Almost every serious contractor dispute involves money that had already changed hands before the problem appeared. Payment structure is the lever homeowners control most directly, and it is worth more attention than the finish selections that usually absorb it.
The principle
Payments should follow value delivered. At any point in the project, the amount you have paid should roughly correspond to the work completed and the materials on site. When that relationship holds, both sides have an incentive to continue. When you have paid well ahead of progress, only one side does.
Deposits
A deposit exists to cover materials the contractor must buy before starting, and to demonstrate you are committed. It does not need to be a large proportion of the total.
Custom items change this legitimately. Bespoke cabinetry, specially ordered windows and non-stock materials require real money upfront and a larger deposit is reasonable — but it should be tied to those specific items and evidenced by the supplier order, not simply a bigger round number.
The pattern worth refusing is a large deposit with no explanation of what it funds, particularly where work is not scheduled to begin for some weeks.
Milestones, not dates
A payment schedule tied to calendar dates pays for elapsed time. One tied to milestones pays for work.
Sensible milestones are objectively verifiable: materials delivered to site, demolition complete, rough-in complete, inspection passed, finishes installed, project complete. Each should be something you can look at and agree has happened, without needing to take anyone’s word for it.
Tying a payment to a passed inspection is a particularly good move, because it puts an independent party between the claim and the money.
The final payment
Hold back a meaningful final payment until the work is genuinely complete, including the small items that tend to linger. That final tranche is what gets the punch list finished, and once it is paid, snagging items compete against the contractor’s next job for attention.
Be fair about it — withholding a large sum over a trivial item damages the relationship and rarely ends well. But retaining something until completion is standard practice and a reasonable contractor will expect it.
How you pay
Pay in a traceable way. Cheques, cards and bank transfers all create a record; cash does not. If a dispute arises, being able to show exactly what was paid and when matters considerably.
Keep receipts for every payment, and get them acknowledged in writing where the contract does not generate them automatically.
If you are asked to pay ahead
Sometimes there is a legitimate reason — a supplier requiring payment before release, a genuine cash flow constraint on a small business. Ask what specifically the money is for and ask for evidence. A contractor with a real reason can show you the supplier invoice. One without a real reason will explain instead.