How do I invoice clients for deposits or retainers in the US?

Understanding deposits and retainers (and why invoicing them correctly matters)

Deposits and retainers are two of the most common ways US freelancers, agencies, consultants, and service businesses protect their cash flow and reduce risk. They help you secure time on your calendar, cover early project costs, and ensure you aren’t financing a client’s work out of your own pocket. But even though they’re common, invoicing them can get confusing fast—especially when you start thinking about what the payment represents, when it’s earned, how to apply it later, and what happens if the project changes or ends early.

When you invoice a client for a deposit or retainer, you’re doing more than requesting money. You’re setting expectations about scope, scheduling, and what will happen with that money as work progresses. Clear invoicing also reduces disputes, speeds up approvals, and makes your bookkeeping cleaner. It also helps clients understand what they’re paying for—whether it’s a portion of a defined project, a reserved block of availability, or a prepayment that will be applied to future invoices.

In the US, there isn’t one single “correct” way for everyone, because the best approach depends on your industry, your contract terms, your state’s rules, and how you recognize revenue in your accounting. Still, there are widely used invoicing patterns you can follow that keep things simple, professional, and consistent. This article walks through practical methods you can use to invoice deposits and retainers, the terminology to use, how to apply the payment later, and how to handle common edge cases like cancellations, rollovers, and partial refunds.

Deposit vs. retainer: what’s the difference in everyday business terms?

People often use “deposit” and “retainer” interchangeably, but they typically mean different things. Understanding how you intend the payment to work helps you invoice it correctly and avoid misunderstandings.

Deposits

A deposit is usually a partial upfront payment toward a specific project with a defined deliverable. It is commonly credited against the final project cost. For example: “50% deposit to begin website redesign.” In many service businesses, the deposit is meant to cover initial labor and expenses and reduce the risk of a client walking away after you’ve started work.

Deposits are often tied to milestones. You might invoice 30% upfront, 30% at the midpoint, and 40% on completion. The deposit can be refundable or non-refundable depending on what your contract says, but it should always be clearly defined in writing.

Retainers

A retainer is often a payment made to secure ongoing access to your services. It can be structured several ways:

1) “Availability” retainer: The client pays to reserve your time or priority. This may not directly map to hours worked. Some retainers are partially or entirely earned upon receipt because you are committing availability and potentially turning away other work.

2) Prepaid hours retainer: The client prepays for a set number of hours each month (for example, 10 hours/month). You track time, apply it against the retainer, and bill overages separately.

3) Minimum monthly spend: The client agrees to a minimum amount billed monthly for ongoing services. This is more like a subscription or recurring services invoice than a traditional retainer, but many businesses call it a retainer.

The key difference is that a deposit typically applies to a specific project, while a retainer often applies to ongoing work or access. Your invoice should reflect that difference in the line item descriptions, the terms, and how you apply the payment later.

Choose the right invoicing model for your situation

Before you send an invoice, decide which model best matches how you deliver value. There are four common models that work well for US clients and keep accounting and client communication straightforward.

Model A: Deposit applied to a single project (most common for fixed-scope work)

Use this model when the client has a defined project, a fixed fee (or a clear estimate), and you want an upfront commitment. The deposit is credited later on the final invoice (or applied to a later milestone invoice).

Model B: Prepayment retainer applied to future time or services (common for hourly consulting)

Use this model when you track hours or deliverables over time. The client prepays a set amount and you draw down the balance as you work. Each month you provide a statement of work completed and how much of the retainer remains.

Model C: Earned-on-receipt retainer (common for reserving availability)

Use this model when the client is paying for access, priority, or availability rather than a specific quantity of work. This is common in legal, consulting, and creative industries when you are committing to be on-call or maintaining capacity. The invoice should clearly state what the retainer covers and when it is earned.

Model D: Recurring service fee (subscription-like retainer)

Use this model when you provide ongoing work each month with predictable deliverables (for example: “monthly bookkeeping,” “social media management,” “website maintenance,” or “fractional marketing services”). In practice, this is invoiced as a recurring monthly service. Some businesses call it a retainer, but the invoice usually looks like a monthly service fee rather than a deposit.

What to include on a deposit or retainer invoice

A strong invoice reduces back-and-forth and makes it easy for the client’s accounting team to approve and pay. Whether you’re invoicing a deposit or retainer, include these elements to keep things clear:

Invoice number and date: Use a consistent numbering scheme. US clients often need this for their AP process.

