Deposit and Progress Invoices: Billing in Stages

Billing the whole of a large job at the end is a quiet way to take on a great deal of risk. You pay for the materials, the time and the stress, and you wait to find out whether the client pays. Deposits and progress invoices solve that by spreading the payment across the life of the project, so the money arrives roughly as the work happens.

This guide explains each type of staged invoice, how much to ask for, how to word the documents, what the final invoice should show and how to handle refunds, tax and changes. There are worked examples for services, construction-style projects and products. To make the documents, use the free invoice generator.

Quick answer: Ask for a deposit of around 25 to 50 percent before you start, bill further stages as milestones are reached, and make the final invoice show the full price, the amounts already paid and the balance due. Put all of it in the quote or contract first.

The four kinds of staged billing

People use the words loosely, so it helps to separate them. Each solves a slightly different problem.

Type	What it is	When it is issued	Typical use
Deposit	A first payment before work starts	At acceptance of the quote	Almost any project
Progress invoice	A bill for work completed so far	At agreed intervals or percentages	Long or large projects
Milestone invoice	A bill triggered by a delivered milestone	When the milestone is approved	Phased projects
Retainer	A fixed regular fee for ongoing work	Usually monthly in advance	Ongoing support
Final invoice	The balance after earlier payments	On completion	Every staged project

A single project often uses several of these together: a deposit at the start, milestone invoices in the middle and a final invoice at the end.

Staged billing from the client’s side

It helps to see staged billing through the client’s eyes, because clients are the ones who have to agree to it. A client considering a large project is weighing risk too: will the work be delivered, on time, and to the standard promised? Staged payments answer that worry as well as yours.

Client concern	How staged billing helps
“What if they take the money and disappear?”	They pay only in step with visible progress
“What if the work is poor?”	They can pause or stop at a checkpoint
“How do we budget?”	Payments are spread and scheduled
“Who approves what?”	Each milestone is a clear approval point
“How do we know the price is fair?”	Each stage is itemised against the quote

When you propose a deposit, frame it as a shared protection, not a demand. A sentence such as “I take a 40% deposit to reserve your slot and cover early costs, and then bill by milestone so you only pay for work you have seen” tends to be well received. Most business clients are used to the idea, and many have their own approval processes built around stage payments.

Why bill in stages

Benefit	What it gives you
Cash flow	Money arrives while the work is under way
Reduced risk	You are never owed a large sum for long
Commitment	The client has put money in and is invested in the project
Smaller invoices	Easier for clients to approve and pay
Natural checkpoints	Approval at each stage prevents surprises
Fairness	The client pays for progress they can see

For the client, staged billing also has advantages: they can see value before paying everything and they can stop if things are going badly. Presented that way, it is easy to agree.

How much to ask for

There is no fixed rule. The right amount depends on your costs, the size of the project and the relationship.

Project	Common structure	Reasoning
Small job, under a week	50% deposit, 50% on delivery, or 100% upfront	Short and simple
Medium project, a few weeks	30 to 50% deposit, balance on delivery	Covers your early costs
Large project, months	20 to 30% deposit, then milestones, final 10 to 20% on completion	Spreads risk
Product made to order	50% to order, balance before shipping	Covers materials
Ongoing service	Monthly in advance	Predictable income
New or unknown client	Higher deposit	Reduces risk
Trusted repeat client	Lower deposit or terms	Reflects the relationship

A useful test is to ask what you would lose if the client disappeared after paying only the deposit. The deposit should at least cover your direct costs and a fair share of your time for the work you would have started. If it does not, raise it.

Fitting staged billing into your quote

The cleanest way to introduce staged billing is to build it into the quote, so the client agrees to it at the same time as the price. A payment schedule section can be short.

Stage	Trigger	Share	Amount
Deposit	Acceptance of this quote	30%	$3,600.00
Milestone 1	Design approved	30%	$3,600.00
Milestone 2	Build complete, ready for review	30%	$3,600.00
Final	Launch and handover	10%	$1,200.00
Total		100%	$12,000.00

Add a line for what happens if a milestone is delayed by the client, such as “If approval is not received within 10 working days, the milestone invoice will be issued automatically.” This protects you from a project that sits half-finished while payment waits. Add another for what happens at the end: “The final payment is due on handover.” The quote generator lets you list the schedule with the terms.

The documents, in order

A staged project creates a short chain of documents. Keeping each one clearly labelled, numbered and linked to the quote prevents confusion.

