Getting paid

Deposit and Advance Payment Invoices

Asking for money before you have done anything feels presumptuous the first few times, which is why so many small businesses skip it and then spend the next year absorbing the consequences. A deposit is not a sign of distrust. It is the ordinary mechanism by which two parties who do not yet know each other share the risk of a transaction that has not happened yet — and in most industries, not asking marks you as inexperienced rather than accommodating.

By Arshad Hossain · Published 16 August 2026

The short version

A deposit protects against the client disappearing; an advance funds work you must pay for.
Non-refundable only holds if it reflects genuine loss, and if the client agreed before paying.
Deposit invoices are still invoices — number them in sequence and account for the tax.
Deduct the deposit visibly on the final invoice, or you will be asked for it twice.

Deposit, advance, retainer or prepayment?

These four words get used interchangeably and mean different things, which matters when someone asks for their money back.

A deposit secures a commitment. It is usually a proportion of the total, and its function is to make the client's cancellation costly enough that they turn up. Wedding photography and event work run on this.

An advance payment funds work you must pay for before you can deliver — materials, subcontractors, licenses. Its function is cashflow, not commitment, and it is usually sized to the actual cost being covered rather than as a percentage of the job.

A retainer buys availability over a period, and is properly covered in retainer and recurring invoices.

A prepayment is simply the whole fee, paid up front. Common for small jobs, new clients and anything where chasing afterwards would cost more than the job is worth.

	What it does	Typical size	Refundable?
Deposit	Secures the booking	20–50%	Usually not, inside a window
Advance payment	Funds your costs	Cost of the inputs	Partly, less costs incurred
Retainer	Buys availability	Monthly fee	Usually not, once the period starts
Prepayment	Pays the whole fee	100%	Depends on work done

How much to ask for

The honest answer is: enough to cover what you lose if the client vanishes, and no more than the market you work in expects.

Between 25% and 50% is the standard range across most service industries. Weddings and event work sit at the top of it and sometimes beyond, because a booked date genuinely cannot be resold. Design and consulting typically sit at 50% for smaller projects and lower for longer ones staged across milestones.

For work with heavy material costs, size the advance to the materials rather than to a percentage. Asking for 30% of a job where materials are 60% of the cost still leaves you funding the client's purchase.

For a first engagement with an unknown client, weight it higher than you would for someone you have worked with for three years. Deposits are a risk instrument, and risk is genuinely different in those two cases.

Making a deposit non-refundable in a way that holds

Writing "non-refundable" on an invoice does not by itself make a deposit non-refundable. In many jurisdictions consumer protection rules will not enforce a term that amounts to a penalty rather than a genuine estimate of loss.

What tends to hold is a deposit that is proportionate to what you actually lose, and that the client agreed to before paying. What tends not to hold is a large deposit retained in full for a cancellation months in advance that cost you nothing.

The practical approach is a sliding scale, stated up front. Cancellation more than 90 days out refunds most of the deposit; inside 30 days retains all of it. That structure is defensible because it tracks real loss, and clients find it fair, which means it is argued with far less often.

State the terms on the deposit invoice itself, not only in a contract. The invoice is the document the client keeps and the one they will look at when they want their money back.

Tax, numbering and the final invoice

A deposit invoice is a real invoice. Give it a number from your normal sequence, not a separate one, so your numbering stays unbroken.

Tax generally becomes due at the point the deposit is received, in most VAT and GST systems. That means the deposit invoice usually needs to show tax, and you account for it in that period rather than waiting for the final invoice. Getting this wrong understates your liability for a quarter and creates a correction later.

On the final invoice, show the full value of the work, then deduct the deposit as a visible line, then show the balance due. Do not simply invoice the remainder with no reference to the deposit — the client's bookkeeper cannot reconcile that against their records, and you will be asked to explain it or, worse, asked to justify why the totals do not match the quotation.

Where a deposit is retained on cancellation, that is generally a taxable supply too rather than a windfall. Check the treatment locally, because it differs between jurisdictions and between deposits and genuine compensation payments.

Deposit invoice questions, answered

What is a deposit invoice?

An invoice requesting part of the agreed price before work begins, securing the client's commitment and reducing your risk. It carries a number from your normal sequence, usually shows tax, and is later deducted from the final invoice as a visible line.

How much deposit should I ask for?

Between 25% and 50% covers most service work. Go higher for events where a booked date cannot be resold, and for first engagements with unknown clients. Where materials are the main cost, size the advance to the materials rather than to a percentage.

Is it normal to ask for a deposit?

Yes, in almost every service industry, and not asking often reads as inexperience rather than flexibility. Clients who commission work regularly expect a deposit and are usually more surprised by its absence than by its presence.

Can I make a deposit non-refundable?

You can, but it only holds where the amount reflects a genuine estimate of your loss and the client agreed before paying. A large sum retained for a cancellation that cost you nothing is likely to be treated as an unenforceable penalty.

What is the difference between a deposit and an advance payment?

A deposit secures commitment and is usually a proportion of the total. An advance funds costs you must incur before delivering — materials, subcontractors, licenses — and is sized to those costs. One manages risk, the other manages cashflow.

Do I charge VAT or GST on a deposit?

In most systems tax becomes due when the deposit is received, so the deposit invoice shows tax and you account for it in that period. Waiting until the final invoice understates your liability for the earlier period and creates a correction.

How do I show a deposit on the final invoice?

Show the full value of the work, then the deposit already paid as a clearly labeled deduction, then the balance due. Invoicing only the remainder with no reference leaves the client's bookkeeper unable to reconcile it against their records.

What is a proforma invoice for a deposit?

A request for advance payment issued before the supply takes place. It is not a tax invoice, carries no tax liability and gives no input tax recovery. Issue the real tax invoice once payment is received or the supply occurs. See our proforma invoice guide.

Should I take a deposit from a repeat client?

Often you can reduce or drop it, since the risk a deposit manages is largely unknown-client risk. Keep it where the job carries real upfront cost to you, or where the client has a history of slow payment, regardless of how long you have worked together.

What if a client refuses to pay a deposit?

Treat it as information. A client unwilling to commit anything before you start is telling you something about either their cashflow or their commitment. Consider a smaller deposit or a paid first milestone, but be wary of dropping it entirely for a new client.

Do I need to refund a deposit if I cancel?

Yes, in full, and promptly. Deposit terms protect against client cancellation. If you are the one who cannot proceed, retaining money for work you will not do is indefensible and will cost you far more in reputation than the sum involved.

When should I ask for 100% upfront?

For small jobs where chasing would cost more than the fee, for new clients with no track record, and for work delivered instantly such as digital products. Full prepayment is normal at the small end and unusual on larger engagements.

Frequently Asked Questions

Is a deposit legally binding?

Paying a deposit generally evidences acceptance of the agreement it was paid under, so it tends to strengthen rather than create a contract. What is enforceable about retaining it depends on whether the term is a genuine estimate of loss.

Can I ask for a deposit after work has started?

You can ask, but it lands badly and clients often refuse, because a deposit is understood to precede work. If you are mid-project and exposed, the better route is invoicing a milestone now rather than retrospectively requesting a deposit.

What is a security deposit versus a booking deposit?

A security deposit is held against damage or default and returned if nothing goes wrong — common in rentals and equipment hire. A booking deposit is part payment of the price and is not returned on completion, because it is absorbed into the total.

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