Payment Nightmare: Should Contractors Require a Deposit Before Starting a Job?

if material is involved, I always get 50% down on jobs under $15K and a variation of 3 payments if it's more than $15k so you aren't strapped to finish the job before you starve. 

If it's just labor, I get 10-30% down to hold the schedule and commit to their project. Then 40-50% at a certain stage and remainder when complete. 

Deposits and card-on-file solve a lot of this, agreed. For the invoices that do go out net terms (recurring commercial clients, etc.), the piece I always struggled with was knowing ahead of time which ones were actually going to be a problem. I ended up building a small read-only Jobber add-on (staycovered.ca) that looks at each client's payment history and flags the invoices genuinely at risk before they're overdue, rather than after. Wasn't a professional dev before this, just used AI tools to put it together for my own business. Happy to share details if useful to anyone here.

For our business, we require an initial cleaning deposit upfront before the first appointment. That allows us to verify the payment method before we invest time and labor into the job. After that initial service, we keep the client’s card securely on file and simply charge it after each recurring cleaning.

I think the right payment policy depends on your business model. For one-time projects or first-time customers, collecting a deposit or verifying payment before starting the work can help avoid awkward situations later. It’s much easier to resolve a payment issue before the job than after you’ve already completed it.

Has anyone else changed their payment policies over the years? I’d be interested to hear what has worked well for other service businesses.

We require 3 payments on larger jobs. 30% down, 40% first day of job and the remaining 30% at completion of job. It works for us and no issues with our customers.

Do 10% non-refundable up front (if local law allows). This helps you cover the work you put in on acquisition, pricing and communication.

In my experience, anyone that has an issue with that will end up becoming a headache down the road. Quality clients pay it without thinking twice. 

Like my old man always said: "It's like an ice cream shop; you gimme the money, then I give you the ice cream cone." He's a retired general contractor, but he's always been enamored with the ice cream shop business model XD

Wow! Thank you all so much for the responses, this is great feedback! Since I own a labor only furniture assembly/light handyman business, I'll start asking for a initial deposit upfront just to make sure that the customer is able to pay once the job is completed. I'm thinking a small 10-15% upfront deposit would be good. Any thoughts on this approach?

I am an electrical contractor for our contractors we do a payment schedule of 30% down before the start of job, 50% due when the rough in inspection is done, and the last 20% done at the finial inspection.  This seems to work less stress.

Same approach here — prepaid, deposit, or card on file, no exceptions. I get paid 100% of the time and don't spend any energy chasing people down.

I used to accept cash, knock-and-pay, or send invoices afterward. It became a nightmare to collect, and I won't go back to it. A handful of people decline because of a bad past experience with card on file, and that's fine — I'm okay losing those clients. The headache of chasing payment isn't worth saving a few accounts.

We are in California, so the law is very specific on what we can collect (10% or $1,000, whichever is less), but we ALWAYS collect a deposit unless it is a small service 1-day job. Red flag if they have issues paying the deposit.

Thank you for the information. I started a landscaping company about a year ago, and asking for a deposit on materials is something I will start doing. This was helpful.