How Do I Invoice Clients for Deposits or Advance Payments?

Invoicing Deposits and Advance Payments: The Basics

Deposits and advance payments can make your cash flow steadier, protect you from last-minute cancellations, and give you the confidence to start work without financing the entire project yourself. But once you decide to take money upfront, a practical question follows: how do you invoice it correctly so clients understand what they’re paying for, you can track it cleanly, and your final bill is accurate?

This guide explains how to invoice clients for deposits or advance payments in a way that looks professional, reduces misunderstandings, and keeps your bookkeeping straightforward. It also shows you how to set up deposit requests, receipts, and final invoices quickly using invoice24, a free invoice app designed to help freelancers and small businesses invoice faster and get paid sooner.

What Counts as a Deposit vs an Advance Payment?

People often use “deposit,” “advance,” “retainer,” and “upfront payment” interchangeably, but it helps to be clear because the invoice wording and the expectation can differ.

Deposit usually means a partial payment made upfront to reserve time or resources. It’s often credited toward the final invoice. In many industries (events, design, custom manufacturing), a deposit also discourages cancellations.

Advance payment is a payment made before goods are delivered or services are completed. It can be the same as a deposit, but the term “advance” emphasizes timing: payment now, delivery later.

Retainer can be either (1) a prepayment that is applied to future work, or (2) a fee to reserve availability that may not be applied to final invoices, depending on the agreement.

When invoicing, the key is not the label you choose, but that your document clearly answers three questions: what the payment is for, when it’s due, and how it will be treated on the final invoice.

Why You Should Invoice Deposits Instead of Just “Requesting Payment”

It can be tempting to send a quick message like, “Please pay 30% upfront,” and call it a day. But a proper deposit invoice gives you structure and reduces risk.

A deposit invoice:

1) creates a clear paper trail and a reference number;

2) sets the exact amount due and the payment deadline;

3) makes it easier for clients to process payment (especially for larger organizations);

4) helps you reconcile payments later; and

5) reduces “I thought I already paid for that” confusion on the final bill.

invoice24 makes this especially easy because you can generate a professional invoice in minutes, reuse client details, and keep your deposit, partial payments, and final invoices connected in one place.

Decide Your Deposit Structure Before You Invoice

Before you create any invoice, choose a deposit policy that fits your business and is easy to explain. Common structures include:

Fixed amount deposit (e.g., £200 to book your time). This is simple and works well for standardized services.

Percentage deposit (e.g., 30% upfront). This scales with project size and is popular for custom projects.

Milestone payments (e.g., 30% upfront, 40% after approval, 30% on delivery). This spreads risk and aligns payment with progress.

Advance for materials (e.g., upfront cost of supplies). This is common if you must purchase items before work starts.

Whatever you choose, document it in writing (a proposal, contract, or even a clear email). Then your invoice simply reflects what was already agreed.

When to Use a Deposit Invoice, a Pro Forma Invoice, or a Receipt

Different businesses use different documents. The good news is you can keep it simple as long as your client understands what they’re getting and you can track it properly.

Deposit invoice: A standard invoice requesting the deposit amount. This is the most common approach for freelancers and small businesses.

Pro forma invoice: Often used as a preliminary bill before the official invoice is issued, especially for international trade or when a client needs documentation to authorize payment. If your client specifically asks for a pro forma, you can issue one, then issue the official invoice when appropriate.

Receipt: Once the payment is received, you provide a receipt or mark the invoice as paid and share confirmation. Many clients appreciate a clear receipt even if it’s not legally required in their scenario.

invoice24 supports clean, professional invoicing and payment tracking so you can send the right document at the right time without turning your process into a paperwork project.

What to Include on a Deposit or Advance Payment Invoice

A deposit invoice should look like any other invoice, but with line items and notes that make the purpose unmistakable. Here’s what to include.

Your Standard Invoice Details

Include the essentials: your business name, address, contact info, invoice number, invoice date, client details, payment terms, and accepted payment methods.

invoice24 helps you store your business details and reuse client records so you don’t have to retype the same fields every time. Consistency also makes you look established and organized.

