Why staged payments exist at all
Staged payments exist because the contractor funds materials and labour before the customer receives finished value. A payment schedule spreads that exposure across the job instead of concentrating it at the end.
They also create checkpoints. If a customer stops paying at milestone two, you learn it after one phase of exposure rather than after the whole job.
How to define a milestone that holds up
- Tie it to an event with evidence: materials delivered, tear-off complete, rough-in inspected, system commissioned.
- Write the amount or percentage next to the event, not separately.
- State how many days after the event the payment is due.
- Say what happens if the customer delays the milestone — access, selections, permits.
- Avoid milestones only you can judge; "substantially complete" is a dispute waiting to happen.
Keeping the remaining balance honest
The number that matters mid-job is the remaining balance: approved total, plus approved change orders, minus everything applied so far. If that figure is assembled by hand from a folder of emails, it will be wrong at exactly the wrong moment.
Applied payments should be records linked to the job, so the balance is derived. When a customer asks "what do I still owe?", the answer should take seconds and be the same answer everyone in the office gives.
Change orders inside a payment schedule
- Approve the change order before the work, with its own amount.
- Decide immediately whether it bills now, at the next milestone, or at final.
- Show it as its own line on the invoice so the customer can see what changed.
- Never fold unapproved extras into a final invoice and hope they pass.
- Update the remaining balance the moment the change order is approved.