Payment Protection for Contractors: The Complete Guide

Here's a number that should make every contractor angry: €280 billion. That's how much gets drained from the construction industry every year through late and non-payment.

Another number: 92%. That's the percentage of construction projects that face cash flow problems because of payment delays.

You're not alone. But you also don't have to accept it.

This guide covers every method available to protect your payments - from simple steps you can do today to more sophisticated protection for bigger jobs.

The Payment Protection Ladder

Think of payment protection as a ladder. Each rung gives you more security:

1. Basic: Good invoicing practices
2. Better: Deposits and clear terms
3. Stronger: Milestone payments
4. Maximum: Escrow and protected funds

Most contractors stay on the bottom rung and wonder why they keep getting burned. Let's climb higher.

Level 1: Basic Protection - Get Your Invoicing Right

Before anything fancy, nail the basics.

Invoice Properly

A proper invoice isn't just professional - it's legally stronger.

Every invoice needs:

• Your business name and address
• Customer name and address
• Unique invoice number
• Date of invoice
• Clear description of work done
• Amount due (with VAT if applicable)
• Payment due date
• Payment methods/details

Invoice Immediately

The #1 mistake: waiting to invoice.

When you invoice	When you typically get paid
Same day	1-7 days
Within a week	14-30 days
A month later	45-90 days (if at all)

Manano tip: Create invoices via WhatsApp in 30 seconds. The job's done, the invoice is sent, before you've left the site.

Make Paying Easy

Remove every excuse:

• Include a payment link (one tap to pay)
• Accept card payments
• Include bank details on every invoice
• Offer multiple payment options

When paying is easy, people pay faster.

Keep Records

Every quote, every message, every photo, every invoice. Keep it all.

If a dispute goes legal, documentation wins. If it doesn't exist in writing, it didn't happen.

Level 2: Better Protection - Deposits and Terms

Always Take a Deposit

The deposit is your first line of defense.

Why deposits work:

• You're not starting from zero
• Customer has skin in the game
• Weeds out timewasters
• Covers at least some material costs

How much?

Job Size	Typical Deposit
Under €500	25-50% (or full payment)
€500-€5,000	30-50%
Over €5,000	25-40%
Materials-heavy	Enough to cover materials

The key rule: Don't start until the deposit clears. Not when they promise it. When it's in your account.

Written Terms

Verbal agreements are worth the paper they're not written on.

For every job, have in writing:

• Total price
• What's included (and what's not)
• Deposit amount and when due
• Final payment terms (when due, accepted methods)
• What happens with extras/variations

Doesn't need to be fancy. A clear quote that the customer accepts by email or text is fine.

Payment Terms That Protect You

Standard: Payment due within X days of invoice (14 days is reasonable)

Better: Payment due on completion

Best: Payment due on completion, with late payment interest clause

Under EU regulations, you're automatically entitled to charge interest on late commercial payments. Including this in your terms reminds customers you're serious.

Level 3: Stronger Protection - Milestone Payments

For jobs over a few thousand euros, milestone payments are essential.

How Milestones Work

Instead of one payment at the end, you get paid at stages:

Example - Kitchen Installation:

• 40% deposit before starting
• 30% when units fitted
• 30% on completion

Example - Extension:

• 30% deposit
• 20% foundations complete
• 25% structure up
• 15% first fix
• 10% completion

Why Milestones Change Everything

1. Cash flow: Money comes in throughout the job
2. Risk reduction: If they can't pay stage 2, you find out before finishing
3. Customer engagement: They pay as they see progress
4. Early warning: Payment problems surface before it's too late

Setting Up Milestones

1. Define clear milestones (what counts as "foundations complete"?)
2. Agree amounts for each stage
3. Put it in writing
4. Invoice immediately at each milestone
5. Don't proceed to next stage until paid

Level 4: Maximum Protection - Escrow and Protected Funds

For high-value jobs or customers you're unsure about, consider payment protection services.

What Is Escrow?

The customer puts the project money into a secure third-party account. Funds are released to you as milestones complete.

How it works:

1. Project value: €50,000
2. Customer deposits €50,000 into escrow account
3. You do Stage 1 work
4. Both parties verify Stage 1 complete
5. Escrow releases Stage 1 payment to you
6. Repeat for each stage

Why Use Escrow?

You know the money exists. It's sitting in the account, not "coming when my client pays me."

