Deposits and progress billing

If you invoice once, at the end, you finance the entire job yourself and carry the whole risk of not being paid until the moment you have the least leverage. Splitting it into two or three payments changes both, and it prevents problems that chasing can only try to fix afterwards.

What a deposit is for

Deposits are usually explained as protection against not being paid. That's true, but a deposit has two other effects that matter more.

A deposit gets the client committed. A client who has paid something treats the project as started, so they tend to answer questions faster, schedule reviews and stop treating the work as provisional. A job with no money paid is easier to let stall. The cost of that is usually the weeks you held in your calendar for something that never began, more than any unpaid work.

A deposit also works as a filter. A client who objects to a standard deposit on a first project is telling you something early, before it has cost you much. It isn't always a bad sign: some organisations can't pay in advance, and that's a procurement rule, not a judgement on you. Either way, you want to know before you've built a month around them.

How much, and how to split it

There is no universal figure, and anyone quoting one is describing their own trade. What is fairly general:

• Two payments (something up front, the rest on completion): suits short jobs, and is the simplest thing to propose to a new client.
• Three or more, tied to stages: suits anything long enough that a month could pass without an invoice. Tie each payment to a deliverable the client can see has happened, not to a calendar date, so there is nothing to argue about.
• Enough up front to cover what you spend before the next payment lands. If a job needs you to buy something, licence something or subcontract something, that money shouldn't come out of your pocket to sit in somebody else's project.

Each stage is a separate invoice with its own number and its own due date. The final invoice shows the full amount and the deposit already paid, so the balance owing is on the document and not in the client's head. Say you quote 5,000 on 40% up front: the first invoice is for 2,000, and the final one shows 5,000 less the 2,000 paid, leaving 3,000 owed. The invoice calculator takes an amount already paid and works the balance down to what is still owed.

How to ask

The request goes badly when it sounds like suspicion, and fine when it sounds like how you work. The difference is mostly in when you say it and how much you explain.

Put it in the quote, not in a separate conversation afterwards. I recommend one line, stated as process: "Payment: 40% on acceptance, 60% on delivery." Don't add a justification, an apology or a story about being let down before. When terms come with reasons, the client can negotiate the reasons.

If it's questioned, I'd answer about scheduling, not trust: the deposit is what books the time, and the time is booked when it clears. That's true and easy to check, and it moves the conversation from "do you trust me" to "when do you want this done".

When it will not work

Some clients can't pay in advance: public bodies, large organisations with purchase-order systems, and anyone whose procurement runs on receipt of goods. Pushing there wastes goodwill on a rule the person you're talking to didn't write and can't change.

Shorten the exposure instead of removing it. I'd bill monthly or at each stage, not at the end, and keep the first stage small. That way, if something is wrong with the arrangement, you find out while the amount at risk is still 1 week of work and not 3 months.

Deposits and tax

A payment taken in advance may create a tax point when it's received, not when the work is done, and whether it does depends on where you are and what you sell. For UK VAT, HMRC's VAT guide on deposits says most deposits are advance payments that create a tax point when you receive them. Be sure to ask an accountant before you take the first one, not at the end of the year.