Cash flow problems on remodels usually start in the contract, with a payment schedule that doesn't match how the money goes out. Here's a simple milestone format and the texts that keep draws on time.
Not legal advice.This article is general business information. Contract, home improvement, lien and billing rules vary by state and sometimes by city. Have a local construction attorney review your contract, your change order form and any clause language before you rely on them.
01Why the payment schedule matters
A payment schedule (also called a draw schedule) spells out how much the client pays and when. A clear schedule tied to finished work keeps your cash ahead of your costs, gives the client a reason to trust each request, and stops the "can we pay at the end?" conversation before it starts.
Deposit limits, progress payment rules and required contract wording vary by state, and some states cap the down payment on home improvement contracts. Check your state's rules and have a local construction attorney review your schedule before you use it.
02Four rules for a schedule that gets paid
Tie each draw to a milestone the client can see. "Drywall hung and taped" beats "week 4."
Keep draws ahead of, or equal to, your spend. Look at your estimate and make sure each payment covers the costs you'll have before the next one.
Hold a final payment for completion. The last draw is due at substantial completion and punch list sign-off, which gives both sides a clear finish line.
Bill change orders separately. Approved changes go on the next draw as their own line, never folded into a milestone. See how to bill for change orders.
03The payment schedule template
The percentages below are an example only, not a recommendation. Set your own based on your costs, your contract and your state's rules.
Project: [ ] Client: [ ] Contract price: $[ ]
# | Milestone (work complete) | % (example) | Amount | Due
1 | Deposit at signing | [example 10%] | $[ ] | At signing
2 | Demo complete, rough framing done | [example 25%] | $[ ] | On completion
3 | Rough plumbing/electrical inspected | [example 25%] | $[ ] | On passed inspection
4 | Drywall, tile, cabinets installed | [example 25%] | $[ ] | On completion
5 | Substantial completion + punch list | [example 15%] | $[ ] | On sign-off
Approved change orders: billed on the next draw as separate lines (CO #, description, amount).
Payment terms: due within [ ] days of invoice. Accepted methods: [ ].
Put the schedule in the contract, and send the client a copy with each invoice showing what's been paid and what's next.
04What each draw invoice should show
The milestone reached, with a photo or two
This draw's amount, plus any approved change orders as separate lines
Total contract (original + approved changes), paid to date, and balance remaining
The next milestone and its expected date
05Payment reminder texts
Most late payments are forgotten payments. A short, friendly reminder fixes most of them. Fill in the brackets and read it once before sending:
Hi [client], quick heads up: we hit [milestone] today (photos attached). Draw #[ ] for $[ ] is on its way to your email, due [date]. Next up is [next milestone]. Thanks!
Hi [client], friendly reminder that draw #[ ] for $[ ] was due [date]. Can you let me know when it's on the way? Happy to resend the invoice.
Late fees and stop-work rights depend on your contract and state law. Ask your attorney before you put either in writing.
06AI prompts for the paperwork
Here is my estimate summary by phase and my contract price of $[ ]. Draft a 5-milestone payment schedule where each draw is tied to visible completed work. Show each milestone, a percentage and the dollar amount. Do not go below my costs to date at any milestone. Flag anything I should check with my attorney.
[paste estimate summary]
Write a short, friendly draw invoice email for [client]. Milestone reached: [ ]. Draw amount: $[ ]. Approved change orders on this draw: [list]. Paid to date: $[ ]. Balance remaining: $[ ]. Next milestone: [ ].
Check every number yourself before anything goes out.
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07FAQ
How big should the deposit be?
It depends on your costs and your state. Some states limit home improvement deposits. Check your state's rules and have your attorney review the number.
What if the client wants to pay at the end?
Explain that each draw pays for work that's already done and materials already bought. A schedule tied to visible milestones makes that easy to accept.
Where does the final payment fit with the punch list?
Tie it to substantial completion and punch list sign-off. See the punch list template.
Get paid on time. Bill every change.
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