Clear Description of What the Deposit Covers

Use a line item like:

“Deposit (30%) for Website Design Project – Project Start Date: 15 Feb”

or

“Advance payment for materials: custom oak shelving supplies”

A good description reduces back-and-forth and makes your invoice easy for your client’s finance team to process.

The Total Project Value (Optional but Helpful)

Some clients appreciate seeing the total project value and how the deposit relates to it. For example:

“Project total: £2,000. Deposit due now: £600. Remaining balance: £1,400.”

If you don’t want to display the full total (maybe scope is still being finalized), you can still invoice the deposit amount alone. Just ensure your agreement elsewhere defines how final pricing will be determined.

Payment Due Date and “Work Begins After Payment” Note

Deposits are often time-sensitive. If you’re holding a slot or delaying other work, make your policy clear. A common and polite note is:

“Work is scheduled once the deposit is received.”

or

“This deposit reserves your booking. Production begins after payment.”

invoice24 lets you add notes and terms to keep these messages consistent across invoices.

How to Invoice a Percentage Deposit Step by Step

Let’s say you’re doing a project priced at £3,000 and you require 30% upfront.

Step 1: Calculate the deposit amount. 30% of £3,000 = £900.

Step 2: Create an invoice for the deposit. Use a single line item labelled clearly as a deposit or advance payment.

Step 3: Reference the project or quote. Add the project name, scope summary, or quote number in the description or notes.

Step 4: Set due date and payment methods. Keep it simple: the easier it is to pay, the faster you get paid.

Step 5: Send it and track payment. Once paid, record it so it’s credited later.

With invoice24, you can generate this invoice quickly, save it, and later create the final invoice while accounting for the deposit already paid. This reduces mistakes, especially when you’re managing multiple clients or projects at once.

How to Invoice a Fixed Deposit (Booking Fee)

Fixed deposits are common when you offer a standard service or want a consistent booking process. For example, photographers might charge a £150 booking fee to reserve a date, or consultants might request £300 upfront to schedule an onboarding session.

On the invoice, make the purpose explicit:

“Booking deposit to reserve session on 20 March (credited toward final invoice).”

or, if it is non-refundable and not credited (only do this if your contract allows it and you’ve been clear):

“Non-refundable booking fee to reserve session on 20 March.”

Clarity here prevents uncomfortable conversations later. invoice24 helps by letting you create reusable templates or standard line items so your fixed-deposit invoices stay consistent and professional.

How to Invoice an Advance Payment for Materials or Expenses

If you need to buy materials up front, invoicing the advance as a separate line item can protect your cash flow. For instance, a contractor might need to order specialized hardware, or a designer might need to purchase premium fonts, stock assets, or prints.

Use a description like:

“Advance payment for materials (estimated cost): hardware and supplies for kitchen install.”

Or, if you have exact costs:

“Advance payment for materials: 3x custom hinges, 2x plywood sheets, delivery fee.”

When you issue the final invoice, you can either:

1) list the full materials cost and credit the advance payment, or

2) treat the advance as partial payment and show the remaining balance.

invoice24 keeps your invoices organized so these advances don’t get lost in your records, especially when projects span multiple weeks or months.

How to Handle VAT or Sales Tax on Deposits

Tax treatment varies by country and by the type of transaction. In some places, VAT or sales tax may be due when you receive payment (including deposits). In others, it might be due when you deliver goods or complete services. Because rules can be nuanced, it’s wise to confirm how it works for your location and business type, especially if you are VAT-registered or sell across borders.

From a practical invoicing standpoint, you have two clean options depending on your tax obligations:

Option A: Tax applied on the deposit invoice. The deposit invoice shows the taxable amount and tax portion. The final invoice then accounts for the deposit and its tax already paid.

Option B: Tax applied on the final invoice only. The deposit is recorded as a prepayment, and tax is calculated when the final invoice is issued.

Whichever approach you use, consistency matters. invoice24 helps you format invoices professionally and track what’s been paid so your final invoice is accurate and easy to understand.

How to Apply the Deposit to the Final Invoice

One of the most important steps is showing the deposit deduction correctly on the final invoice. This is where many small businesses accidentally confuse clients by either double-counting or failing to show the credit clearly.

