Deposits and milestone billing: stop funding your clients' projects

Picture a six-week project where you buy the materials in week one, pay your crew every Friday and send one invoice at the end. For six weeks, plus however long the client takes to pay, you are financing their project out of your own account. Do two of those at once and a single slow payer can leave you short on payroll.

Deposits and milestone billing fix this by matching the money to the work. The client pays a share up front, then pays for each stage as it is reached. Done well, clients like it too: nobody is asked for a large sum on trust, and every payment corresponds to something they can see.

Deposit, milestones, progress: what each one means

The words are used loosely, so it is worth being precise with your clients.

Most small service businesses combine the first two: a deposit to start, then a payment at each milestone, with the balance on completion.

How much deposit to ask for

There is no universal right number, and the rules on deposits differ between countries and trades, so check what applies where you work. A sensible way to set yours:

1. Cover your early costs. At a minimum, the deposit should pay for anything you must buy or commit to before you can start: materials, hire, a booked subcontractor.
2. Reflect the risk. A new client, a custom order that cannot be resold, or a date you are turning other work away for all justify a larger deposit.
3. Keep it proportionate. A deposit so large it feels like payment in full makes clients hesitate, and a hesitant client takes longer to say yes.

State plainly on the quote what the deposit covers and that it is credited against the final total. "A deposit of $3,000 secures your start date and covers materials; it comes off the final invoice" is clearer than a percentage alone.

Choosing the milestones

Good milestones share three qualities.

• They are visible. The client can see that the stage is done: the walls are up, the design is signed off, the kitchen is fitted.
• They are yours to reach. Avoid milestones that depend on the client, like "when the client approves the tiles", unless you also set a date after which it bills anyway.
• They are evenly spaced in cost. If most of the cost falls in stage two, most of the payment should too.

For a typical renovation that might be: deposit, first fix complete, second fix complete, handover. For a design studio: deposit, concept approval, final drawings, delivery. For an agency: kickoff, first draft, final delivery. Write the stages and their shares into the quote, so accepting the quote means accepting the schedule.

Wording that clients accept

Clients push back on payment schedules when they feel exposed, not when they are asked to pay. Reassure them in the same breath:

• "You will never pay for work that is not done: each payment follows a stage you can see."
• "The deposit is credited in full against the final total."
• "Each invoice lists exactly which stage it covers."

If you share progress with the client as you go, through photos or a progress page, each invoice arrives already expected. Nobody is surprised by a bill for a stage they watched being finished.

When the scope changes

Projects change, and the payment schedule has to change with them, or the last invoice ends up carrying every surprise. Handle it the same way every time:

1. Put the change in writing as a revised quote, with its price.
2. Get it accepted before doing the work.
3. Add it to the next milestone invoice as its own line, or bill it as its own stage if it is large.

Keeping every version of the quote means you can always show what changed, when, and what it did to the total. That record ends most disputes before they start.

What to do when a stage payment is late

Stop, politely. The advantage of milestone billing is that you have a natural pause point before you have given away the whole job. A simple, fair policy is that work on the next stage begins when the previous stage is paid, stated on the quote from the start. You will rarely need to use it; the fact that it exists is usually enough.

Example schedules by trade

Every business sets its own shares, but seeing a few complete schedules makes it easier to design yours. These are illustrations, not rules.

Notice what they share: the client always pays before the business has spent much of its own money on the next stage, and the final payment is due before the last visit, not weeks after it.

Common mistakes to avoid

• Too many milestones. Ten small invoices for a six-week job create admin for both of you. Three to five stages suit most projects.
• A tiny final payment with a big final stage. If the last stage is the handover and snag list, and it carries only a token amount, some clients lose the urgency to sign off.
• Vague stage names. "Phase two" invites debate about whether it is finished. "Cabinets installed and doors hung" does not.
• Billing late because the stage "nearly" finished. Agree what finished means up front, and bill when it is.
• Forgetting the deposit on the final invoice. Always show the deposit and every earlier payment as credits, so the client sees the running total.

Keeping track without a spreadsheet

The weakness of milestone billing is bookkeeping. With five jobs in progress, each at a different stage, it is easy to lose track of which stage was billed and which was paid. This is where job software earns its keep.

In grewray, the stages and their shares are part of the job, so reaching a milestone can raise its invoice for you to check and send. Each invoice carries a Pay now link, the job shows what has been billed and paid against it, and clients can follow progress on their own page without a password. Milestone and progress billing are included on the Growth and Business plans.

See invoicing and payments and jobs in detail, or put your numbers through the break-even calculator to see how many jobs a month your fixed costs need.