You pay the plant on your account terms. The crew gets paid every Friday. The customer pays 30 days after the invoice, or 45, or when the GC gets paid. On a big job you can be profitable on paper and short on cash for a month.
The fix is in the proposal, before the job starts: a deposit where it's allowed and makes sense, and progress billing on anything that runs more than a few days.
Deposits
A deposit covers what you spend before the customer sees any work: material ordered, the equipment transport and setup, the crew day you've booked.
Check your state's rules first, especially for homeowners. Many states limit deposits on residential home improvement contracts. California, for example, caps the down payment on a home improvement contract at $1,000 or 10% of the contract price, whichever is less. Others have their own limits, or rules about when you can collect. Know yours before you print it on a proposal.
Commercial and GC work usually doesn't take deposits. Mobilization can be its own line in the schedule of values, billed on the first pay application.
When you do take one:
- State the amount and when it's due in the proposal.
- Don't order material or book the plant for custom work until it's paid.
- Show it as a credit on the final invoice so the customer sees where it went.
If a homeowner won't pay a reasonable deposit, that tells you something about how the final invoice will go.
Progress billing
On jobs that run more than a few days, bill as the work gets done instead of waiting for the end.
Milestone billing works for most private jobs. Write it into the proposal:
"Invoice 1: equipment on site and base repair complete, 30%. Invoice 2: paving complete, 50%. Invoice 3: striping and punch list complete, 20%."
Tie each milestone to something the customer can see is done, not to a date.
Schedule of values billing is standard on GC and public work. You break the contract into line items with values, and each month you bill the percentage complete on each line. The continuation sheet (the AIA G703 format is the common one) shows each line's value, what was done before, what was done this period, and the balance.
Retainage
On GC and public work the customer often holds back a percentage of each payment, commonly 5% or 10%, until the job is complete and accepted. The contract sets the percentage and when it's released. Many states have prompt payment laws that limit retainage or set release deadlines on public work.
- Track it on every invoice: what was billed, what was held, and the running total held.
- Know the release trigger: substantial completion, the punch list, final acceptance.
- Bill for its release as soon as you hit the trigger. Retainage nobody asks for can sit for months.
- If you hold retainage from your subs, match your terms to what's held from you.
How customers pay you
Make it easy. Residential customers expect to pay by card, and many commercial customers pay by ACH through their accounts payable system. Checks still come in.
- Card fees are a cost of taking cards. Build them into your pricing, or check your state's rules and your card processor's terms before adding a surcharge.
- ACH is cheaper to accept and suits larger commercial payments.
- Record every payment against its invoice, including partial payments, retainage and deposits. When a customer disputes what they paid a year later, clean records settle it in minutes.
Related articles
- QuickBooks Online for paving contractors: accounts, jobs and 1099s
- Change orders: get the extra work signed before you do it
- Managing subs: COIs, W-9s and payment terms
Pavr is job software for paving, sealcoating, striping and concrete contractors. A deposit invoice comes off the final invoice on its own. On bigger jobs the schedule of values is built from the signed proposal, each pay application bills the percent complete on every line, holds back retainage and prints a G703-style continuation sheet. A customer gets a reminder at 7, 14 and 30 days past due, and their statement whenever you send it. The Pay button on your invoice goes to your QuickBooks payment page or to wherever you already take payments. Try it free → Pavr vs spreadsheets and QuickBooks covers what progress billing looks like in each, with retainage.