There is a specific kind of small business that is busy, well reviewed, and permanently short of cash. Almost always it is funding its customers' projects out of its own account — buying materials weeks before invoicing, holding a slot for someone who has committed to nothing, and then waiting thirty days to be paid for work completed a month ago.
Deposits and payment terms are the fix, and the resistance to them is nearly always about a conversation the owner does not want to have rather than anything a customer has actually objected to.
What a deposit is actually for
Framing decides everything here. A deposit asked for as protection sounds like distrust. The same deposit asked for as a booking sounds like a normal transaction, and the difference is one sentence.
- It reserves the slot. A date without a deposit is a preference. A date with one is a booking, and it stops you holding a crew for someone still getting other quotes.
- It buys the materials. If you are ordering a unit, a door, or two pallets of anything, the deposit is the customer paying for their own materials rather than you lending them the money.
- It filters. The customer who will not put down a deposit for a job they claim to want is, very reliably, the customer who cancels the morning of.
- It caps the loss. If a job goes wrong at the halfway point, the deposit decides whether you are inconvenienced or out of pocket.
How much, and when
The right number is not one number. It scales with materials cost and job length, because that is what the deposit is covering.
| Job type | Typical deposit | Reasoning |
|---|---|---|
| Small repair, same day | None — payment on completion | No materials float, no slot risk worth the friction |
| Job with ordered materials | Cost of materials, or 30–50% | You should never be financing someone else's equipment |
| Multi-day install | 30% to book, progress payment at milestone | Limits exposure and keeps cash moving through the job |
| Large project, several weeks | 25–30%, then staged payments | Nobody should be forty days of labour into an unpaid invoice |
| Recurring maintenance | None — card on file | The relationship is the security; friction is the enemy |
Two rules underneath the table. Never let your unbilled exposure — work done plus materials bought, minus money received — exceed what you can comfortably absorb. And on anything longer than a week, invoice at milestones rather than at the end, so a dispute at the end is a dispute over the last payment rather than all of it.
The terms line that quietly costs the most
"Net 30" on an invoice does not mean thirty days. It means thirty days from whenever the invoice was sent, which in most service businesses is whenever someone got round to it. A job completed on the 3rd, invoiced on the 19th, paid at 30 days is a fifty-six-day gap you described to yourself as net 30.
Which means the highest-leverage change to your cash flow is usually not the terms at all — it is the time between finishing and invoicing. Cut that to same day and you get most of the benefit of tighter terms without a single awkward conversation.
For residential work, drop net terms entirely
Net 30 is a commercial convention that arrived in residential service by imitation. A homeowner is not running an accounts payable cycle. They expect to pay when the work is done, the way they do everywhere else, and offering them thirty days simply delays a payment they were prepared to make on the spot.
Due on completion, paid before the van leaves, card on file for recurring work. Commercial clients genuinely have a payables process and their terms are a real negotiation. Residential customers do not, and inheriting the convention costs weeks of float for no reason.
Chasing without a chase
The most common collections mistake is treating a late invoice as a personal failure of the customer. Usually it is a lost email or a forgotten task, and the fix is a schedule rather than a confrontation.
- 01Day 0 — invoice on completion
Sent while the work is fresh, ideally before you leave the property, with a payment link in it.
- 02Day 7 — a friendly nudge
Automated, short, assumes it was overlooked. Most late invoices resolve here and no human needs to be involved.
- 03Day 14 — a person
A phone call, not another email. If something is actually wrong with the invoice or the work, this is when you find out — and finding out matters more than the money.
- 04Day 30 — a decision
A payment plan, a formal demand, or a write-off. What kills small businesses is not bad debt, it is bad debt that stays "open" for eight months while nobody decides.
When a customer refuses a deposit
It happens, and it is information. Some of it is legitimate — a commercial client whose procurement process genuinely cannot issue one. Most of it is not.
The useful response is a small concession that keeps the principle: take a card to hold the slot without charging it, reduce the deposit to the materials cost alone, or offer to start with no deposit on a job with no materials outlay. What you should not do is drop it entirely for a job where you are ordering equipment, because that is precisely the case where the deposit was never about trust.
You are a service business, not a lender. Notice when you have started acting like one.
Common questions
Should a service business take a deposit?
For anything involving ordered materials or a multi-day slot, yes. A deposit reserves the date, pays for the customer's own materials rather than financing them, and filters out the bookings that cancel on the morning. For small same-day repairs it usually adds friction without covering any real risk.
How much deposit should I ask for?
Enough to cover materials, typically 30–50% on a job with ordered equipment and 25–30% on a longer project with staged payments after that. The number should track your exposure — work performed plus materials bought, minus money received — not a fixed percentage applied to everything.
How do I ask for a deposit without sounding like I distrust the customer?
Name what the money does. "To hold Tuesday the fourteenth and order the unit, we take 30% — $840 — with the balance on completion" reads as a booking. "We require a deposit before we can start" reads as suspicion. Same money, entirely different conversation.
Should I offer net 30 to residential customers?
No. Net 30 is a commercial convention that reached residential service by imitation. Homeowners have no payables cycle and expect to pay on completion, so offering terms simply delays a payment they were ready to make. Keep net terms for commercial clients who genuinely run a procurement process.