Stay on track of your project’s income and expenses by downloading our free construction payment schedule template. Then read on to discover how digital software programs can streamline your business processes efficiently and effectively, saving you time and money in the long-term. 

What is a payment schedule for construction?

On most construction projects, the total fee for labor and materials is split into staggered payments throughout the life cycle of the project to ensure the work continues until completion. This timeline of payments is structured by a construction payment schedule, ensuring all parties know when each payment is due. This not only allows the homeowner to budget to ensure they can afford the project, it also allows the contractor to efficiently manage outgoing payments to subcontractors and vendors to keep the project running. 

A contractor can also track their outgoing payments on what is known as a draw schedule, allowing them to calculate their income throughout the project.

Why are construction payment schedules important?

A construction payment schedule can have a positive impact on a construction pro’s bottom line, such as:

• Ensuring consistent cash flow - With regular scheduled payments, a construction pro knows exactly when they can pay subcontractors, suppliers and themselves, without having to wait until the end of the project to settle bills or make a profit.  
• Preventing disputes  - When opting for a progress payment schedule (more details below), the client and contractor will be forced to regularly discuss the progress of the project, allowing for any issues to be raised during the work and not at the end when it is often too late, such as the project exceeding the agreed budget. These progress pauses allow for reflection and for appropriate changes to be made, avoiding disputes arising at the end. 
• Allowing for work flexibility  - By billing as you go, a project has the flexibility to be halted should any payment issues or supply delays occur. For example, if a client has financial difficulties paying for the project, the schedule will highlight missing payments and allow the contractor to pause the project until the client can resume payments.
• Keeping a project on track  - Thanks to a clear and transparent payment schedule, a contractor can have an overall view of the project at all times, knowing when money is available for ordering supplies and hiring extra subcontractors to keep the project moving forward.

What elements should be included in a construction payment schedule template?

As well as stating when payments should be made, a construction progress payment schedule template should include the following elements listed below, in order to make anticipated payments quick and easy to process on both sides:

• Your construction company name and contact info - Make your payment schedule easy for clients and vendors to identify by clearly stating your company’s details at the top of each page. It's also important the client can contact you easily to discuss any problems with payments.
• Client or project name and contact info  - If you have several projects on at the same time, ensure each payment schedule is clearly labeled for the project it corresponds to so there is no confusion.
• Description of work - Describe the scope of the work that is to be carried out so that everyone is on the same page.
• Amount of payment and due date - State the amount that is to be paid at that installment and the date it is expected by. 
• Actual amount paid and payment date - Add the amount and date the payment was deposited. 
• Payment method - Offer the client or vendor simple ways of transferring the money, including bank details if necessary. Also include notes or payment terms, including any fees for late payments. 

Common types of construction payment schedules

The type of payment schedule you create will depend on the billing method and contract you have with your client. For example, if you have a fixed-price contract for a well-defined project, then requesting a payment every two or four weeks will keep it simply structured, while a time and materials contract requiring payment for materials and labor costs can offer more flexibility around billing. 

Here’s a deeper dive in to the common types of construction payment schedules you can adopt:

• Deposit + final payment schedule - This is ideal for smaller projects without a huge contract value. The deposit should be enough to cover the materials and supplies to begin the project, while the final payment acts as an incentive to complete the project, and should cover the labor costs and profit. For example, if the cost of installing patio doors is around $5,000 for labor and materials, then a 50% deposit would be sufficient to cover the cost of the doors, while the final payment would wrap up the time spent doing the work. 
• Progress payment schedule - These payments are made while the project is ongoing and correspond to the portion of work that is completed. The main advantage of progress payment schedules is that they provide regular cash flow, as well as allowing the client and contractor to check the subcontractors work to ensure its satisfactory before payment. This also resolves disputes before the project is completed. There are three types of progress payment schedules depending on the size and scope of the project:
• Time-based payment schedule - This type of schedule breaks up the total value of the project into equal amounts spread over set intervals, usually monthly. They make payment amounts clear and easy to follow, however, they sometimes need adjusting if change orders occur. 
• Milestone-based payment schedule - When the project hits certain milestones, such as foundations laid or new wiring system installed, then payment can be requested once significant parts of the project are completed. This type of schedule is ideal for big house renovations that involve many different elements, breaking the project up into manageable chunks. 
• Completion-based payment schedule - This type of schedule requires payment at certain completion percentages, such as every 20% of the project’s completion. However, disputes can occur when determining these values, and only really works if the project has a clearly defined schedule of what each completion value entails. 
• Retainage schedule - A retainage schedule is when a portion of the contract value is set aside by the client to make sure the project is completed on time. The amount is usually a small percentage of each progress payment. Choosing this type of payment schedule instills reassurance in the client that the construction company is confident the job will be completed to high industry standards. 

