In the world of low-voltage integration, one size does not fit all—and that even applies to getting paid by clients. From commercial AV projects contracted as a sub to a general contractor to residential automation jobs direct with the homeowner, the structure and timing of progress payments can mean the difference between being underwater for months on end and healthy, even robust, cash flow.
To help integrators navigate this tricky terrain, we tapped into 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 practices.
Why Progress Payments Are Necessary
Before we delve into various best practices for progress payments, it’s important to recognize why you should have an established progress payment policy. Morgan cites cash flow as by far the most important reason.
“Progress payments ensure steady cash flow throughout the 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 project costs.
Another key reason progress payments are a good idea is that they reduce your risk. Getting paid as you go significantly lowers the risk associated with 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 they've already paid a non-refundable sum.”
10 Best Practices to Consider for Progress Payments
Once you have determined progress payments are the smartest and best way to structure your contracts and charge your clients, here are 10 best practices to consider as it relates to progress payments.
1. Map Out Your Progress Payment Structure
When looking to develop your own progress-payment structure, Sayen says the first question he asks integrators is: “How do you want it to happen?” He says that question is important because most integrators have not thoroughly planned their payment cycles. Instead, they are reactionary… usually asking for payments based on circumstances like completing a change order, finishing an installation phase, or just simply deciding “It’s time to bill the customer” with little formality.
“My recommendation is for integrators to map out payment terms based on project milestones. When do you want to collect the deposit? In a perfect world, work should not be started until they have cashed the deposit, 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
Another important aspect of mapping out your payment structure is determining who in the integration team is going to be involved. For example, it needs to be clearly established who within the organization is determining when a phase is completed and who is informing the back office that it is time to invoice the client. Doing this can avoid costly payment delays. Make it part of your standard operating procedure (SOP) to assign clear responsibility for requesting that an invoice be sent.
"Who triggers the invoice? Sales? Project Manager? Technician? Make that part of your SOP," says Morgan.
3. Base Your Payment Schedules on Project Type or Size
"There's usually two main project types: new construction and fast-track or retrofit projects," says Sayen. New builds often call for anywhere from four to eight payments. Retrofits might only require two. Let the project complexity and timeline guide your structure.
As examples, a large multi-phase project with design/engineering, prewire, trim, and finish stages likely calls for progress payments. But a single-phase installation may simply require a deposit and final payment.
4. Aim to Cover Your Equipment Costs Upfront
Obviously, more expensive equipment will require 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 and then structure labor payments separately. If necessary, use an "equipment deposit" to secure funds before ordering.
5. Use 3 to 4 Payment Phases
There is no hard-written rule on how many progress payments you should receive on a project. Most of VITAL’s clients break up their payment schedule into three to four payments, according to Morgan. Similarly, Sayen’s clients’ payment phases vary widely. Four phases keep payments manageable and aligned with project milestones without overcomplicating things.
Here are some options for how to break down your payment structure with clients to consider and apply based on the situation. None of these options includes an initial design fee. According to both Sayen and Morgan, few of the integrators they work with request a design fee.
50% / 40% / 10%
- Use When: Projects are mid-size, multi-phase, and equipment-heavy.
- Why: Front-loads cash flow to cover parts while allowing the client to hold 10% to ensure successful project completion.
30% / 30% / 30% / 10%
- Use When: Larger projects with 4+ clearly defined phases.
- Why: Even distribution accommodates extended timelines and complexity.
100% (equipment) + 50% (labor) / 50% (labor)
- Use When: Equipment is highly customized or high-cost (e.g., projection systems, full home theaters).
- Why: Eliminates financial risk from unapproved equipment outlays.
60% / 30% / 10%
- Use When: Cash flow needs are high or equipment procurement must happen early.
- Why: Offers security up front for small to mid-size integrators.
80% / 20%
- Use When: Client has a poor payment track record or it's a single-phase fast-track project.
- 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
Colloquially referred to as “robbing Peter to pay Paul,” or more appropriately “comingling funds,” the business 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, advises Morgan.
9. Avoid Progress Payments for Service Calls
Sayen recommends that integrators not institute progress payments for service calls.
“Ideally, your service technicians should be collecting the service payment when they are on the jobsite. Some integrators even get credit card information and authorization prior to arriving on site. That way, they are definitely getting paid as soon as they are done,” he says.
10. Protect the Final 5% or 10%
That last payment is the most elusive. Morgan advises baking your minimum profit into the first 90% to avoid missing your profit margin if a client refuses to make the final payment. Often, integrators will tie the final 5% or 10% to customer walkthroughs, keypad engraving, training, and signed approvals.
When do 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. According to Morgan, it can be the date the product is “turned on” and the manufacturer warranty kicks in, as an example.
Conclusion
In the low-voltage integration industry, a well-structured progress-payment policy isn't just good practice—it's 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.
