Deposit

What is a deposit?

A deposit is money collected from a client before you start work. It's a commitment from the client that secures your time and covers your initial costs—materials, scheduling, or simply the opportunity cost of turning down other work. The deposit is then credited toward the final invoice.

Deposits are standard practice in contracting, construction, custom fabrication, and many service businesses.

How much to charge

Common deposit amounts include:

• 25% — Light commitment, common for smaller jobs
• 50% — Standard for many contractors and service providers
• Materials cost — Covers your out-of-pocket expenses before work begins
• First milestone — Payment tied to completing an initial phase

The right amount depends on your industry, the project size, and your relationship with the client. Larger or riskier projects typically warrant larger deposits.

Why deposits matter

Deposits protect you in several ways. They confirm the client is serious and financially able to pay. They cover your costs if the project is cancelled. They improve cash flow so you're not financing the client's project. And they reduce the final balance, making collection easier at the end.

Deposit vs. retainer

A deposit is typically a one-time upfront payment for a specific project. A retainer is an ongoing payment to secure continued access to your services over time. Deposits are credited against the final bill; retainers may or may not be, depending on the arrangement.