- Starting the next stage while the last one is unpaid, then finding you are owed two.
What to do this week
- Look up your state's rules for domestic building work and write the answers to the questions above on one page.
- Work out your real up-front spend on your three most common larger jobs.
- Draft a standard stage schedule for each, with visible milestones and percentages.
- Write the schedule into the note template you use for those jobs.
- Set up a stage invoice you can send from your phone the day a stage is reached.