How to Create a Deposit Invoice

A deposit invoice is a document used to request a deposit from a customer. This type of invoice is typically used by businesses that require a down payment for goods or services.

In this piece, we do a deep dive into creating a deposit invoice step-by-step, what to include and when to use one.

What is a deposit invoice?

A deposit invoice is a type of invoice that allows businesses to request partial payment in advance for goods or services delivered at a later date. Pay-over-time payments benefit the customer by breaking up the costs into more affordable chunks. 

Deposits are beneficial for companies that need to secure funds and customer commitment before beginning a project. Some small businesses also request deposits in advance to cover the cost of materials.

How do you create a deposit invoice?

Here are the simple steps that you can follow to create a deposit invoice:

Step 1: Create the first invoice with the deposit

You need to create the deposit invoice before providing the goods or services. You must issue your first invoice and receive payment before starting the work. Clarity up front will avoid confusion or conflicts about the full amount owed.

To create a deposit invoice, you will need to include the following information:

– The word “Deposit” in the title or header of the invoice

– The date of the invoice

– The name, contact information, and bank account of the business

– The name, contact information, and bank account of the customer

– A brief description of the goods or services being invoiced

– The total amount of the deposit

– The balance amount

– The due date for paying the balance

– The terms and conditions of the invoice

Step 2: Send the deposit invoice to the customer

Once you have created the deposit invoice, you will need to send it to the customer. You can do this by email, regular mail, or hand-delivering the invoice. Ensure you do it well in advance to receive the invoice payment before starting the project.

Step 3: Create the final invoice by deducting the deposit amount

Once the work is completed and the goods or services have been delivered, you must create an invoice for the final payment. 

This invoice should include the details of the deposit amount, date of issue, business details, and the customer’s contact information. The final invoice should also include the date that the balance is due and the terms and conditions of the invoice. You can create invoices using online invoice templates.

When should you use a deposit invoice? 

Deposit invoices can be used for a variety of purposes. Some businesses use deposit invoices to secure a commitment from the customer before starting a project, while others use them to cover the cost of materials and improve cash flow.

Here are some instances where you may want to consider using a deposit invoice:

  • You require payment in advance to cover the cost of materials.
  • You offer custom-made goods or services and need some security before you start working.
  • You are working as a freelancer with a new customer and want to ensure that you will be paid for your work.

Benefits of using a deposit invoice

Here are some benefits of using a deposit invoice:

  • Cover costs: Deposit invoices can also cover the cost of materials or other expenses incurred in advance of providing the goods or services. The upfront payment will cover the costs of materials, thereby reducing your liabilities and improving cash flow. 
  • Reduce risk: By requiring deposit payment, businesses can secure a commitment from the customer and reduce the risk of non-payment. This is particularly useful for companies that provide services on a per-project basis. Once the customer has paid the initial amount, it will be difficult for them to turn down their services.
  • Avoid conflict: By issuing a deposit invoice, businesses can avoid customer conflicts about the owed amount. The customer will have already paid a portion of the total amount due.

Deposit invoice: dos and don’ts

Here are some best practices for creating a deposit invoice:

  • Keep it simple: The deposit invoice should be clear and concise. It should only include the necessary information, such as the date of the invoice, the name and contact information of the business and customer, a brief description of the goods or services being invoiced, the total amount of the invoice, and the date that the balance is due.
  • Be clear about the terms: The deposit invoice should include the terms and conditions of the transaction. This will help avoid confusion or misunderstanding about the agreement.
  • Ensure understanding: It is essential that you take the time to explain the deposit invoice to the customer. Make sure they understand the agreement so there are no surprises.
  • Get it in writing: The deposit invoice should be in writing and signed by both parties to protect your business’s interests in case of any dispute.

Here are some of the don’ts of deposit invoicing:

  • Don’t be late: The deposit invoice should be sent to the customer as soon as the agreement is reached. 
  • Don’t forget to follow up: Once the deposit invoice has been sent, it is critical to follow up with the customer to ensure they have received it and understand the terms.
  • Don’t be afraid to negotiate: The deposit amount is typically negotiable. You should clearly communicate the funds you need in order to get started. This will help avoid any conflict or misunderstanding about the terms of the agreement.
  • Don’t force your payment method: The deposit invoice should include the terms of the transaction, but it should not be used to force the customer to use a particular payment method. Instead, you should keep a clear line of communication with your customers and try to accommodate their needs.

Get paid faster with Broadly

Deposit invoices are a great way to protect yourself and ensure timely payment, but it’s essential to follow best practices to avoid confusion or conflicts. At Broadly, we provide customers with streamlined and automated payment solutions

Further, we also provide a wide range of reputation management services to improve customer experience and set up a website for success. Our platform makes it easy to get paid on time and avoid the hassle of invoicing. 

Get started with us today by scheduling a demo.