Deposit and progress invoices: how they work
For bigger jobs you rarely wait until the end to be paid. A deposit or progress invoice brings money in earlier and protects you if the project stops.
The three common ways
- Deposit or retainer: an upfront amount, often 25% to 50%, before work starts.
- Progress (milestone) invoices: a share of the price when a stage is done.
- Final invoice: the rest, after delivery.
Step by step
- Agree it in writing in the quote: amounts, dates or milestones and payment terms.
- Send a deposit invoice (number it like any invoice) and describe what it covers, for example “Deposit 30% for website redesign”.
- Record the payment when it arrives.
- On the final invoice, list the whole job, show the money already received as “Deposit / payments received” and refer to the deposit invoice. The balance due is what remains.
Example
| Line | Amount |
|---|---|
| Website redesign (total) | $6,000.00 |
| Deposit received (invoice INV-1001) | −$1,800.00 |
| Balance due | $4,200.00 |
Sales tax on deposits
When tax on a deposit is due depends on the state and on what you sell. Ask your state’s revenue department or a tax professional before you decide how to invoice taxable work in stages. See sales tax on invoices.
Frequently asked questions
Is a deposit refundable?
That depends on your agreement. Say in the quote whether a deposit is refundable and what it covers.
Should a deposit have its own invoice number?
Yes. Give every invoice a unique number and refer to it on the final invoice.
How much deposit is normal?
Many service businesses ask for 25% to 50% upfront for larger projects.
Related
- Payment terms (Net 30)Invoice payment terms explained: Net 30, Due on Receipt, 2/10 net 30
- Late fees and interestLate fees on invoices: can you charge interest?
- Sales tax on invoicesSales tax on invoices: what small businesses need to know
- Step-by-step guideHow to create an invoice in 10 steps
This page is general information as of October 2026. Rules differ by state and industry; check your situation with a tax professional or your state’s revenue department.