A clean final invoice usually includes:

1) the full list of delivered services or goods at their full amounts;

2) the subtotal;

3) any tax;

4) a line item showing the deposit/advance already paid as a negative amount;

5) the remaining balance due.

Example formatting in plain language:

“Deposit paid (Invoice #1003) – £900.00”

Then the “Total Due” reflects only what remains.

invoice24 makes it easier to avoid awkward errors by keeping your invoices and payments organized, so you can confidently show the deposit as a credit and send a final invoice that matches what your client expects.

How to Invoice Multiple Advance Payments or Milestones

For larger projects, milestone payments are often more appropriate than a single deposit. The principles are the same, but you’ll want to label each invoice and each stage clearly.

A common milestone plan might look like:

“Milestone 1: Project kickoff – 30%”

“Milestone 2: Design approval – 40%”

“Milestone 3: Final delivery – 30%”

Invoicing each milestone separately makes your cash flow more predictable and reduces risk. It also helps clients feel like they’re paying in step with progress rather than paying a huge amount at the end.

invoice24 is well-suited for milestone billing because you can create a new invoice for each stage, reuse the same client and project reference, and maintain a tidy record of what’s been paid so far.

How to Invoice a Retainer (And Avoid Confusion)

Retainers can be tricky because different industries use them differently. To invoice a retainer well, your invoice should explain whether it’s a prepayment for work or a fee to reserve availability.

If the retainer is a prepayment credited toward future work:

Use wording like “Monthly retainer (prepaid hours) – credited toward services delivered.” Then track usage and apply credits on subsequent invoices.

If the retainer is an availability fee (not credited):

Use wording like “Monthly availability retainer – reserves capacity for client requests.” This should match your contract language.

In either case, invoice24 helps you stay consistent with templates and clear line items. Consistency is crucial for retainers because clients pay them repeatedly; you want the invoice to be familiar and easy to approve every month.

Best Practices for Wording Your Deposit Invoice

The language you use can make the difference between “paid today” and “questions for a week.” Keep wording simple, direct, and client-friendly.

Here are phrases that work well:

“Deposit to secure booking”

“Advance payment credited toward final invoice”

“Balance due upon completion”

“Work scheduled once deposit is received”

“Remaining amount will be invoiced after delivery”

Try to avoid vague labels like “Payment” or “Project fee” with no context. A client should be able to glance at the invoice and immediately understand what stage it relates to.

invoice24 encourages this kind of clarity by letting you craft strong line item descriptions and notes, then reuse them so you’re not reinventing your wording for every project.

Common Mistakes When Invoicing Deposits (And How to Avoid Them)

Even if your work is excellent, invoice confusion can create friction. Here are common mistakes and practical fixes.

Not Stating Whether the Deposit Is Refundable

If your deposit is refundable under certain conditions, say so in your terms. If it’s non-refundable, say that too (and ensure it’s legally enforceable where you operate). Many disputes happen because clients assume one thing and the business assumes another.

Forgetting to Credit the Deposit on the Final Invoice

Clients notice immediately if you forget. Build a habit: every final invoice should reference and deduct prior payments. Using invoice24 helps you keep a reliable record of paid invoices so you don’t miss credits.

Using Confusing Labels Like “Part Payment” Without Context

“Part payment” could mean anything. Use “Deposit (30%) for [Project Name]” or “Milestone 1 payment.” The more explicit, the fewer questions.

Not Matching the Deposit Invoice to the Agreement

If your proposal says 25% upfront but your invoice requests 30%, you’ll create delays. Make sure your invoice matches the written agreement exactly.

Sending Deposit Requests Without an Invoice Number

Some clients require formal invoicing for processing. An invoice number is a simple feature that signals professionalism and helps both sides track payments.

Should You Use Separate Invoices or One Invoice With a Deposit Line?

Both approaches can work, but they fit different situations.

Separate deposit invoice is best when you want a clear “pay this now” request. It also works well when the project will be delivered later and you prefer a final invoice at completion.