Step	Document	What it does
1	Quote	States scope, total price and payment schedule
2	Acceptance	Written agreement from the client
3	Deposit invoice	Requests the first payment
4	Receipt	Confirms the deposit was received
5	Progress or milestone invoices	Bill each stage
6	Final invoice	Shows full value, payments received and balance
7	Receipt	Confirms the final payment

The quote generator can state the schedule up front, and the receipt generator confirms each payment.

The deposit invoice

A deposit invoice looks like any other invoice, with a few specific features.

Element	Example
Title	Invoice, or “Deposit invoice”
Description	“50% deposit for kitchen renovation, as per quote Q-0031”
Reference to the quote	Quote number and date
Amount	A fixed sum or percentage with the total shown
Due date	Before work starts, such as “Due on acceptance”
What it secures	“Reserves your start date of 2 December”
Policy	“Deposit is non-refundable after materials are ordered”

Say clearly what the deposit is for and what happens to it. It reads as professional, and it prevents disagreement if the project is cancelled.

Progress and milestone invoices

Progress invoices bill for work completed. There are two common ways to define “completed”.

Method	How it works	Good for
Milestones	Each named deliverable triggers a payment	Projects with clear phases
Percentage complete	A share of the total, agreed or measured	Construction and long builds
Time and materials	Hours and costs to date	Uncertain or evolving scope
Fixed calendar dates	A set amount on set dates	Long projects with a steady pace

Whichever you use, say in the quote how stages are measured and who confirms them. An invoice for “milestone 2: design approved” is straightforward when the milestone was defined at the start. An invoice for “about 60% done” invites debate.

The final invoice

The final invoice should give the client a complete picture: the whole price, what has been paid and what remains. This is the most important design point in staged billing, because it prevents confusion and double payment.

Line	Amount
Project total (quote Q-0031)	$12,000.00
Less deposit paid (invoice 0051, 2 Dec)	-$3,600.00
Less milestone 2 paid (invoice 0056, 20 Dec)	-$3,600.00
Balance due	$4,800.00

Notice that every earlier payment is listed with its invoice number and date. A client or an accountant can reconcile the final figure at a glance.

Choosing the trigger for each payment

The trigger is the heart of any schedule. A good trigger is objective, visible to both sides and hard to dispute. A poor one invites argument.

Weak trigger	Why it fails	Better trigger
“When about half done”	Subjective	“When the first draft is delivered”
“When the client is happy”	Open-ended	“When the client approves in writing, or after 10 working days without comments”
“At the end of the month”	Unrelated to the work	“On delivery of milestone 2”
“When we have time”	No commitment	A specific date or event
“On completion”	Might be disputed	“On handover of the final files”

A deemed-approval clause is especially useful. If the client has not responded within a set period, the milestone is treated as approved. It stops one slow reply from freezing both the work and the payments, and it is easy to word fairly.

Worked example 1: a design project

A freelance designer agrees a $6,000.00 brand identity project: 40% deposit, 30% on concept approval and 30% on final delivery.

Invoice	Trigger	Amount	Paid
0061 Deposit	Quote accepted	$2,400.00	3 Nov
0064 Concept approved	Client approves concept	$1,800.00	21 Nov
0068 Final	Files delivered	$1,800.00	12 Dec
Total		$6,000.00

Each invoice references the quote and states the milestone. The final invoice lists the previous two as “paid” so the client sees $6,000.00 in total. In this case, the final invoice can also state “Paid in full” once the receipt is issued.

Worked example 2: a building or renovation project

Construction and renovation work often uses staged billing with a held-back retention.

Item	Detail
Contract price	$40,000.00
Deposit	10%: $4,000.00
Progress payments	Monthly, by percentage complete
Retention	5% held until completion and defect period ends

Here is how three monthly progress invoices might look.

Month	Work complete to date	Value to date	Less retention 5%	Less previously paid	This invoice
Month 1	20%	$8,000.00	-$400.00	-$4,000.00 (deposit)	$3,600.00
Month 2	55%	$22,000.00	-$1,100.00	-$7,600.00	$13,300.00
Month 3	90%	$36,000.00	-$1,800.00	-$20,900.00	$13,300.00

Check the Month 2 line: value to date of $22,000.00 less retention of $1,100.00 is $20,900.00 owed in total so far. Previously paid is $7,600.00 ($4,000.00 deposit plus $3,600.00 from month 1). The invoice is $20,900.00 minus $7,600.00, which is $13,300.00. Month 3: $36,000.00 minus $1,800.00 is $34,200.00; previously paid $7,600.00 plus $13,300.00 is $20,900.00; invoice $13,300.00.

