Deposits: How Much to Ask For and How to Say It
A deposit protects both sides. The question is how much, when the rest comes, and how to say it so the customer says yes.
What a deposit is for
Ask for a deposit that covers what you buy before the job starts, and say it on the quote. That is the short version. The rest is how much, and when the balance is due.
A deposit does 2 things:
- It covers the material you buy up front. If they cancel, you are not left holding a water heater or 40 squares of shingles.
- It turns a maybe into a booking. A customer who has paid something has decided.
It is not a profit line. It is not a way to get paid early for work you have not done. Customers know the difference, and so do the state agencies that regulate home improvement contracts.
How much to ask for
A simple guide, by job size:
- Service work under a few hundred dollars: no deposit. The visit is the commitment.
- A repair with a big part on order: the cost of the part, or close to it, when they book.
- An install: enough to cover the material and a day of labor. When the job is mostly equipment, like a furnace or a water heater, that is often a third to half of it. Ask less when the job is mostly labor.
- A large project, like a roof, a rewire or a landscaping build: a deposit at signing. Then payments on material delivery and at set stages, with the balance at the end.
Some states cap deposits on home improvement contracts. California is the best-known. There, the cap is a small fixed amount or a small share of the contract, whichever is less.
Check your state before you print a percentage on the quote. A milestone schedule usually satisfies both the law and your cash flow.
Milestones beat one big deposit
For anything over a couple of days of work, use a payment schedule, not one big deposit. It tells the customer exactly what triggers each payment. It also keeps your risk to one stage of work at a time.
A simple 3-part schedule:
- A deposit when they accept, to cover material.
- A payment when the material is on site, or a set stage is done.
- The balance when the job is done.
Put the trigger for each payment on the quote, not just the amount. "Due when the equipment is delivered" is a trigger. "Second payment" is an argument.
How to say it on the quote
The deposit goes on the quote, before they accept, in one line. Say what it is, when it is due, and what it covers.
For example: "A deposit of [amount] books the job and covers the equipment. The balance of [amount] is due when the job is done."
Do not apologize for it, and do not negotiate it on the doorstep. A customer who reads a clear deposit line on the quote pays it. A customer who first hears about it when you ask for the check does not.
Refunds and cancellations
Say on the quote what happens if the customer cancels:
- Material already ordered is charged at cost.
- A restocking fee applies where the supplier charges one.
- The rest is refunded.
Written once, it is a policy. Made up at the kitchen table, it is a dispute.
Fair questions
- When should the deposit be due?
- When they accept, on the quote itself, so saying yes and booking happen together. A deposit asked for days later is a second decision the customer has to make.
- What if a customer refuses to pay a deposit?
- For service work, that is fine, because there is none. For an install with material on order, a refusal is a warning sign. You are being asked to carry all the risk. Offer the milestone schedule. If the answer is still no, let the job go.
- Does a deposit change my sales tax or income timing?
- That depends on your state and how you keep your books. Ask your bookkeeper once and write down the answer. Keeping deposits as their own payment line on each invoice makes the question easy to answer later.