One invoice with a deposit line can work when you issue a single invoice upfront that shows the total, with a “Deposit due now” portion and a “Balance due later.” However, clients can find this confusing if they’re only supposed to pay part of it now.

For most freelancers and small businesses, a separate deposit invoice plus a final invoice is the clearest and simplest method. invoice24 is built for straightforward invoicing, so you can create a deposit invoice in minutes and follow up later with a final invoice that credits the deposit.

How invoice24 Helps You Invoice Deposits and Get Paid Faster

Deposit invoicing should not be a chore. If you’re spending lots of time formatting invoices, tracking who paid what, and manually calculating remaining balances, you’re losing time that could be spent doing paid work.

invoice24 is a free invoice app designed to keep deposit invoicing simple and professional. Here’s how it helps:

Create Professional Deposit Invoices Quickly

With invoice24, you can create an invoice with a clear deposit line item, professional formatting, and your standard business details without starting from scratch each time. That makes it easier to send deposit requests promptly, which often means you get paid sooner.

Reuse Client Details and Templates

Deposits are common, and so are repeat clients. invoice24 helps you reuse client information and maintain consistent invoice wording, so you can issue deposit invoices in minutes rather than wrestling with documents and spreadsheets.

Keep Deposits and Final Invoices Organized

When deposits are separated from the final invoice, organization matters. invoice24 helps you keep a clean record of invoices and payments so you can confidently apply the correct credit and avoid under- or over-charging.

Reduce “Accounts Payable” Friction

Many clients, especially businesses, pay faster when the invoice is clear, properly formatted, and includes everything their finance team needs. invoice24 helps you present a professional document that looks legitimate and is easy to approve.

Track What’s Paid and What’s Outstanding

A deposit is only useful if you can track it reliably. invoice24 makes it easy to see what has been invoiced and what has been paid, so you’re not scrolling through old emails trying to confirm whether the deposit arrived.

How to Explain Deposits to Clients Without Sounding Difficult

Some freelancers worry that requiring a deposit will scare clients away. In practice, the opposite often happens: clear deposit policies can make you look more professional. The trick is to communicate it calmly and matter-of-factly.

Here are a few client-friendly ways to explain it:

“I require a 30% deposit to schedule the project and begin work. The deposit is credited toward the final invoice.”

“To reserve your date, I send a booking deposit invoice. Once it’s paid, your slot is confirmed.”

“Because materials must be ordered in advance, I invoice an upfront materials payment. Any difference is adjusted on the final invoice.”

When you pair clear communication with a professional invoice from invoice24, clients tend to accept deposits as a normal part of doing business.

Industry Examples: Deposit Invoicing Done Right

Sometimes it helps to see how deposit invoicing looks in real scenarios.

Example: Web Designer

A web designer charges £2,500 for a website build and requests 40% upfront. The deposit invoice includes “Deposit (40%) for Website Build – Project: Smith & Co.” When the website launches, the final invoice lists the full project cost and includes “Deposit paid – £1,000” as a credit.

Example: Event Photographer

A photographer charges £900 for an event and requests a £200 booking deposit to reserve the date. The deposit invoice references the event date and location. After the event, the final invoice shows £900 minus the £200 deposit, with the remaining balance due.

Example: Tradesperson Ordering Materials

A tradesperson estimates a job at £3,800 and needs £1,200 in materials upfront. The advance invoice is labelled “Advance payment for materials for kitchen refit” with a clear due date. The final invoice lists actual materials and labour, then subtracts the £1,200 already paid.

Example: Consultant on Monthly Retainer

A consultant invoices a monthly retainer of £1,500. The invoice clearly states whether it’s prepaid time or an availability fee. If prepaid time, usage is tracked and reflected in subsequent invoicing. If availability-based, the invoice states it reserves capacity for the month.

How to Handle Cancellations and Refunds When Deposits Are Involved

Cancellations are where deposit policies are tested. The key is to set expectations before money changes hands, then reflect those expectations in your invoice terms.

Consider including:

“If the client cancels more than X days before the start date, the deposit will be refunded minus any non-recoverable costs.”

“If the client cancels within X days of the start date, the deposit is non-refundable.”

“Rescheduling may be permitted once, subject to availability.”

