BUSINESS
How to Build a Construction Payment Schedule
Contractor method for building a payment schedule where deposit, milestones and final sum to 100%.
A payment schedule protects cash flow and sets expectations. Deposit, milestones and the final payment must add up to exactly 100% of the contract.
THE SHORT ANSWER
How do you build a construction payment schedule?
Set a deposit, one or more milestones and let the final payment be whatever remains so the percentages total 100%. A 10% deposit, 40% and 30% milestones on $250,000 leave a 20% final payment of $50,000.
Set the deposit
A deposit at signing covers mobilization and materials. Keep it high enough to protect the early outlay but defensible to the client.
Add milestones
Milestones release cash as defined stages complete. Each should reflect a real amount of work, not an arbitrary split.
- Deposit at signing
- Milestone 1
- Milestone 2
- Final payment
Let the final balance the schedule
The final payment is whatever remains after the deposit and milestones. This forces the percentages to total 100%.
Validate the totals
10% + 40% + 30% + 20% = 100%. On $250,000 that is $25,000, $100,000, $75,000 and a $50,000 final. Use the Construction Payment Schedule Calculator.