How Much Deposit Should a Contractor Ask For?

For service and repair calls, most trade contractors don't take a deposit at all. The diagnostic or trip fee does that job. For installs and replacements, where you're ordering equipment, a deposit that covers some or all of the equipment cost is common. But some states cap it. California, for example, limits the down payment on home-improvement work to $1,000 or 10% of the contract price, whichever is less. Check your state's rules first.

That's the short answer. Here's how to decide job by job, and how to ask without slowing down a yes.

This post is general information, not legal advice. Deposit rules vary by state and by type of work. Check with your state's contractor licensing board or an attorney.

What a deposit is for

A deposit does three jobs:

1. Covers what you spend before the work starts. Special-order equipment, permits, a crane.
2. Confirms the customer is serious. A signed quote with money behind it rarely gets cancelled for the next bidder.
3. Protects your schedule. You block a day for a two-person install crew. If the customer backs out the night before, that day is gone.

If none of those apply to a job, you probably don't need a deposit on it.

Service calls: let the diagnostic fee do it

On a repair call, the diagnostic or trip fee is your commitment from the customer. It covers the drive and diagnosis. Many shops credit it toward the repair if the customer goes ahead.

A deposit on top of that adds friction for little benefit. The exception is a repair that needs a special-order part. Then a deposit covering the part can make sense before you order it, within your state's rules. More on pricing the visit itself in how to charge for travel time.

Installs and replacements: size it to what you spend up front

For a water heater swap, a system replacement or a panel upgrade, you're about to spend real money on the customer's behalf. Common approaches:

• Cover the equipment. The deposit roughly matches what you'll pay the supply house.
• A fixed percentage. A set share of the quote, the same on every install, so nobody has to think about it.
• A flat amount. A round number for jobs where the equipment cost is small.

What matters most isn't the exact number. It's that it's the same on every job of that type, so your techs aren't negotiating it at the table.

Where the law sets the limit

Some states cap residential deposits. California is the one most contractors have heard of. The Contractors State License Board says: "The down payment cannot be more than $1,000 or 10 percent of the contract price, whichever is less, for a home improvement job or swimming pool, excluding finance charges." The same page adds that there are no exceptions for special-order materials, and that California requires a written contract for all home-improvement projects over $500.

On a $12,000 system replacement in California, that means the most you can take up front is $1,000, not $1,200.

Other states have their own rules, and some have none. Before you set a deposit policy, look up your state's contractor licensing board. It's usually one page.

The three-day cancellation rule

If you sell a replacement in the customer's home, a federal rule may give them three days to cancel. The FTC's Cooling-Off Rule covers sales made at the buyer's home, and it doesn't cover sales under $25 made there. It also doesn't cover sales made because the customer asked you to visit to repair or maintain something. But, in the FTC's words, "things you buy beyond that repair or maintenance request are covered".

In plain terms: the repair they called you out for is exempt, but the new system you sold at the same visit may not be. Where the rule applies, a customer who cancels in time gets their money back, deposit included. Your attorney can tell you exactly what notice your paperwork needs.

Put the deposit in the quote

The most common deposit mistake isn't the amount. It's asking for it as a separate conversation after the customer has said yes.

Put the deposit on the quote, next to the price. When the customer accepts the quote, they're accepting the deposit at the same time. There's no second ask, no awkward pause, and no "can I pay it next week?"

Then make it easy to pay right then: something they can pay from their phone before your tech leaves the driveway.

When a customer pushes back

Some customers will balk at paying before the work starts. That's usually about trust, not money. A few things that help:

• Explain what it's for. "This covers the unit we're ordering for you" lands better than "we require a deposit".
• Make it the same for everyone. "We take a deposit on every install" isn't personal. A number the tech made up at the table feels like it is.
• Show how it comes off the bill. Customers relax when they see the deposit as a credit on the final invoice.
• Take it the professional way. A payment from your business's own checkout, not "send it to my personal account".
• Know when to bend. For a long-time customer or a commercial account with terms, you may skip it. Decide that as a policy, not on the spot.

If a customer won't pay any deposit on a special-order unit, that tells you something about whether the job will happen.

Keep deposits out of your revenue numbers

A deposit isn't revenue yet. It's money held against a job you haven't done. If you count it as revenue when it arrives and again when you invoice the job, you've double-counted that job in your reports.

The cleanest setup:

• The deposit is its own invoice.
• The final invoice shows the deposit as a credit, so the customer sees what's left.
• Your revenue reports count the job once, on the final invoice.

Taking deposits in FSM Navigator

In FSM Navigator quotes, you can require a deposit on a quote, as a fixed amount or a percentage of the option the customer picks:

• The deposit invoice is issued the moment the customer accepts and signs.
• Customers pay it online from your customer portal, by card or bank transfer, through the same checkout they use for invoices. A platform fee applies to online payments; see pricing.
• It shows as a credit on the final invoice.
• It stays out of your revenue, invoiced totals and receivables until the job is invoiced.
• It isn't taxed. The final invoice charges the full tax once.
• If it's still unpaid when you go to create the job, you're asked for a reason before the job is created.

Two limits to know: deposits need online payments turned on for your account, and while Stripe Tax collects your sales tax, deposits are switched off and the quote screen tells you why.