A modest deposit and a sensible progress-payment schedule protect your cash flow without scaring off a good client. The published industry norm for residential renovation in Canada is a deposit of 10 to 15 percent at signing, enough to schedule materials and lock in the work, and homeowners are widely advised never to pay more than 30 percent up front and never in cash. So if you ask for a deposit, keep it proportionate, give a receipt, and tie the rest of the money to milestones rather than demanding it all early. A tradesperson who asks for everything up front looks like the thing every homeowner has been warned about.
Why a deposit is reasonable, and how much
A deposit does real work: it lets you order materials, books the client into your schedule, and shows the client is committed. For residential renovation, 10 to 15 percent at signing is the published norm and is usually enough. You rarely need more than a small fraction up front. The exception is genuine custom or special-order materials, where a materials-only deposit is fair, but itemise it and give the client a receipt so they can see exactly what they paid for.
Keep these principles whatever your trade:
- Keep it proportionate. A deposit far above 15 percent on an ordinary job is a red flag to homeowners and a reason to lose the work.
- Always give a receipt. No paper trail means no recourse for either side, and it is the cash-only operator who skips this.
- Never take a deposit in cash. Homeowners are warned against paying cash deposits precisely because there is no record. A traceable payment protects you too.
- Put it in the written quote. The deposit, the schedule and the final balance all belong in the quote the client signs. See Quoting to Win Without Racing to the Bottom.
Progress payments for bigger jobs
On a job too large to fund from a single deposit, stage the payments. Tie each payment to a visible milestone, not to a calendar date, so the client always sees value for the money released and you are never far out of pocket. A simple structure for a mid-size renovation might be:
- A deposit at signing (within the 10 to 15 percent norm) to order materials and schedule
- A payment at a clear, inspectable stage (for example, rough-in complete, or materials on site and first phase done)
- A further stage payment at substantial completion of the main work
- A final balance on completion, once the client is satisfied and any snags are cleared
The principle is that the money you hold should always be roughly in step with the work still to do. If you are paid well ahead of the work, the client loses leverage and you lose the discipline that protects your reputation; if you are paid well behind, you are financing the client.
The flip side: the holdback the owner can keep from you
Deposits flow one way, but money can be held back the other way too. Most provinces require, or allow, the person paying you to retain a statutory holdback, commonly 10 percent (7.5 percent in Manitoba; 15 percent over $15,000 or 20 percent at or below $15,000 in Prince Edward Island), as a protected fund for the trades below until the lien period passes. That is not the client being difficult; it is the law. Build your cash flow expecting that the last slice of each payment may be held back and released only after the lien window closes. The detail is in Pricing a Job and Understanding Markup and your province's construction-lien rules.
A worked illustration
A $20,000 bathroom renovation. All figures are illustrative.
- Deposit at signing, 12 percent: $2,400, by e-transfer with a receipt, used to order tile and fixtures
- Stage payment when rough-in is done and inspected: $7,000
- Stage payment at substantial completion of tiling and fit-out: $7,000
- Final balance on the client's sign-off, after snags: $3,600
At every point the client has paid roughly for what is done, and you are never funding the whole job out of your own pocket. The plus-tax total and the schedule are written into the signed quote, so there are no surprises.
Common mistakes
- Asking for too much up front. A deposit above the 10 to 15 percent norm reads as a warning sign and loses good clients.
- Taking cash with no receipt. It protects no one and signals the underground economy.
- Payments tied to dates, not milestones. Pay-by-calendar invites disputes; pay-by-milestone keeps money and work in step.
- Forgetting the holdback. Plan your cash flow knowing the final slice of each payment can be lawfully held back.
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