Most late payments are set up before the job starts. The deposit was too small to matter, the terms were never written down, the invoice went out a week after the work, and nobody followed up until the money was already a month old. Each of those is a choice you can make differently on the next job.
Deposits: size them from the job, not from habit
A deposit does two things. It pays for what you have to spend before the client has seen any work, and it shows the client is committed. So the size of the deposit should follow two facts about the job: how much material you buy up front, and how long you carry the job before the next payment.
Small, quick jobs
A same day repair where the parts are on the truck carries almost no risk before you start. A deposit adds friction and little protection. Collect in full when the work is done.
Jobs with special order material
When you order equipment or material for one client that you cannot easily return or use elsewhere, the deposit should cover that purchase. If the client walks away, you are not left holding it.
Example: a job needs $3,200 of special order material and $2,400 of labor, $5,600 in total. A deposit that covers the material is $3,200, about 57 percent of the job. A deposit of 25 percent, $1,400, leaves you $1,800 out of pocket on material alone until the final invoice is paid.
Long jobs
On work that runs for weeks, one deposit up front and one payment at the end means you are financing the job in between. Break it into progress payments tied to stages a client can see: rough in done, inspection passed, fixtures set.
Example: a $24,000 job running four weeks. Instead of a deposit and a final payment, you might bill 20 percent to book ($4,800), 40 percent at rough in ($9,600), 30 percent when fixtures are set ($7,200) and 10 percent on completion ($2,400). The most you are ever owed for finished work is one stage, not the whole job.
Check your state before you set a number
Some states limit what you can take up front on residential work. California is a clear example. On a home improvement contract, Business and Professions Code section 7159.5 says the down payment cannot exceed $1,000 or 10 percent of the contract amount, whichever is less. The state licensing board’s home improvement contract page adds that there are no exceptions for special order materials. The statute exempts contractors who carry certain qualifying bonds.
On the $5,600 example above, that California limit would be $560, because 10 percent is less than $1,000. The material has to be carried some other way, usually by progress payments that the same law also regulates. Other states have their own rules, and Canadian provinces have consumer protection laws of their own. Look up yours before you print a deposit percentage on a quote.
Payment terms: residential and commercial are different
| Residential client | Commercial client | |
|---|---|---|
| Usual terms | Due on receipt | Net 15 or net 30 |
| Who pays | The person who let you in | An accounts payable process |
| What slows payment | Forgetting, disputes, cash flow | Missing paperwork, approval steps |
| What you need | A clear total and an easy way to pay | A purchase order number, the right billing contact, their required format |
Residential: use “due on receipt” and mean it. The homeowner is standing there, the work is fresh, and they can pay by card, bank transfer, check or cash before you leave. Net 30 on a homeowner turns a finished job into a chore they get to later.
Commercial: a property manager or a business usually cannot pay on the spot, because the invoice goes through someone else. Agree the terms before the job, write them on the quote and the invoice, and ask what they need to approve payment. An invoice without the purchase order number can sit unpaid for a month without anyone noticing it is stuck.
Whatever the terms, put the actual due date on the invoice, not just “net 30.” A date is harder to misread.
Invoice on site, the same day
The longer the gap between the work and the invoice, the weaker your claim feels to the client. On the day of the job, the client remembers the leak and the fix. Two weeks later they only remember the price.
Finish the invoice before you pull out of the driveway, walk the client through it, and take the payment then if the terms are due on receipt. Include the photos or notes that show what was done. If the client has a question, you answer it in person rather than in an email thread next week.
Late fees: only what the law and your agreement allow
A late fee can make an invoice worth paying first. But whether you can charge one, and how much, is set by the law of the state or province where the work was done, and the rules differ. Some limits apply to interest, some to flat fees, and consumer work often has stricter rules than commercial work.
Two things apply everywhere:
- The late fee has to be in the agreement before the work starts. Adding one to an invoice after the fact is not something the client agreed to, and it gives them a reason to dispute the whole bill.
- State it precisely. When it applies, how it is calculated and how often. “Late fees may apply” is not a term.
Look up the rule for your state or province, or ask a lawyer to check your standard terms once. Then use the same wording on every quote.
Following up on an overdue invoice
Follow up in a fixed order, on a fixed schedule, with the same polite tone until the last step. The early messages should assume an honest mistake, because that keeps the door open for the client to simply pay.
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Before it is due (net terms only). A short note a few days ahead.
“Hi Dana, a reminder that invoice 1042 for $1,860 is due on October 15. You can pay by card or bank transfer from the link in the invoice. Thanks.”
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The day after it is due. Assume it was missed, not refused.
“Hi Dana, invoice 1042 for $1,860 was due yesterday. I have attached it again in case it got buried. Let me know if anything on it needs a second look.”
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About a week later. Ask a direct question.
“Hi Dana, invoice 1042 for $1,860 is now a week past due. Can you tell me when I should expect payment? If something about the work is holding it up, I would like to sort it out.”
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About two weeks later. Call. A phone call gets an answer an email does not. If they cannot pay in full, agree a payment plan with dates and confirm it in writing the same day.
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About a month later. A formal final notice. In writing, with the amount, the original due date, any late fee your agreement allows, and the date by which you will take the next step.
“Invoice 1042 for $1,860 was due on October 15 and remains unpaid. If payment is not received by November 20, I will pursue collection of the balance, which may include a lien on the property or a claim in small claims court.”
Only write a next step you are actually prepared to take, and check that any deadline for it has not already passed.
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The next step. A collection agency, a small claims filing or a lien, depending on the amount and your rights. That is the point where the lien rules below matter, and often where a short consultation with a lawyer pays for itself.
Keep a record of every reminder: date, channel and what was said. If it ends up in front of a judge, that record is your case.
Mechanics liens and construction liens: check your own rules early
A lien lets someone who improved a property and was not paid make a claim against the property itself. Every US state has some form of it, usually called a mechanics lien or construction lien. Canadian provinces have them too under other names. Ontario uses the Construction Act, British Columbia the Builders Lien Act, and in Quebec the Civil Code provides a legal hypothec for people who took part in construction or renovation.
What catches small contractors out is that the lien right is often won or lost at the start of the job, not the end. Many places require a preliminary notice early, with strict deadlines and delivery rules, and a missed notice can mean no lien at all later.
California shows how specific this gets. The state licensing board’s lien page says a preliminary notice is required from subcontractors and suppliers who may need to file a lien, and not from laborers or the direct contractor. It can be delivered before the work starts and up to 20 days after, and a later notice only covers work done from 20 days before it was delivered. So the same electrician can need a notice when working under a general contractor and not need one when hired directly by the homeowner.
Other states and provinces set different deadlines, different forms and different people who must receive the notice. Look up the rules for the place where the job is, before the job starts, and put the notice deadline on the calendar the day you sign.
If you want reminders to go out on a schedule without keeping a spreadsheet, Foldrule sends automated invoice reminders and takes deposits on approved quotes.