Client details: Legal business name, billing address, and the contact person (especially important for larger organizations).

Your business details: Your business name, address, email, phone, and tax ID if you choose to include it (many small businesses do not put sensitive IDs on invoices unless necessary).

Clear line item descriptions: The line item name should say “Deposit” or “Retainer” with enough context to avoid confusion.

Amount and payment terms: Include due date and acceptable payment methods.

How the payment will be treated: State whether it is refundable, whether it will be applied to future invoices, and any relevant conditions (like cancellation windows).

Project or agreement reference: Add the project name, PO number, or agreement date to help the client match the invoice to the contract.

Notes section: Use notes to explain application of funds, next steps, and what happens after payment (for example, “Work begins once deposit is received”).

How to invoice a deposit for a fixed-fee project

The simplest way to invoice a deposit is to create an invoice with a single line item labeled “Deposit” and specify that it is credited toward the total project fee. You want the client to understand two things immediately: (1) why you’re requesting money now, and (2) how it affects what they’ll pay later.

Recommended deposit invoice structure

Line item: “Project Deposit (50%) – Website Redesign (Project Name)”

Description: “Deposit to schedule and begin work. This deposit will be applied as a credit toward the total project fee of $X.”

Amount: $X (the deposit amount)

Notes: “Work begins upon receipt of deposit. Remaining balance will be invoiced at milestone(s) or upon completion.”

How to apply the deposit later

When you reach your final invoice (or the next milestone), you generally apply the deposit as a negative line item (a credit) so the client sees exactly what they’ve already paid.

Example on final invoice:

Line item 1: “Website Redesign – Final Payment” – $5,000

Line item 2: “Deposit Credit (Invoice #1023)” – -$2,500

Total due: $2,500

This approach keeps your documentation clean. The client has an invoice showing what they paid upfront and another invoice showing how it was credited. It also makes reconciliation easier if the client paid by ACH, check, or credit card.

Handling deposits with multiple milestones

If you invoice by milestones, you can apply the deposit credit on the first milestone invoice after the deposit, or hold it for the final invoice. Either approach can work—what matters is that you are consistent and transparent. Many businesses apply deposits on the final invoice because it’s easiest for clients to understand and reduces the chance you “double count” credits across multiple invoices.

How to invoice a prepaid retainer that is applied to future work

With a prepaid retainer (often called a “retainer balance” or “retainer bank”), you invoice the client for a set amount upfront, then track work performed and apply it against that balance. This is common for consultants, designers, developers, marketing contractors, and anyone billing hourly or by small deliverables over time.

Recommended retainer invoice structure

Line item: “Retainer Prepayment – March 2026 (10 Hours)”

Description: “Prepayment retainer to be applied to services performed. Time billed at $X/hour. Unused hours: [state your policy, such as roll over within 30 days, expire monthly, or convert to credit].”

Amount: $X (the retainer amount)

Notes: “Retainer will be applied to future invoices for work performed. You will receive a monthly summary of time used and remaining balance.”

How to show “drawdowns” against the retainer

There are two clean ways to handle this on invoices:

Approach 1: Monthly service invoice + retainer credit line

You issue a monthly invoice for the work performed (hours or deliverables), then add a credit line for the portion covered by the retainer. If the month’s work exceeds the retainer, the client pays the difference.

Approach 2: Retainer statement (invoice-like record) + separate invoice for overages

You provide a monthly statement showing hours used and remaining balance, and only send an invoice if the client owes an overage. This reduces payment friction for clients, but some clients prefer a standard invoice each month for their records. If you choose this method, keep the statement formatting consistent and reference the original retainer invoice number.

Keeping the client informed

Prepaid retainers work best when clients can see what’s being consumed. Include a short monthly summary that lists: (1) starting retainer balance, (2) work performed, (3) amount applied, and (4) remaining balance. Even if your invoice app tracks this automatically, it helps to present it clearly in the invoice notes or an attached breakdown.

How to invoice an earned-on-receipt retainer (availability retainer)

An availability retainer is different: the client is paying for reserved access to you, priority response, or capacity. Because the value is the reservation itself, many providers consider all or part of the retainer earned when paid. If you use this model, clarity in invoicing and terms is essential to avoid disputes.

