Deposits and staged payments on a long job
On a job that runs six weeks, being paid only at the end means financing somebody else's project out of your own account. Materials on the account, wages on the Friday, fuel every day, and nothing coming back until the last radiator is on the wall.
Plenty of one person businesses have failed while perfectly profitable for exactly that reason. The work was priced correctly and the money simply arrived too late to pay for the work it was funding.
A split customers accept without a conversation
The shape almost nobody argues with is a deposit, one or two stage payments, and a balance on completion.
The deposit covers what you have to buy before you start. A quarter to a third is normal, and the honest test is whether it covers the materials you are about to lay out for, not what you think you can get away with. A customer who asks why it is 30% deserves a real answer: because the units are ordered on Monday and paid for on Monday.
Stage payments are the part worth thinking about. Tie them to something the customer can see. First fix complete. Units delivered to site. Roof watertight. Not to dates.
Dates invite an argument about whose fault a delay was, and on any outdoor job that argument arrives with the first wet fortnight. A milestone does not have the problem. Either the roof is watertight or it is not, and the two of you can stand in the garden and agree which.
Say what happens if a stage is not paid
One line, written down before anybody signs: work pauses until the stage payment clears.
It does not read as aggressive. What reads as aggressive is downing tools on a Wednesday having never mentioned that this was a possibility. The line also does something useful for the customer, which is to tell them the schedule they care about depends on something they control.
The arithmetic that quietly loses money
Here is a mistake almost every spreadsheet makes, and it stays invisible until an accounts system finds it.
A job is £1,000.00, split 30 / 40 / 30. Thirty per cent is £300.00, forty is £400.00, thirty is £300.00, and the three stages sum to exactly the job. Nothing to see.
Now the job is £999.99. Thirty per cent is £299.997, which rounds to £300.00. Forty per cent is £399.996, which rounds to £400.00. The last thirty rounds to £300.00 as well. Add them up and you have invoiced £1,000.00 for a £999.99 job.
A penny. Except that the penny is why the final balance never quite reaches zero, and a customer's accounts system will flag a job that does not close out. Round the other way and you are a penny short, which is worse, because now you have written off money you never noticed earning.
The fix is to allocate rather than to round. Work out each stage as a running cumulative total of the whole job, then take each payment as the difference between this cumulative figure and the previous one. The parts always sum to the whole, because the last one is defined as whatever is left.
On a £4,999.99 job in three equal stages that gives £1,666.66, then £1,666.67, then £1,666.66. The odd penny lands somewhere specific and traceable instead of appearing from nowhere on the final invoice.
Doing it by hand, the practical version is one sentence long. Calculate the early stages however you like, and make the final one the contract total minus everything already invoiced. Never calculate the last stage as a percentage.
What a stage invoice should show
Every stage invoice still needs everything an invoice normally needs, and then the whole picture rather than its own slice: the contract total, what has been invoiced so far, what has been paid, what this invoice covers, and what will remain afterwards.
A bathroom at £6,450 split 30 / 30 / 40 runs £1,935, then £1,935, then £2,580. The second invoice should say all of it. Contract £6,450. Previously invoiced £1,935, paid in full. This invoice, first fix complete, £1,935. Remaining on completion, £2,580.
Six lines. A customer reading them knows exactly where they are and pays. A customer who receives a third invoice for £2,580 with no context cannot tell whether they are being asked for the balance or for something new, so they ask their accounts department to check, and that is another fortnight of your money sitting in their bank rather than in yours.
Where deposits get you into trouble
Two things, both worth knowing beforehand rather than afterwards.
A deposit is usually taxable at the point you take it, not at the point the work happens. If you are registered for VAT, taking £1,935 in March on a job that finishes in May generally puts the VAT on that £1,935 into the March quarter. Your own tax authority's rules are the authority here, and it is a five minute question worth asking an accountant once.
The other is that a deposit you have spent is not a cushion. It is materials. The temptation in a slow month is to treat an incoming deposit as this month's money, and then the units get ordered against next month's deposit, and you are one cancelled job away from a hole in the account. Keep it boring. The deposit buys the thing the deposit was for.
Retention, if you work for a contractor
On commercial work there is often a fourth stage nobody mentions at the start, and it is the one that catches people the first time.
Retention is a percentage of every payment that the contractor keeps back against defects. Five per cent is common. On a £6,450 job that is £322.50 held, usually released in two halves: £161.25 at practical completion, and the other £161.25 after the defects period ends, which can be twelve months later.
Two things follow. Price it in, because five per cent held for a year is five per cent of your margin sitting in somebody else's account. And diarise the release, because retention is not paid automatically; it is paid when somebody asks, and if nobody asks it stays where it is. A note in your calendar for the month after the defects period ends is worth more than any letter you will write afterwards.
Before the next long job
Take the last job you ran that lasted more than a fortnight and work out how much of your own money was tied up in it at the worst point, and for how many weeks. That figure is what a staged split buys back. It is usually larger than people expect, and it is the whole argument in one number.
To split a total by percentages into stages that add up to the penny, the staged payment calculator does the arithmetic, and the app does the same when it bills an estimate in stages.