Billing workflows
Deposit Invoices and Progress Billing: A Practical Guide
When to ask for a deposit, how much is standard, how to credit it on the final invoice, and how milestone billing keeps long projects cash-positive.
By Stephen Fox · Updated July 9, 2026 · 6 min read
Waiting until the end of a project to bill means you are financing the whole job — your hours, your materials, your risk. Deposits and progress billing spread payment across the project so your cash flow tracks the work. Clients accept both readily when they are stated up front; they resist both when they appear mid-project.
When to ask for a deposit
- New clients with no payment history
- Jobs where you buy materials before starting (construction, landscaping, custom fabrication)
- Bookings that block out your calendar (photography, events, consulting engagements)
- Any project long enough that walking away mid-job would hurt
How much is standard
25–50% is the broad norm for service work. Materials-heavy trades often charge the full expected materials cost plus a portion of labor up front, so a client change of heart never leaves you holding inventory. Session-based businesses (photographers, tutors) often use a flat, non-refundable booking fee instead of a percentage. Whatever you choose, state it in the estimate — the deposit is part of the price conversation, not a surprise after approval.
Invoicing a deposit, step by step
- 1State the deposit in the estimate: “40% deposit due before work begins; balance due on completion.”
- 2After approval, send a deposit invoice for just that amount, clearly labeled “Deposit — [project name].”
- 3Start work when the deposit clears — not when it is promised.
- 4On the final invoice, show the full project total, then the deposit as a credit line, then the balance due. The client should see the whole story on one page.
Progress billing for longer projects
Past a few weeks of work, split the price across milestones tied to visible progress — phases the client can verify, not dates on a calendar. In construction, it is also common for clients to hold back a small retainage (often 5–10%) until final walkthrough; if you agree to one, put the release condition in writing.
A $12,000 kitchen remodel, billed in three parts
Invoice 1 — Deposit on approval (40%) .......... $4,800
Invoice 2 — Rough-in complete (30%) ............ $3,600
Invoice 3 — Final walkthrough (30%) ............ $3,600
Each invoice references the estimate and shows amounts already paid.
Track deposits on the invoice itself
The free invoice generator has deposit and amount-paid fields that recalculate the balance due automatically — so the final invoice always shows total, minus deposit, equals balance, with no side math.
Frequently asked questions
Should a deposit be refundable?
Decide before you take it, and put the answer in writing. A common structure: refundable minus costs already incurred (materials ordered, hours worked) if the client cancels early; non-refundable booking fees for calendar-blocking work. Vague deposit terms create the exact dispute they were meant to prevent.
Does a deposit get its own invoice?
Yes — send a real invoice for the deposit with its own number, and issue a receipt when it is paid. It keeps the paper trail clean and gives business clients the document their bookkeeping needs to release the payment.
Is sales tax charged on a deposit?
It depends on your jurisdiction — some tax at the time of each payment, others when the sale completes. Many businesses apply tax proportionally on each invoice. Ask a local accountant once and encode the answer into how you bill.