How do you set up payment plans?
Payment plans let you split a job's total cost into installments instead of one lump sum. This keeps cash flowing during longer projects and makes the invoice less painful for customers. Here's how to set them up and actually collect.
Decide on your payment schedule upfront
Before you send an invoice, nail down the payment terms. Most contractors use one of three structures. Deposit plus completion: 50% due to start work, 50% on final walkthrough. This protects you from material costs and covers your risk if the job stalls. Thirds: 33% deposit, 33% at the halfway point, 33% on completion. This spreads risk evenly and feels fair to homeowners doing a $15,000 roof. Progress billing: invoice weekly or at each phase. This works for longer jobs like renovations where you need cash to buy materials as you go. State your terms clearly on every invoice. Don't assume the customer remembers what you discussed on the phone.
Make digital payments the default option
You'll get paid faster when customers can tap a card or click a link instead of writing a check. Offer ACH transfers, credit cards, and digital wallets—this covers 95% of people. Credit card processing costs you 2-3%, but you get paid in 1-2 business days instead of waiting for a check to clear. For a $5,000 invoice, that's $100-150 in fees but cash in hand by Tuesday. If a customer chooses to mail a check, that's their choice—but don't make it convenient. Digital payment should be the path of least resistance. When you invoice, include a clickable payment link. If you're sending invoices manually, services like Square or Stripe let you generate one in 30 seconds.
Send reminders before each payment is due
The most common reason contractors don't get paid on time isn't that customers are broke—it's that they forget. Send a friendly reminder 3-5 days before each installment is due. A simple text works: 'Hi John, second payment of $3,500 is due on Friday. You can pay here: [link].' That beats chasing someone down two weeks later. If you're doing this with multiple jobs, you'll lose track. A CRM tracks all your due dates and can automate reminders so you don't have to remember who owes what. Schedule these reminders when you set up the job, not when you're stressed about cash flow.
Follow state laws on deposits and retainage
Some states cap how much you can collect upfront—usually 10% of the total contract value or a specific dollar amount. A few states require that deposits be held in a separate account. If you're doing commercial work, retainage might apply: the client holds back 5-10% until 30-45 days after project completion for quality assurance. Ignore these rules and you lose the right to collect, or worse, face penalties. Check your state's construction licensing board website for requirements. When you set payment terms, build these constraints in. This protects both you and the customer.
Bottom line
Split invoices into 2-3 installments tied to project phases, make digital payments the easiest option, and send reminders before each one is due. You'll see cash faster and fewer payment headaches.