Recommended invoice structure

Line item: “Monthly Availability Retainer – April 2026”

Description: “Retainer to reserve capacity and priority availability. Earned upon receipt. Includes up to [X] meetings / priority response / on-call coverage as described in the service agreement.”

Amount: $X

Notes: “This retainer is for reserving availability and priority access. Any additional project work will be invoiced separately unless otherwise stated in the agreement.”

When to combine availability and prepaid work

Some businesses split the difference by charging a smaller earned-on-receipt availability fee plus a separate prepaid hours bank. If you do this, invoice them as two separate line items so the client understands what is earned immediately versus what will be applied to future work.

How to invoice recurring service retainers (monthly packages)

If your “retainer” is really a monthly package (for example, “monthly content creation,” “monthly bookkeeping,” “maintenance and support,” or “fractional CFO services”), the cleanest method is to invoice it like a recurring service. You’re charging for service delivery during a defined period.

Recommended invoice structure

Line item: “Monthly Service Package – May 2026”

Description: “Includes: [list key deliverables]. Additional work outside package billed at $X/hour or quoted separately.”

Amount: $X

Notes: “Service period: May 1–May 31. Payment due on receipt (or Net 7/Net 15).”

Why this reduces confusion

Clients understand monthly packages because they resemble subscriptions. It also reduces disputes about whether funds are “held,” “applied,” or “refundable,” because the invoice is for service during a time period.

How to handle sales tax and compliance concerns (without overcomplicating the invoice)

Sales tax in the US varies widely by state and by what you sell (services vs. tangible goods vs. digital products). Some deposits and retainers may be taxable if the underlying product or service is taxable in that jurisdiction. Some states tax certain services, others don’t, and local rules can add another layer.

Rather than guessing on the invoice itself, keep your invoice descriptions accurate and consistent with the underlying service. If you are required to collect sales tax for what you provide, apply your tax settings to the appropriate taxable line items. If the deposit is simply a partial payment toward a taxable product, it may be treated as part of the taxable amount. If the retainer is for taxable services, it may be taxable as well.

The practical best practice is to align your invoice line items to what you are actually selling and make sure your tax configuration matches your business obligations. If you’re unsure, consult a local tax professional because the correct handling can depend on your state registration status and the client’s location.

Refundable vs. non-refundable: how to communicate it on the invoice

Clients care a lot about whether a deposit or retainer is refundable. Disputes usually happen when expectations weren’t explicit. Your invoice should never be the only place you define refundability (your contract or agreement should do that), but the invoice can reinforce the terms in plain language.

If the deposit is refundable (common with cancellations before work starts)

In the invoice notes, include a simple statement: “Deposit is refundable if the project is canceled before work begins, subject to the cancellation terms in the agreement.”

If the deposit is partially refundable

Use language like: “Deposit is refundable minus time and non-recoverable costs incurred prior to cancellation, per the agreement.”

If the deposit is non-refundable

Be direct and calm: “Deposit is non-refundable and reserves project start date and initial work allocation, per the agreement.”

Even if you are confident in your policies, keep the invoice wording professional and neutral. The goal is clarity, not intimidation.

How to invoice deposits and retainers with professional payment terms

Payment terms matter because deposits and retainers are usually tied to scheduling. You don’t want a situation where the client delays payment but still expects you to hold a start date. Align your terms with your workflow.

Common deposit payment terms

Due on receipt: Best when work starts only after payment. You can also specify “Due upon receipt to confirm scheduling.”

Net 7: A short window that can work with corporate AP while still protecting your schedule.

Specific due date: If the client needs a date for their system, give a concrete due date and mention what happens if it’s missed (for example, the start date may move).

Common retainer payment terms

Due on the 1st of the month: Typical for monthly packages and prepaid hours retainers.

Auto-pay / saved payment method: If your invoice workflow supports it, auto-pay helps retainers stay consistent and reduces administrative work.

Late fees: If you charge late fees, keep them reasonable and make sure they are allowed under your local laws and included in your agreement.

What the invoice should say: examples of clear line item wording

Here are practical examples you can adapt. The structure matters more than the exact words: name the payment type, connect it to the project or period, and explain how it will be used.

Deposit line items

“Project Deposit (30%) – Brand Identity Package”

“Deposit to Schedule – Wedding Photography (Date: June 14)”

“Initial Deposit – Custom Software Build (Phase 1)”

Prepaid retainer line items

“Retainer Prepayment – 10 Hours (February)”

“Support Retainer – $2,000 Credit Bank”