Progress payments can mean the difference between being underwater for months on end and healthy, robust cash flow.
In the world of low-voltage integration, one size does not fit all—and that even applies to getting paid by clients.
For integrators, the structure and timing of progress payments can mean the difference between being underwater for months on end and healthy, robust cash flow.
To navigate this tricky terrain, we tapped the expertise of Jason Sayen of IAmSayen and Emily Morgan of VITAL, two seasoned industry consultants who work closely with integration firms across North America, to provide a list of best practices to consider when determining payment terms and collection.
Why Progress Payments Are Necessary
“Progress payments ensure steady cash flow throughout multiple phases of a project, enabling funds to be available to pay suppliers and labor resources,” says Morgan.
Instead of relying on a lump-sum payment at the end of a project, staggered payments ensure you can cover the cost of materials, labor, and overhead at every stage of a project without accessing money designated for overhead or profits or comingling funds from another project to cover costs.
They can also reduce risk. Getting paid as you go significantly lowers the likelihood of project abandonment or client default.
“If a client has already paid 50%, they’re less likely to walk away,” Morgan notes. “It’s harder to abandon something halfway through if you’ve already paid a non-refundable sum.”
10 Tips to Structure Progress Payments
If you plan to leverage progress payments to structure your contracts and charge your clients, here are 10 best practices to consider along the way.
1. Map Out Your Progress Payment Structure
Map out payment terms based on project milestones. For example, when do you want to collect the deposit? In a perfect world, work shouldn’t start until the deposit is cashed, but some integrators admit they start working on a project before they get paid, says Sayen. “Map how you want it to happen. Set your process, then stick to it.”
2. Clarify Internal Roles and Invoicing Triggers
Who will be involved? For example, to avoid costly payment delays, you must clearly establish who will determine when a phase is complete and inform the back office when it’s time to invoice the client. Make it part of your standard operating procedure (SOP) to assign clear responsibility for requesting that an invoice be sent.
3. Base Payment Schedules on Project Type or Size
Let the project complexity and timeline guide your structure. New builds often call for anywhere from four to eight payments, while retrofits might only require two.
For instance, a large multi-phase project with design/engineering, prewire, trim, and finish stages likely calls for progress payments. A single-phase installation may simply require a deposit and final payment.
4. Cover Equipment Costs Upfront
More expensive equipment requires a higher deposit. “If you’re ordering a $250,000 projector, a 50% equipment deposit may not cut it,” warns Morgan. Sayen adds that many integrators collect 100% of equipment prices upfront, then structure labor payments separately. If necessary, use an “equipment deposit” to secure funds before ordering.
5. Define Payment Phases
There’s no rule on how many progress payments you should receive on a project. Morgan says that most of VITAL’s clients break up payments into three to four increments. Four phases can keep payments manageable and aligned with project milestones without overcomplicating things.
Here are some options to break down your payment structure. (None of these options includes an initial design fee.)
50% / 40% / 10%
For: Mid-size, multi-phase, and equipment-heavy projects
Why: Front-loads cash flow to cover parts while allowing the client to hold 10% to ensure successful project completion
30% / 30% / 30% / 10%
For: Large projects with four or more clearly defined phases
Why: Even distribution accommodates extended timelines and complexity
100% (equipment) + 50% (labor) / 50% (labor)
For: Projects with highly customized or high-cost equipment
Why: Eliminates financial risk from unapproved equipment outlays
60% / 30% / 10%
For: Projects where cash-flow needs are high or equipment procurement must happen early
Why: Offers security up front for small to mid-size integrators
80% / 20%
For: Clients with a poor payment track record or single-phase, fast-track projects
Why: Minimizes risk; suitable for jobs with minimal post-install follow-up
6. Tie Payments to Milestones, Not Calendar Dates
Milestone-based invoicing is the industry norm for a reason. Contract approval, prewire completion, equipment-rack delivery, and final walkthroughs make logical billing markers. Time-based schedules only make sense for long-term commercial projects, according to Sayen.
7. Keep Projects Financially Isolated
The practice of using money from one client to finance the purchase of equipment and/or pay for labor on another project is a bad idea.
“Integrators often think they’re profitable because they have cash,” says Sayen, “but it doesn’t work that way.” Avoid the trap of funding Job A with Job B’s deposit. Track cash flow and profitability on a per-project basis.
8. Align with Accrual Accounting
“Cash accounting is reactive,” Morgan explains. “Accrual accounting aligns revenue with work performed and gives you a true P&L.”
Deposits should be logged as liabilities until work is completed. This ensures accurate financial reporting, better forecasting, and more credibility with lenders.
9. Avoid Progress Payments for Service Calls
Sayen recommends that integrators don’t institute progress payments for service calls.
“Ideally, your service technicians should collect service payment when they’re on the jobsite,” he explains. “Some integrators even get credit card information and authorization prior to arriving onsite. That way, they’re getting paid as soon as they are done.”
10. Protect the Final 5% or 10%
The last payment is often the most elusive. Bake your minimum profit into the first 90% to avoid missing your profit margin if a client refuses to make the final payment. Often, integrators tie the final 5% or 10% to customer walkthroughs, keypad engraving, training, and signed approvals.
When should you ask for that final payment? It varies. Some integrators invoice the final payment upon “substantial completion” or being “reasonably complete.” The definition of these terms can be murky, so defining them in your contracts is advised.
Your Payment Policy Is Your Survival Plan
A well-structured progress-payment policy is essential for survival. By tying payments to project milestones, clearly defining internal roles, and isolating finances per job, integrators can maintain healthy cash flow and reduce risk. Set expectations early, invoice consistently, and always collect enough upfront to avoid playing financial catch-up.
Jason Knott is a data solutions architect and evangelist at D-Tools, an NSCA Business Accelerator.