Choosing the right construction progress payment schedule template will depend on the size of your company and the projects you take on. Despite progress payment schedules taking longer to put together than a single final payment schedule, for smaller businesses that don’t have a huge cash reserves, progress payments ensure income continues to flow and avoids the need to seek financial assistance. Billing-on-the-go also protects contractors from clients that don’t pay, enabling you to stop work on the project until payments are met. Continue learning and check out our guide on Construction Billing Methods to learn more.

How to create a construction payment schedule

Follow these steps to creating the right construction payment schedule for your business:

• Select the type of construction payment schedule that is best suited to your company and the project. If you decide that a progress payment schedule is your best option, you can still include a deposit and final payment within the schedule, ensuring you have enough funds to get the work underway.
• Build your own payment schedule using a software that allows you to take deposits and send automatic payment requests and invoices. Alternatively, print out the template above and fill out all the required elements above.
• Double check your payment schedule for accuracy before sharing with a client or subcontractor.
• Share with the client and agree on the payment terms. Ask them to sign the schedule as confirmation. 
• Start collecting payments and track payment deadlines.

Tips for ensuring your construction payment schedule gets paid on time

Take note of these handy hints on leveraging construction payment schedules for your benefit:

• Mechanics lien - A construction payment schedule helps you keep track of incoming payments so the project continues to flow. However, if a client fails to meet a payment deadline, you can file for a mechanics lien to ensure you get paid. It’s important to note that there are certain deadlines to file a mechanics lien, so having automated tracking of these deadlines in place will ensure you never lose your right to file a lien. 
• Be detailed and descriptive - The more detail you include in your payment schedule documenting exactly when and how payments are due, the less likely you will run into disputes that could delay the project.
• Give the team access to schedules - By using collaborative scheduling tools, you can make communications and payment schedules available to your team and your clients on-demand, ensuring satisfaction all round. 
• Store schedules securely - By keeping project files securely in one place, such as Houzz Pro’s unlimited cloud-based storage, you’ll be able to retrieve files at any time from anywhere in the world. 

Benefits of software over construction payment schedule templates

Read on and discover even more advantages for choosing software over manual construction contract payment schedule templates:

• Automated payment deadline tracking and reminders - Being able to view the project cash flow at a glance can help plan ahead and make sure the project runs without any hitches, while automated payment requests, invoices and reminders will prevent any late payments or lien deadlines being missed. 
• Online payment integration helps speed up payment - With Houzz Pro, clients can pay instantly with the click of a button, ensuring essential funds hit your bank account quickly. 
• Save valuable time with automated online schedules - Frustrated with having to start every payment schedule from scratch? Houzz Pro's payment schedules are ready to go, with all the essential information saved. All you have to do is input the project and client details, the scope of the work, the payment breakdown and delivery dates. 
• Increased accuracy - Eliminate the possibility of human error with automated payment schedules that create accurate calculations every time. 

Conclusion

If you’re an established construction company that’s keen to grow and expand, automating your business processes is a sure-fire way of upscaling quickly, effectively and professionally. By switching to digital construction payment schedules in your business, not only will you stay on top of every dollar and get paid faster, you’ll deliver an all-round efficient project and a pleasant experience for everyone involved. 

Sign up today for your free trial of Houzz Pro to explore our payment schedule, online payment tools and e-signatures. Or, continue learning and check out our comprehensive Guide to Construction Invoicing.