Handbook / Pricing your work

How to charge a deposit for services: amounts, terms and wording

A deposit is money a client pays upfront to secure your services before work begins. Deposits protect your time, cover early costs and confirm that the client is committed. For freelancers and service businesses, they are one of the simplest ways to reduce late cancellations and unpaid work.

Why deposits help

• Commitment: clients who pay upfront are more likely to follow through.
• Cash flow: you can buy materials or pay subcontractors without using your own money.
• Protection: if the client cancels late, you are not left with nothing for time you turned other work away.
• Screening: a client unwilling to pay any deposit may be a sign of future payment problems.

When to ask for one

Common situations include:

• new clients without a payment history
• custom or made-to-order work
• reserving a specific date, such as for an event
• projects with significant upfront costs
• long projects, where a deposit starts a series of payments

For long projects, a deposit can be the first step in progress billing.

Choosing an amount

There is no universal rule. Consider:

• upfront costs, such as materials or subcontractors
• the time you reserve and the work you turn down
• the size and length of the project
• what is normal in your industry
• your risk with this client

Many businesses use a fixed percentage of the project price; others use a flat amount for date bookings. Whatever you choose, apply it consistently so clients see it as standard policy, not a judgment about them.

Put the terms in writing

Your agreement or proposal should state:

• the deposit amount and due date
• what it secures, such as a date or a place in your schedule
• that work does not start, or the date is not held, until it is paid
• whether it is refundable, and under what conditions
• how it is applied to the final invoice
• what happens if the client cancels or postpones

Cornell's Legal Information Institute explains that consideration, something of value exchanged, is a basic element of an enforceable contract. Clear written terms show what the deposit was paid for. Rules on non-refundable deposits vary by state and situation, so get advice if a large sum is involved.

Wording examples

A deposit of [amount] is due on signing to reserve your date. The deposit is applied to your final invoice. It is non-refundable if you cancel less than [period] before the date.

Work begins once the deposit of [percentage] of the project fee is received. The balance is due on delivery.

Invoicing a deposit

Send a separate deposit invoice with:

• a clear label, such as "Deposit for [project]"
• the amount, due date and payment methods
• a reference to the agreement or proposal

See how to invoice. On the final invoice, show the full price, subtract the deposit received and show the balance due.

Recording deposits

Record each deposit when received, linked to the client and project. Your accounting method affects when income is recognised; IRS Publication 538 explains cash and accrual methods, and the guide to cash vs accrual summarises them. If you are unsure how advance payments are taxed, ask a tax professional. Keep records of agreements and payments; see how long to keep records.

Handling cancellations

If a client cancels, follow your written terms. Explain calmly, refer to the agreement and confirm in writing what happens to the deposit. If you choose to be flexible, such as moving the deposit to a new date, record that too.

Deposits and retainers

The words are used differently across industries. A deposit usually secures a job and is credited to the final bill. A retainer can mean an ongoing monthly fee for access to your services, or money held in advance and drawn down. Define the term in your agreement. See retainer pricing.

Payment methods

Make deposits easy to pay by offering bank transfer, card or online payment links.

Send a receipt for every deposit so the client has a record; see invoice vs receipt.

Require deposits where you carry risk or reserve time, choose a consistent amount, write down what it secures and when it is refundable, invoice it before starting, credit it on the final bill and record it properly.