Getting paid
Deposits and cancellation notices: where contractors get in trouble
Collecting money before the work starts is normal. Collecting the wrong amount, or skipping a notice, is how a good job turns into a licensing complaint. Here is what to check before you take a deposit.
September 23, 2026 6 min read
A deposit is a promise in both directions. The customer is trusting you to show up; you are trusting them to stay. States regulate the deposit because it is the one point where the homeowner has paid and has nothing yet.
Three rules that show up over and over
- A cap on the deposit, either a dollar ceiling, a percentage of the contract, or a limit tied to work actually performed.
- A written contract that must exist before any money changes hands — often with required language, an itemized scope, and a start and end date.
- A cooling-off notice for jobs signed at the customer's home, giving them a few days to cancel in writing.
Which of those applies to you depends on your state, and sometimes on your county or city. Some states also require a surety bond, a specific complaint-filing notice, or a disclosure about insurance before a customer signs.
Why "everyone does it this way" is a bad basis
The licensing complaint that shuts a contractor down is rarely about the quality of the work. It is about a deposit that was too large for the state's cap, a job that started without a signed contract, or a cancellation notice that was never given. Those are documentary facts — nobody has to argue about whether the tile was level.
A safe deposit routine
- 1Look up your state's deposit rule and write the number in your company settings once, so every quote uses it.
- 2Keep the deposit at or under the cap, and state what it covers.
- 3Get the contract signed before the deposit is collected, not after.
- 4Give a written cancellation notice and a way to use it that does not require the customer to find you.
- 5Log every payment with a date, amount and what it paid for, and keep the log with the job.
- 6Never spend the deposit as if it were revenue — it is the customer's money until the work exists.
Quote Genius flags the deposit caps and required notices it knows about for each state and warns you when a deposit exceeds the cap it has for your state. Those summaries are a starting point, not legal advice: confirm the current rule with your state licensing board, and have a licensed attorney review your contract language.
What to do when a job goes sideways
If the customer cancels, refund what the contract says, promptly and in writing. If you cannot start on time, tell them before they ask and put the new date in a signed change order. Most complaints are not about money — they are about silence.
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