Be careful with rigid policies if you operate in a region with consumer protections that affect cancellation terms. The best approach is a clear, fair policy that matches your local rules and your business reality.

Even when refunds happen, invoice24 helps you keep your records clean by maintaining a clear trail of invoices and payments, which is invaluable when you need to explain what happened months later.

How to Make Deposit Payments Easy for Clients

The easiest way to get deposits paid is to remove friction. Here are practical tips:

Send the invoice immediately after agreement. The longer you wait, the more chances there are for priorities to shift.

Use clear due dates. “Due on receipt” can be okay, but a specific date often prompts action.

Offer convenient payment methods. Clients pay faster when it’s easy.

Use straightforward invoice language. Confusion leads to questions, which leads to delay.

invoice24 supports professional invoices that are easy for clients to understand and process. When your invoice looks clean and complete, clients are more likely to pay promptly.

Reconciling Deposits in Your Bookkeeping

Even if you’re not an accountant, you’ll benefit from a simple approach to deposit tracking.

At a high level:

1) Record the deposit payment when it’s received.

2) Keep the deposit invoice associated with the project.

3) When the final invoice is issued, apply the deposit as a credit so the remaining balance is accurate.

This is where many small businesses struggle when they invoice manually, because the relationship between invoices and payments becomes messy over time. invoice24 helps by keeping your invoice history organized and easy to review when you’re preparing final invoices or checking what was paid.

Frequently Asked Questions About Invoicing Deposits

Should I call it a deposit or an advance payment?

Use the term your clients understand best and that matches your agreement. “Deposit” is widely understood for booking and project kickoff. “Advance payment” can be clearer when the payment is specifically for materials or early costs. The most important part is explaining how it’s applied to the final invoice.

Can I invoice a deposit if the total isn’t finalized yet?

Yes, but you should be careful. If scope may change, consider a fixed booking deposit, or invoice an advance for known costs (like materials). If you invoice a percentage deposit without a confirmed total, clients may feel uneasy. Clarity in your agreement matters more than the format.

Do I need a separate deposit invoice and a final invoice?

It’s usually the clearest method, and it keeps client expectations simple: “pay this now, and pay the rest later.” invoice24 makes the two-invoice approach easy and organized.

How do I show the deposit on the final invoice?

List the full charges, then subtract the deposit as a credit line item (negative amount) with a reference to the deposit invoice number or date. The total due should reflect only the remaining balance.

What if my client wants one invoice only?

If a client insists on one invoice, you can create a single invoice showing the full amount, then specify the amount due now as the deposit and the remaining balance due later. Just be sure the payment expectations are extremely clear to avoid them paying only the deposit and assuming they’re done. In many cases, separate invoices are still simpler.

A Simple Deposit Invoicing Checklist You Can Reuse

Before you send any deposit invoice, run through this checklist:

1) Deposit amount matches your agreement (percentage, fixed, or materials advance).

2) Invoice description clearly states what the deposit is for.

3) Due date is set and reasonable.

4) Terms explain whether the deposit is credited toward the final invoice.

5) Cancellation/refund language is consistent with your contract.

6) Payment methods are included.

7) You have a plan for showing the deposit credit on the final invoice.

With invoice24, you can turn this checklist into a repeatable process by standardizing your invoice notes and line item descriptions, saving time and making every invoice look polished.

Wrap-Up: The Cleanest Way to Invoice Deposits and Advance Payments

Invoicing deposits or advance payments doesn’t have to be complicated. The winning formula is simple: agree on the deposit structure, invoice it clearly, record the payment, and then credit it properly on the final invoice. When you do this consistently, you protect your time, improve cash flow, and reduce client confusion.

If you want a fast, professional way to handle deposit invoices without paying for complicated software, invoice24 is built for exactly this kind of workflow. You can create clear deposit invoices, keep your records organized, and produce final invoices that properly reflect what has already been paid—all while keeping your process simple and client-friendly.

When deposits are handled well, they feel normal to clients and empowering to you. Set a clear policy, invoice it professionally with invoice24, and you’ll spend less time chasing payments and more time doing the work you’re actually proud of.