@Mindy Jensen As a contractor myself I've personally experienced this many times over the course of my career. There has been times where I have subbed certain tasks out to other guys on my flips and times that I have done the work myself.
First point is the relationship. As the relationship builds on both sides and trust is established than there is no issue so this question wouldn't pertain to a case like that. If I have a trust with someone I can be paid in advance and they know the job will get done or I can do the job and get the money in the future whenever it is convenient for my client. I just had a job where I paid all the materials out of pocket and began work before any payment was given to me. I received the check a few days later with no issues. That is because there was trust and I knew I would receive my payment.
What I usually like to do in any job is to have some type of down payment or payment structure even if materials are purchased. Some contractors may rip people off but flippers, investors, home owners, human being in general are all possible of ripping someone off in a form of no payment. So until that trust is established I usually like to get what is formally known as a "good faith payment" from my clients. As @Tom Shallcross said about a payment plan or schedule of some sort. I usually like to just get 20% after 20% of the work is completed just to keep everyone honest. After the job is completed and punch list is done and client approves then a check for the remaining 80% can be given for final payment.
In my experience I've learned that if you give someone too much, or make it to easy for them, then, they have nothing left to strive for. So yes I feel that some type of good faith payment is necessary but if materials are being purchased by you then you can pay a small percentage after that amount of work is done. If the job is large and timely you can establish a payment plan. If the contractor wont agree to that then that isn't someone I would work with. The contractor should have enough money to afford his payroll for at least a couple of weeks. If he doesn't then he is doing something wrong and I wouldn't use him unless he agrees to the terms stated above.
On a final note, I always like to leave a majority of payment for the end of the job which is why I like the 20/80 rule even for myself. If you have a contractor that you are asking to come back to do/fix stuff to finalize the job and you still owe him 80% of total balance its a pretty good chance that they will come finish everything to your standards even if they have to come back several times to do it. Now lets look at this way, say you've made several payments to this same contractor and he/she is only owed a small balance, now the chances of them skipping out on the tedious final work is much higher than if they are owed a majority of their balance.
On small jobs 20/80, on longer job I might say 20/20/60 but I would never pay a down payment for a labor only job and I would never pay more than 50% until final payment.