Customer knows their money is safe. It's not going to you until work is verified.

Disputes have a process. If there's disagreement, the escrow provider can help resolve it.

When to Use Escrow

• Very large jobs (€30,000+)
• New customers you haven't worked with
• Customers who've been slow to pay before
• Complex projects with potential for disputes
• Commercial work with multiple phases

The Cost

Escrow typically costs 1-2% of the project value. For a €50,000 job, that's €500-€1,000.

Is it worth it? Consider:

• €500 to guarantee you get €50,000
• vs. risk of €50,000 non-payment

For big jobs, it's cheap insurance.

Types of Payment Protection

Full escrow: All funds held until milestones complete Deposit protection: Deposit held securely, balance on terms Payment guarantee: Third party guarantees payment if customer defaults Trade credit insurance: Insurance against non-payment (more for commercial)

Choosing Your Protection Level

Match your protection to the risk:

Situation	Recommended Protection
Small job, regular customer	Basic invoicing + payment terms
Medium job, known customer	Deposit + clear terms
Medium job, new customer	Deposit + milestones
Large job, any customer	Milestones minimum
Large job, unknown customer	Escrow
Commercial contract	Milestones + retention + possibly escrow

Red Flags: When to Demand More Protection

Watch for these - they predict payment problems:

Financial red flags:

• "I'll pay when my own customer pays me"
• "Can we skip the deposit?"
• Haggling aggressively after agreeing a price
• Previous tradespeople who left job unfinished

Behaviour red flags:

• Slow to respond to messages
• Vague about what they want
• Constant changes and additions
• Unrealistic expectations

Practical red flags:

• Property being sold/remortgaged
• Works at a distance (harder to chase)
• No clear ownership of property

When you see red flags, increase your protection. More deposit. More frequent milestones. Escrow. Or walk away.

Legal Protections You Already Have

Even without special arrangements, the law provides some protection:

Late Payment Interest

Under the Late Payment in Commercial Transactions Regulations:

• You can charge 8% + ECB base rate on overdue amounts
• Plus fixed compensation (€40-€100 depending on debt size)
• This is automatic for B2B - you don't need to specify it

Retention of Title

If you supply materials, you can include a clause that you retain ownership until paid. If they don't pay, technically you can take the materials back (though practically this is difficult).

Mechanics Liens (In Some Jurisdictions)

In some countries, contractors can place a lien on the property for unpaid work. Ireland doesn't have this, but it exists in the US and some EU countries.

Small Claims Court

For debts under €2,000 in Ireland, the Small Claims Court costs just €25 to file. Most people pay when they receive court papers.

The Manano Approach to Payment Protection

Manano builds protection into everyday invoicing:

Instant invoicing - Create invoices in 30 seconds via WhatsApp. Never delay billing.

Payment links - Every invoice has a "Pay Now" button. Customers pay by card in one tap.

Deposit invoices - Send deposit requests just as easily as regular invoices.

Stage invoices - Create milestone invoices throughout the project.

Payment tracking - See what's been paid and what's outstanding at a glance.

Fast payment - When customers can pay instantly, they do. Average time to payment with Manano is hours, not weeks.

Records kept - Every quote, invoice, and payment documented automatically.

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Quick Reference: Payment Protection Checklist

Every job:

• Written quote/agreement
• Clear payment terms
• Invoice sent immediately on completion
• Payment link included
• Records kept

Jobs over €1,000:

• Deposit taken (and received before starting)
• Payment terms confirmed in writing

Jobs over €5,000:

• Milestone payments agreed
• Stage invoices at each milestone
• Don't proceed without stage payment

Jobs over €20,000:

• Consider escrow
• Verify customer can pay (how? Ask for references, check property ownership)
• Formal contract with clear terms

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The Bottom Line

You wouldn't leave tools on an unprotected site overnight. Don't leave your income unprotected either.

Every layer of protection you add - deposits, milestones, clear terms, payment links, escrow - reduces the chance of working for free.

Start with the basics. Invoice properly, invoice fast, make paying easy.

Add deposits and terms. Never start without some money in hand.

Use milestones. Get paid as you work, not months later.

For big jobs, go further. Escrow exists for a reason.

You do good work. Make sure you get paid for it.

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Ready to protect your payments? Manano creates invoices with instant payment links. Customers tap to pay. Money in your account the same day. Try it free on WhatsApp