What Is the 50/40/10 Payment Schedule?
The 50/40/10 payment schedule splits a job's total price into three payments:
| Payment | % | When Due | Purpose |
|---|---|---|---|
| Deposit | 50% | Before work starts | Cover materials, lock in the job |
| Progress | 40% | Mid-job or milestone | Cover ongoing labor and materials |
| Final | 10% | On completion | Completion payment / punch list |
The 50% deposit means you're never using your own money to fund a customer's project. The 40% midpoint keeps cash flowing as labor costs accumulate. The 10% holdback gives the customer leverage to ensure you complete the job — and gives you a final payment to collect when you're done.
Why Contractors Use a 50% Deposit
A 50% deposit serves several important functions:
- • Covers material costs upfront. For most jobs, materials are 30–50% of the total. The deposit ensures you're not buying materials out of pocket.
- • Filters out unserious customers. Customers who won't pay a deposit are often the same ones who dispute final invoices.
- • Locks in the job. Once money has changed hands, customers are far less likely to cancel or delay.
- • Protects against customer non-payment. If a customer disappears, you've at least covered your material costs and a portion of labor.
Variations on the 50/40/10 Structure
50/40/10 is the most common split, but the right structure depends on your trade and job type. Common variations:
- 33/33/33 — Equal thirds: deposit, midpoint, completion. Common for medium-duration projects with steady material and labor costs throughout.
- 50/50 — Deposit and final. Used for smaller jobs where there's only one major milestone.
- 25/25/25/25 — Four equal stages. Used for large, long-duration projects (roofing, large remodels) with multiple defined phases.
- Custom phase billing — Milestone names tied to job phases: Foundation, Framing, Rough-In, Finishes, Completion. Each phase invoiced when completed.
How to Present a Payment Schedule to Customers
Payment schedules should always be included in your written estimate or contract — never verbal. Best practices:
- • State the payment schedule explicitly in the estimate: "50% ($X,XXX) due before work begins. 40% ($X,XXX) due upon [milestone]. Final 10% ($XXX) due upon completion."
- • Specify the milestone trigger clearly (e.g., "upon delivery of materials" or "upon rough-in inspection passing").
- • State accepted payment methods and any late payment terms.
- • Send each phase invoice as soon as the milestone is reached — don't wait.
What Happens If a Customer Refuses a Deposit?
Experienced contractors know: a customer who refuses a reasonable deposit is a red flag. Some responses to pushback:
- • Explain that the deposit covers material costs and job scheduling. You're not profiting from the deposit.
- • Offer to reduce the deposit to 33% or 25% on very small jobs, but hold firm on some amount.
- • If a customer won't pay any deposit, ask why. Their answer tells you a lot about whether they're a customer you want.
Set Up Progress Billing in CogniFlow Books
CogniFlow Books supports fully customizable payment schedules on every estimate and invoice. Set 50/40/10, custom milestone names, custom percentages — and generate each phase invoice automatically when it's time to collect.
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