Deposits vs Progress Billing: When to Take Money Up Front

Most small jobs (under $2,000, one visit, materials on hand) don't need a deposit at all, just clean invoicing after the work. Jobs over roughly $5,000, or any job with special-order materials, should carry a deposit of 10% to 30% of the contract price. Jobs that run for weeks (remodels, larger installs, multi-phase electrical or HVAC work) should move to progress billing, where you collect a percentage at defined milestones instead of one lump sum up front.

The mistake most owner-operators make isn't asking for money up front. It's using the wrong tool for the job size. A flat deposit on a six-week remodel leaves you carrying payroll and material costs for weeks before you see another dollar. Progress billing on a same-day water heater swap just adds paperwork nobody needs.

This post breaks down what's normal, what a few states legally cap, and how to decide between a simple deposit and a milestone-based schedule.

Key takeaways

• Small, fast jobs (a few hours, materials on hand) usually don't need a deposit; invoice on completion.
• For bigger jobs, 10% to 20% up front is standard on contracts over about $15,000; smaller or higher-risk jobs sometimes run 30% to 50%.
• California and Nevada cap the initial deposit on home improvement contracts at 10% of the price or $1,000, whichever is less.
• Progress billing (collecting a percentage at defined stages) fits any job running more than a couple of weeks or requiring large material buys.
• Retainage, money withheld until final completion, typically runs 5% to 10% of each progress payment.
• Tie every payment, deposit or milestone, to something the customer can see and verify, not just a date on the calendar.

How much deposit should you actually ask for?

Deposit size should track two things: how much you're spending before you start work, and how big the job is relative to your cash flow.

For straightforward jobs with off-the-shelf materials, a 10% to 15% deposit is standard practice; it covers permit fees and initial ordering without overreaching, according to LegalClarity's contractor deposit guide. Complex or custom jobs, where you're pre-ordering specialty equipment or committing a crew for weeks, commonly run 20% to 33%, per the same source.

Smaller jobs behave differently. A contractor doing a $16,000 bathroom remodel might reasonably ask for a 50% deposit because the fixed costs (permits, materials, one crew tied up for days) are a much bigger share of a small contract, while a $100,000 renovation typically sees only 10% to 20% up front, according to Sweeten's deposit guide. Anything above 50% without a clear material-cost justification is a common red flag that both licensing boards and consumer sites call out.

What your state actually allows

Deposit percentages aren't just a matter of preference in every state. California and Nevada are the strictest: a licensed contractor can require a down payment of no more than 10% of the contract price or $1,000, whichever is less, under California's Business and Professions Code, enforced by the Contractors State License Board, according to Custom Home's breakdown of the rule. That cap doesn't scale up with the job. A $500,000 remodel still caps the legal deposit at $1,000.

Once work starts, any additional progress payment can't exceed the value of work actually completed, per ContractorLicenseCA's summary of California payment rules. Other states are looser but most consumer-protection guidance still treats 10% to 30% as the reasonable band, with anything past a third of the contract price inviting scrutiny, according to QuoteChecker's state-by-state rules roundup. If you work across state lines, check your local contractor licensing board before setting a standard deposit policy company-wide.

When to switch to progress billing

Progress billing means you collect a percentage of the contract at defined stages of completion instead of one deposit and one final invoice. It's the right call whenever a job:

• Runs longer than two or three weeks
• Requires multiple material deliveries or subcontractor phases
• Has a total price high enough that a single deposit doesn't cover your rolling costs

Typical construction progress payments are tied to milestones and range from 10% to 30% of contract value per stage, often billed monthly or at defined completion percentages (30%, 60%, 100%), according to Procore's guide to progress payments. The best practice, per the same guide and ServiceTitan's construction payments guide, is tying every payment to something measurable and inspectable, a finished rough-in, an approved inspection, a delivered material load, not just "week three."

Retainage: the piece owners forget

Most progress billing schedules also include retainage, a percentage withheld from each payment until the whole job is signed off, protecting the customer if something goes wrong late in the project. Retainage typically runs 5% to 10% per payment, according to Mastt's overview of progress payments. Note that California is tightening this specifically: starting January 1, 2026, a new state law caps retention on private construction contracts at 5%, down from the 10% norm, according to O'Melveny's legal alert. If you do larger private jobs in California, build that into your 2026 contracts now.

Deposit vs progress billing at a glance

Making either method work without friction

Whichever method you use, put the schedule in writing before the first dollar changes hands. A one-line "deposit due at signing, balance on completion" clause is enough for small jobs. For progress billing, list each milestone, its percentage, and what triggers it (inspection passed, rough-in complete, equipment delivered) directly in the contract so there's no argument later about whether a stage is "done."

Automating the invoicing side removes a lot of the friction, too. In FieldRobin, you can set up milestone-based invoices tied to job stages and send automated payment reminders so you're not the one chasing a check three weeks into a job. It won't tell you what percentage to charge (that's a business decision), but it takes the manual tracking off your plate once you've decided.

FAQ

Is it normal for a contractor to ask for money before starting?

Yes. Asking for a deposit before ordering materials or scheduling a crew is standard practice across the trades. What matters is the amount: 10% to 30% is typical, and anything over 50% without a clear reason (custom equipment, extended crew commitment) should raise questions.

Can a contractor ask for 100% up front?

Some do for very small jobs (a $200 service call, for example), but for larger contracts it's widely considered a red flag. Several states, including California and Nevada, legally cap the deposit a licensed contractor can require, so 100% up front on a big job may not even be legal depending on where you work.

What's the difference between a deposit and retainage?

A deposit is paid before work starts. Retainage is the opposite: it's a percentage held back from payments during the job and released only after final completion, to protect the customer if work is left unfinished or defective.

How do I decide between a deposit and progress billing for a mid-size job?

Use job length and material spend as the test. If the job wraps in under two weeks and materials fit on one truck, a deposit plus final invoice is simpler for both sides. If it spans multiple weeks or phases, progress billing protects your cash flow better and gives the customer more visibility into what they're paying for.

References

• Custom Home: California Contractor Deposit Limits
• ContractorLicenseCA: California Contractor Deposit and Payment Rules
• QuoteChecker: How Much Is a Contractor Deposit? State-by-State Rules
• LegalClarity: How Much to Pay a Contractor Up Front
• Sweeten: What Is a Normal Deposit for a General Contractor?
• Procore: Guide to Progress Payments on Construction Projects
• ServiceTitan: Construction Payments, Tips, Methods & Best Practices
• Mastt: Progress Payments in Construction
• O'Melveny: California's New 5% Retention Cap for Private Construction Contracts