Best Practices for Collecting Unpaid Invoices in Home Services Contracting

Use Progress Payment Milestone Structure in Your Contracts

If you’re a licensed Nevada contractor working on residential improvements — like granite countertops, other remodel projects, or concrete landscape improvements for homeowners — and you’re operating without a clear Terms and Conditions section in your contracts, you’re exposing your business to serious risk. Under NRS Chapter 624, especially the new rules in NRS 624.970, contracts must meet specific legal standards to protect both you and your clients.

In today’s uncertain economic climate, failing to include clear payment terms and a progress payment schedule in your contracts can lead to clients delaying or outright refusing to pay. When your Accounts Receivable starts stacking up with balances over 90 days late, your business could face a cash flow emergency — and fast.

Most small contractors operate on tight margins. Just like missing your home’s utility bill, mortgage, or car payment can lead to shutoffs, foreclosure, or repossession, your business needs to enforce timely payments to survive. You’re not a charity — you’re a for-profit enterprise. Do your giving elsewhere. If you don’t, the dreaded “B-word” — bankruptcy — might come knocking.

Here is a brief overview of Nevada’s New Homeowner Protections under Nevada Law — AB39 & NRS 624.970

Progress Invoicing and Staying Compliant with NRS 624.970

Why?

To protect you and your business as well as your client. You write a contract to define the scope of work, but it should also go beyond that — clearly outlining payment terms, timelines, and legal responsibilities.

So, make it clear as to what is expected, within the framework provided by the Nevada Contractors Board and relevant Nevada Revised Statutes.

Including a clear Terms and Conditions section is highly recommended. This gives clear instructions to your client about what is expected from them.

And to stay compliant with the new homeowner protection statutes, you either have to purchase a Surety Bond for $100,000.00 or perform the Progress Payment Invoices tied to stated Milestone system.

What is the Nevada Residential Improvement Contract?

A Nevada Residential Improvement Contract is legally required for residential improvements under AB39. It is the written agreement between a licensed contractor and the owner of a completed, owner-occupied single-family residence for any remodeling, repair, or improvement work performed on that property.

• Mandated by: Assembly Bill 39 (AB39), effective October 1, 2023.
• Codified in: NRS 624.970.
• Does not apply to: New construction, commercial properties, or rental homes.

Why is this contract necessary?

Preventing financial exploitation of homeowners

AB39 was introduced to address a growing concern: homeowners being taken advantage of by contractors who collected large upfront deposits and then failed to perform or complete the work.

• Problem: Some contractors were demanding large deposits (sometimes 30–50% of the contract price) before starting work, leaving homeowners financially exposed if the contractor disappeared or defaulted.
• Solution: AB39 limits the initial deposit to $1,000 or 10% of the total contract price, whichever is less, unless the contractor posts a $100,000 Consumer Protection Bond.

This ensures that homeowners are not left financially vulnerable before any work begins.

Encouraging contractor accountability through bonding or deposit limits

The $100,000 Consumer Protection Bond serves as a financial safeguard for homeowners.

• Purpose: If a contractor fails to perform, commits fraud, or violates the contract, the bond provides a source of restitution for the homeowner.
• Access: Homeowners can file a claim against the bond through the Nevada State Contractors Board (NSCB) if they suffer damages due to contractor misconduct.
• Incentive: Contractors who want to collect larger deposits must demonstrate financial responsibility and good standing by qualifying for the bond.

Standardize contracts to reduce disputes

AB39 mandates a minimum set of contract elements to reduce ambiguity and improve communication between contractors and homeowners.

• Required elements include:
  • Contractor and homeowner information.
  • Scope of work.
  • Total price and taxes.
  • Payment schedule tied to milestones.
  • Estimated completion date.
  • Required disclosures (e.g., lien rights, Recovery Fund).
  • Initialing of key provisions to confirm understanding.

This standardization helps prevent disputes and ensures both parties understand their rights and obligations.

Empowering homeowners with legal remedies

AB39 gives homeowners the right to void contracts that do not comply with the law — particularly if the deposit exceeds the legal limit or if required disclosures are missing.

• This provision acts as a deterrent against non-compliant contracting practices.
• It also provides a legal remedy for homeowners who may otherwise be stuck in unfair or unclear agreements.

Promoting industry integrity and public trust

The Nevada State Contractors Board emphasized that AB39 supports its mission to:

• Promote professionalism and quality construction.
• Protect the health, safety, and welfare of the public.
• Ensure integrity in the residential contracting industry.

This is an example of a payment schedule for a flooring contractor selling flooring and installation labor for NRS 624.970 compliance:

Sample Schedule Progress Payment clause:

Each progress payment is due upon completion of the corresponding milestone, as defined in this agreement. Payment is expected within three (3) calendar days of milestone completion.

Sample Schedule Progress Payment with Late Payment clause:

Each progress payment outlined in this agreement is due within three (3) calendar days following the completion of the corresponding milestone, as defined in the Payment Schedule.
If payment is not received within this period, a late fee of 0.83% per month (10% annually) will be applied to the outstanding balance, beginning on the fourth (4th) calendar day after the milestone completion date.
This interest shall accrue monthly until the balance is paid in full. In the event of non-payment, the Owner shall also be responsible for all reasonable costs of collection, including attorney’s fees and court costs, as permitted by Nevada law.

Sample Suspension of Work clause:

If Owner fails to make any scheduled progress payment within the time specified in this agreement, Contractor may suspend work after providing written notice at least ten (10) calendar days in advance. If payment is not received within fifteen (15) calendar days after suspension, Contractor may terminate this agreement. If payment is received before the termination date, Contractor shall resume work without penalty.

Final Thoughts About NRS624.970 and Milestone Progress Invoicing

First, this is not an exhaustive list of required language clauses on your Residential Improvement Contracts. So please consult a licensed lawyer to make sure you have everything covered in these contracts.

Navigating collections in the home services industry requires more than persistence — it demands proactive planning, legal awareness, and clear communication. By implementing milestone-based payment schedules, adhering to Nevada’s AB39 requirements, and including enforceable clauses like late fees and suspension of work, you can protect your business from cash flow disruptions and legal disputes.

As the regulatory landscape continues to evolve, staying informed and updating your contracts accordingly is not just a best practice — it’s a necessity. If you’re unsure whether your current agreements meet Nevada’s legal standards, now is the time to consult with a qualified construction attorney and bring your documents into compliance.

You may like NRS 624 – Maybe Boring BUT Necessary Subcontractors — Key Nevada Revised Statutes You Should Know.