A draw schedule is the payment plan for a construction project. It breaks the total contract value into milestone-based payments -- called draws -- that are released as specific phases of work are completed.
If you're a general contractor, your draw schedule is the single most important financial document on the job. Get it right, and cash flows smoothly. Get it wrong, and you're fronting $40K of your own money while waiting for an inspection that got delayed.
I've structured hundreds of draw schedules running residential remodels in California. Here's how they actually work, what most GCs get wrong, and how to build one that protects you.
How a Draw Schedule Works
A typical residential remodel might have 4-6 draws tied to project milestones:
| Draw | Milestone | Typical % | Example ($200K job) |
|---|---|---|---|
| 1 | Mobilization / Contract Signed | 15-20% | $30,000-$40,000 |
| 2 | Demolition + Rough-In Complete | 20-25% | $40,000-$50,000 |
| 3 | Inspections Passed | 20-25% | $40,000-$50,000 |
| 4 | Finishes Installed | 20-25% | $40,000-$50,000 |
| 5 | Substantial Completion | 10-15% | $20,000-$30,000 |
| 6 | Final Walkthrough / Punch List | 5-10% | $10,000-$20,000 |
Each draw becomes eligible when the milestone is reached. At that point, the GC submits an invoice (often with inspection reports, photos, or other documentation), and the client releases payment.
On jobs with a construction lender involved, the bank may require their own inspector to verify progress before releasing funds. This adds 5-10 days to the payment timeline.
Why the Draw Schedule Matters More Than the Contract Price
Here's what most clients don't understand and what many new GCs learn the hard way: the contract price tells you how much you'll earn. The draw schedule tells you whether you'll survive the project.
On a $200K kitchen remodel, my costs don't arrive evenly. I might spend $60K in the first three weeks on demolition, framing, plumbing rough, electrical rough, and HVAC. If my first draw is only $30K, I'm $30K in the hole before the second month starts.
Multiply that across 5-8 active jobs, and the cash gap can be $100K+. That's not a profitability problem -- you could be making 20% margins on every job and still run out of cash because the draw schedule doesn't match your cost curve.
How to Structure a Draw Schedule That Works
Rule 1: Front-Load Without Being Unreasonable
You want 15-20% at contract signing (mobilization draw). This isn't a deposit -- it covers permits, initial material orders, and mobilization costs. Clients who push back on this are a red flag.
The first two draws should cover 35-45% of the contract. This keeps you cash-positive through the most expensive early phases (demo, framing, rough plumbing/electrical).
Rule 2: Tie Draws to Inspections, Not Calendar Dates
Never tie draws to dates. "Draw 3 due on March 15" creates a conflict if the work isn't done by then. Instead: "Draw 3 due upon passage of rough plumbing and electrical inspections."
This protects both parties. The client doesn't pay for work that isn't verified. You get paid as soon as the milestone is provably complete.
Rule 3: Keep the Final Draw Small
The final draw (punch list completion) should be 5-10% of the contract. No more. If your final draw is 20%, the client has $40K of leverage to nitpick every detail during the walkthrough. Keep it small enough that completing the punch list quickly is worthwhile for both sides.
Rule 4: Include Change Order Language
Your draw schedule should state how change orders affect the payment structure. My standard language: "Approved change orders will be added to the next eligible draw or invoiced separately upon completion of the additional scope."
Without this, you end up doing $15K of extra work and not getting paid until the next scheduled draw, which might be weeks away.
Rule 5: Define "Completion" Clearly
For each draw milestone, define what "complete" means. "Rough-in complete" could mean:
- All rough plumbing, electrical, and HVAC installed
- Rough inspections passed by the city
- Insulation installed (if applicable before drywall)
- Photos documented in the project record
If you don't define it, you'll have arguments about whether a draw is eligible.
Draw Schedule vs. Progress Billing vs. AIA Billing
These terms get confused. Here's the difference:
Draw Schedule (residential): Fixed payments tied to specific milestones. Most common in residential remodeling and custom homes. Simple, predictable, easy for homeowners to understand. Progress Billing (commercial): Payment based on percentage of work completed, often assessed monthly. A project manager or inspector estimates that 35% of the concrete scope is done, so 35% of that line item is billable. More flexible but requires more documentation. AIA Billing (commercial/institutional): Standardized billing using AIA Document G702/G703 forms. Breaks the contract into a schedule of values, and each pay application shows work completed, materials stored, and retainage. Required on most commercial and government projects.If you're a residential GC, you're using draw schedules. If you're doing commercial work, you're likely using progress billing or AIA format.
Common Draw Schedule Mistakes
Mistake 1: Back-Loading the Schedule
If 40%+ of the contract is in the last two draws, you'll be cash-negative for most of the project. Your subs and suppliers don't wait -- they expect payment when their work is done, not when you collect your final draw.
Mistake 2: No Mobilization Draw
Starting a project with $0 collected means every expense comes from your operating cash. Permits alone can be $5K-$15K on a residential remodel. Always collect a mobilization draw at contract signing.
Mistake 3: Tying Draws to Dates Instead of Milestones
Date-based draws create misaligned incentives. If you rush to meet a date, quality suffers. If the city delays an inspection, you miss your draw date through no fault of your own.
Mistake 4: Not Invoicing Immediately
When a milestone is hit, invoice that day. Not tomorrow, not this weekend. Every day between milestone completion and invoice submission is a day added to your collection timeline. On a $200K job, a one-week delay in invoicing costs you roughly $800 in carrying costs (assuming 4% cost of capital).
Mistake 5: Verbal Draw Agreements
If the draw schedule isn't in the signed contract, it doesn't exist. I've seen GCs agree to a draw schedule verbally and then have clients dispute the amounts mid-project. Put it in writing. Get it signed. Reference it in every invoice.
How Opsite Handles Draw Schedules
I built draw management into Opsite because it was one of the most painful parts of running my business manually.
In Opsite, each job has a draw schedule with:
- Named phases tied to specific milestones
- Draw amounts (fixed or percentage-based)
- Status tracking (Not Started, In Progress, Ready to Invoice, Invoiced, Paid)
- Automatic invoice generation when a draw is marked as ready
- Inspection reports attached to the draw automatically
- Client notification with PDF invoice, backup documentation, and a payment link
When an inspection passes, the draw status updates, the invoice generates, and the client gets a professional PDF with everything attached -- in under 5 minutes. No manual work, no forgotten invoices, no delays.
Bar Benbenisty is a licensed general contractor in California and the founder of Opsite. See how draw management works Disclaimer: This article is for general informational purposes only and does not constitute legal, financial, or professional advice. Draw schedule structures, payment regulations, and lien laws vary by state and project type. Consult a licensed attorney or financial advisor for advice specific to your situation.