Plenty of tradies are flat out with work and still struggling to pay wages, suppliers and the ATO on time. The problem is rarely a lack of jobs. It is the gap between spending money on a job and actually getting paid for it.
Deposits, progress payments and how you handle late payers are the three areas that make the biggest difference to that gap. Get them right and cash flow becomes far more predictable. Here is how to set each one up properly.
- Deposits cover early costs and confirm the client is committed, but domestic building work has legal limits.
- Progress payments should be tied to clear, completed stages written into the contract.
- Most late payment problems start with vague terms and slow invoicing, not bad clients.
- A simple, consistent follow-up process gets most overdue invoices paid without conflict.
Why Cash Flow Is Harder for Tradies
Trade businesses often pay out before they get paid in. Materials are bought upfront, wages go out every week, and the invoice only goes out when the job is finished. On larger jobs, that can mean weeks or months of funding the work yourself.
From working with trade business owners, the pattern we see most is simple. The business is profitable on paper, but the timing of money coming in and going out is out of sync. Deposits, progress payments and tight collections are how you close that gap.
Getting Deposits Right
A deposit does two jobs. It helps cover the early costs of a job, such as materials or ordering, and it shows the client is serious about going ahead.
Know the Rules for Domestic Work
If you do domestic building work in Victoria, deposits are capped by law. The maximum is 10% of the contract price for jobs under $20,000, and 5% for jobs of $20,000 or more. For most domestic work worth more than $10,000, you also need a major domestic building contract in place. Each state has its own rules, so check the requirements wherever you work.
Set Deposits Up Clearly
- State the deposit amount and due date in your quote and contract
- Do not order materials or book the job until the deposit is received
- Send the deposit invoice as soon as the quote is accepted
- Make it easy to pay with a payment link or clear bank details
For smaller jobs where a deposit is not practical, ask for payment on completion before you leave site.
Setting Up Progress Payments
On longer jobs, progress payments stop you from carrying all the costs until the end.
Tie Payments to Completed Stages
Progress payments work best when each payment is linked to a clear, finished stage of work. For domestic building work in Victoria, clients are only required to pay for stages that are complete, so it pays to define each stage carefully in the contract. Vague stages lead to disputes about whether a payment is due.
Make Each Claim Easy to Approve
- Invoice the same day a stage is finished
- Include photos or notes showing the work is complete
- Reference the contract stage and amount clearly
- Keep variations separate, with written approval before the work is done
Variations are a common cash flow trap. Extra work agreed on a handshake is easy to forget and hard to claim later. Getting written sign-off before starting a variation protects both you and the client.
Dealing With Late Payers
Late payments are one of the most common cash flow problems in trade businesses. The good news is that most can be prevented or fixed with a clear process.
Prevent Late Payments Before They Start
- Agree on payment terms before the job starts, and put them in writing
- Use short payment terms, such as seven days, for domestic clients
- Invoice immediately, ideally from your phone before you leave site
- Offer easy payment options, including card and payment links
Follow Up Consistently
A simple follow-up routine works better than chasing only when cash gets tight:
- Send a friendly reminder a day or two before the due date
- Send a second reminder on the day it becomes overdue
- Call the client if it is a week overdue
- Send a formal written notice if it is still unpaid after two weeks
Most clients pay once they are reminded. A phone call often sorts out a delay fastest.
When It Becomes a Dispute
If a client still will not pay, get advice before taking further action. In Victoria, domestic building disputes generally go through Domestic Building Dispute Resolution Victoria first. For larger amounts or commercial work, talk to a lawyer about your options.
Building a System Around It
Deposits, progress payments and collections work best as part of a weekly routine: send invoices, check what is overdue and update a simple cash flow forecast. For tradies who want help building that system, our cash flow management coaching focuses on forecasting, payment terms and collections, so you can see cash pressure coming and act before it bites.
Frequently Asked Questions
Can I ask for a bigger deposit on domestic jobs?
Not in Victoria. Deposits for domestic building work are capped by law, so larger upfront costs should be covered through progress payments instead.
Should I stop work if a progress payment is late?
It depends on your contract and the type of work. Check what your contract allows and get advice before stopping work on a domestic job.
Get Your Cash Flow Under Control
If you are busy but always short of cash, Y Coaching can help you set up deposits, payment terms and a cash flow system that works for your trade business. Contact Conrad or call 0413 451 235 to book a free strategy session.
This article is general information only and is not legal advice. Check the current rules in your state and get advice for your situation.
Conrad Morgan is a qualified MBA, GAICD, and seasoned Non-Executive Director with a track record of helping businesses grow. His business coaching blends structured frameworks with deep understanding, ensuring every session delivers value. That’s why he’s considered one of the best business coaches in Melbourne.