Deposit invoices

When to ask for a deposit

Ask for a deposit when you buy materials before the first day on site, when you order anything custom or non-returnable, when the job blocks out your calendar for more than a few days, and when the client is new. The question is what it would cost you if the job were cancelled the night before it started. If the answer is more than an afternoon, take a deposit.

Skip it for small repeat jobs for clients who have paid on time before. A deposit invoice on a two-hour call-out is paperwork for its own sake.

How much deposit to ask for

Tie the amount to what you spend before you start. Add up the materials, any non-returnable orders and the first few days of labour, and that is the deposit. On a $15,000 kitchen where the cabinets and countertop cost $6,000, a $6,000 deposit covers the order; $7,500 covers the order and the first days on site. A round percentage is fine as long as it lands near that number: a 50% deposit is common on jobs where materials are a big share of the price, and 25% to 30% where labour is.

Check the cap for your state first. California limits the down payment on a home improvement contract to $1,000 or 10% of the contract price, whichever is less, with no exception for special-order materials, and every payment after that is limited to the value of the work done and materials delivered. Other states set their own rules for home improvement work, and your state's contractor licensing board publishes them. Commercial and business-to-business work is usually not capped, so the deposit there is whatever the client accepts on the quote.

Deposit, down payment or retainer

Three words that get used for the same thing, and one of them is different. A deposit is part of the price paid before the work, credited against the balance at the end. A down payment is the same thing under the name consumer contracts and state statutes use, which is why California's cap talks about a down payment. A retainer is money paid in advance to hold your availability or to draw against for ongoing work, such as a lawyer's or a consultant's hours; it is drawn down as the work is done and topped up, and it belongs on a recurring invoice rather than a one-off deposit invoice. Use the word the client's paperwork uses, and make the quote say which one you mean.

The deposit line on the quote

The deposit is its own line on the quote, with the amount, what it covers, when it is due, and what happens when it clears.

The quote generator has a deposit field for this, and a valid-until date, so the price and the deposit expire together if the client sits on it.

Deposit invoice example

Once the quote is accepted, send the deposit invoice the same day, with the quote attached. It is an invoice like any other: a number in your normal series, the date, the client's details, one line that says what it is, the due date, and a payment link so it can be paid before the client closes the email.

Book the start date when the money clears, not when the invoice is sent. A deposit that has not arrived is a quote that has not been accepted yet.

Refundable or non-refundable

Decide before the quote goes out and write it down, because the question only ever comes up after a cancellation. A common position: the deposit is refundable in full until the materials are ordered, and after that you refund what you have not spent and keep the cost of anything ordered on the client's behalf that cannot be returned. A fully non-refundable deposit is harder to hold onto than the sentence suggests, because what you can keep also depends on your contract and your state's consumer rules. The sentence on the quote is what you will be held to.

The deposit receipt

When the deposit lands, send a receipt: what it was for, the amount, how it was paid, the date, and the balance still to come. The receipt maker builds a deposit receipt with the balance shown, so the client has proof of payment and a reminder of what is left in one document.

Billing the balance due

The final invoice lists the work, then states what has already been paid, so the client can see the whole job:

If your invoicing tool has no line for a partial payment already received, put that sentence in the terms and bill only the balance as the line items. The accepted quote, the deposit invoice and the final invoice then add up on their own. On a longer job, the deposit is stage one of a progress billing schedule and every later invoice shows it under "billed on earlier invoices".

The tools for this

More guides

• Progress billingHow to bill a job in stages: the schedule of values, a worked progress invoice with retainage, pay applications and AIA forms, and the quote wording that gets each stage paid.
• Chasing an unpaid invoiceWhat to do when a client is not paying: the day-one reminder email, the day-seven call, the overdue notice with the late fee, the final demand letter, then liens, small claims and collections.
• Change ordersWhen to write a change order, what goes on the form, how to price extra work including time and materials, keeping a log, and how an approved change reaches the invoice.
• Invoice numbersAn invoice numbering system that never repeats or skips, format examples with a year or job prefix, separate series for quotes and credit notes, and where the number goes on the invoice.