Progress Billing for Renovation Contractors: Deposits, Draws and Holdback, Explained

A six-week renovation invoiced once, at the end, means you were the bank for six weeks. You bought the cabinets, paid the electrician, covered the bin rental, and the client paid nothing until the last coat of paint dried. Progress billing fixes that. It is not complicated, but the schedule has to be agreed before the first day on site, not negotiated once your money is already in the walls.

Why one invoice at the end kills cash flow

On a $40,000 kitchen, materials and subs can easily be half the price, and most of that goes out the door in the first two weeks. If the only invoice lands on completion, you carry $20,000 of someone else's kitchen on your credit line for the whole job, plus however long the client takes to pay.

Stack two or three jobs like that and a healthy business can run out of cash while every job is profitable on paper. Progress billing does not change what you earn. It changes when the money arrives, so the client funds the job as it happens instead of you funding it for them. It also means the final bill is never a surprise, because there is no single big number at the end.

The common schedules, and when each fits

Three schedules cover almost every residential renovation. The percentages are of the contract price, and each stage is tied to a milestone the client can see, never to a calendar date.

50 / 50: deposit, then completion

Half on signing, half when the job is done. Simple to explain and track. It fits short jobs where you buy most materials up front: a bathroom refresh, a flooring job, a painting contract. On anything longer than a couple of weeks, you are back to funding the middle of the job yourself.

30 / 40 / 30: deposit, mid-project, completion

The workhorse for a kitchen, a basement or a full-floor renovation running three to eight weeks. The deposit covers early material orders, the middle draw lands when rough-ins pass or drywall is up (pick a milestone the client can see), and the last third comes on completion. Because the final stage is 30% rather than 50%, the client's "wait until I've checked everything" instinct costs you far less. If a job has one large purchase, such as custom cabinetry, add a stage for exactly that: "40% when cabinetry is ordered."

10 / 40 / 50: small deposit, big draws

A small deposit to secure the dates, a large draw once the expensive materials are ordered, and the balance on completion. This suits clients who are wary of paying a lot to a contractor they have just met. It puts more weight on the end, so use it when you are confident of the client and the timeline.

How to word a draw so the client agrees up front

The biggest mistake is sending the schedule in an email after the estimate has been accepted. By then the client has agreed to a price, not a payment plan, and every draw feels like a new request. The schedule belongs on the estimate itself, above the signature line, so agreeing to the price is agreeing to the schedule.

Each stage needs three things: a label, a share, and a trigger the client cannot argue with. For example:

• Deposit, 30%: due on acceptance of this estimate, before materials are ordered.
• Mid-project, 40%: due when rough plumbing and electrical pass inspection.
• Completion, 30%: due on substantial completion, before the final walkthrough deficiencies are addressed.

Notice the last one. "Substantial completion" means the kitchen works, not that every touch-up is done. If the last payment depends on a deficiency list, a stuck cabinet handle can hold your last $12,000 for a month. Fix deficiencies promptly, but do not make them a condition of payment for finished work.

Add a line stating what happens if a stage is not paid: work pauses until it is, and the schedule moves back by the same number of days. Clients rarely object to that in advance. They object a lot when it is announced mid-job.

Holdback and retainage, in plain terms

Holdback (Canada) and retainage (US) are the same idea: a percentage of each payment that the payer keeps back until the job is done and any lien period has run out. It protects the person paying against subs and suppliers who were not paid and file a lien on the property.

In Ontario, the Construction Act requires the party paying under a construction contract to hold back 10% of the value of the work and materials supplied until the lien period expires. That is the payer's obligation, not the contractor's choice, and it applies whether the payer is a homeowner or a general contractor paying a sub. Other provinces have their own lien and holdback rules, and in the US retainage varies by state and is far more common on commercial and public work than on a homeowner's kitchen. None of this is legal advice: check the rules where you work, and if you are a sub on a larger project, expect holdback and price for it.

For your invoices, holdback means two things. Every stage invoice shows the holdback deducted, so the client pays 90% of the stage rather than 100%. And there is one extra invoice at the end, the holdback release, for everything retained. Plan for that last invoice or the money gets forgotten.

What a good progress invoice shows

A progress invoice is not a regular invoice with a smaller number on it. The client needs to see where this payment sits in the whole job, or they will phone to ask. Every progress invoice should show:

• Contract value: the agreed price, including any approved change orders.
• Previously invoiced: the total of every earlier stage.
• This stage: the label, the percentage, and the amount, with holdback shown if there is one.
• Remaining: what is still to be invoiced after this one.
• Its own due date and its own way to pay. A draw with no due date is a suggestion.

Tax goes on each stage in the normal way. If you have a pay-by-card button on the invoice, put it on every stage, not only the last one. The mid-project draw is exactly the payment a client will make from their phone on a Tuesday night if you make it easy.

How this works in Estiquik

The payment schedule lives on the estimate. Under Payment schedule, add your stages and their share, or press a preset (50 / 50, 30 / 40 / 30, 10 / 40 / 50), and optionally set a holdback percentage. The schedule prints on the client's copy, so when they approve or e-sign the estimate, they are agreeing to the payment plan as well as the price.

Each stage then becomes its own invoice: press Invoice this stage, or Create invoice and Estiquik picks the next unbilled stage. The invoice shows the contract value, what was invoiced before, this stage's share less any holdback, and what remains, with its own due date and, with Stripe connected, its own pay link. When a holdback is set, the last invoice is the holdback release. On Pro and Crew, overdue stages get the same automatic reminder emails as any other invoice, and job costing and QuickBooks count each stage as it is billed. Progress invoicing itself is on every plan, including Starter.

You can see a job billed in three stages in the live demo without creating an account.

Questions contractors ask

What if the client will not pay a stage on time?

That is what the pause clause is for. Stop work politely, point to the schedule they signed, and resume when the stage is paid. It is far easier to hold that line when the rule was written down before the job started.

Does holdback apply to a homeowner's kitchen?

It depends on where you are and who is paying. In Ontario the statutory holdback applies to the payer's obligations on construction contracts generally, though many homeowners have never heard of it. If you are working for a general contractor, expect it. Check your province or state, and ask a lawyer if a job is large.