At practical completion, the final invoice bills the remaining value, and the retention is released at the end of the defects period under the contract.

Worked example 3: a product made to order

A furniture maker agrees to build a dining table for $3,200.00, with 50% to start and the balance before delivery.

Stage	Document	Amount	Notes
Order	Deposit invoice 0072	$1,600.00	Covers timber and a start date
Completion	Final invoice 0075	$1,600.00	Due before delivery
Delivery	Receipt	Paid in full	Issued when delivered

On the final invoice, the maker shows the table price, the deposit paid and the balance. If tax applies, it is calculated on the full price and shown on the final invoice, with the deposit deducted from the total including tax.

Worked example 4: a retainer

A consultant provides up to 10 hours of advice each month for $1,500.00, invoiced on the first of the month.

Month	Invoice	Amount	Notes
January	0081	$1,500.00	Up to 10 hours, January
February	0085	$1,500.00	Up to 10 hours, February
March	0089	$1,500.00 + $150.00	Extra 1 hour at $150.00

Retainer invoices should state the period covered, what is included and what happens to unused hours. If hours do not roll over, say so in the agreement and on the invoice. A retainer is normally invoiced in advance, which makes cash flow predictable.

Variations, extras and change orders

Staged projects change as they go. How you handle changes should be part of the agreement, because each change affects the schedule and the amount still to be billed.

Change	How to handle it	On the invoices
Small addition	Confirm in writing, with price	A separate line on the next invoice
Larger addition	Issue a variation or change order	A new milestone or adjusted total
Work removed	Agree the reduction in writing	Credit on the next invoice or final invoice
Timeline change	Agree new dates	Adjust milestone dates
Client-supplied delay	Apply the deemed-approval or delay clause	Issue the milestone invoice as per the agreement

A change order can be a short document: a description, the price, the effect on the timeline and a space for the client to approve it. Keep it with the quote and refer to it on the invoice, such as “Includes change order CO-02, approved 2 December.” The final invoice then shows the original price plus approved changes, with no surprises.

Refunds and cancellations

A deposit raises the question of what happens if the project does not go ahead. Settling it in advance is far better than arguing about it later.

Situation	Typical treatment	What to document
Client cancels before work starts	Full refund or small admin fee	Quote terms
Client cancels after work started	Keep an amount covering work done and costs	Record of work and costs
You cancel	Refund in full	Notice and refund
Project paused	Hold deposit, set a restart date	Written agreement
Materials already bought	Non-refundable to that extent	Receipts
Reserved time or a start date	A reservation element can be non-refundable	Wording on the quote

Credit notes for refunds

If you refund part or all of a deposit, record it with a credit note that references the deposit invoice, then pay the refund. The credit note generator produces it, and what is a credit note explains the process and the tax effects.

Consumer protection

If your client is a consumer, local rules may give them cancellation or refund rights that cannot be removed by your terms. Check what applies to you, particularly for distance sales, services at the customer’s home and large contracts.

Deposits that are not deposits: holding fees, security and reservations

The word deposit covers several different arrangements, and they are treated differently. It helps to know which one you are using.

Type	What it is	Typical treatment
Part payment or advance	A first instalment of the price	Counts towards the price, deducted at the end
Booking or reservation fee	Pays to hold a date or slot	Often non-refundable, may or may not be credited
Security deposit	Held against damage or non-performance	Returned if conditions are met
Holding deposit	Reserves goods or a place for a limited time	Credited if the purchase goes ahead, otherwise governed by terms
Retention	Part of progress payments held back by the client	Released at completion or end of a defects period

Be precise about which you mean on the invoice and in the quote. “Booking fee, non-refundable, credited against the final invoice” and “Security deposit, refundable within 14 days of completion” are very different promises, and calling both a “deposit” is a common cause of disputes.

Tax and deposits

The tax treatment of advance payments depends on where you are and what you sell. Some general points apply in many places.

Question	General position
Is tax due when I receive a deposit?	In many VAT and GST systems, yes: tax is due on an advance when invoiced or received
Is a deposit income when received?	Depends on your accounting method and local rules
Do I show tax on the deposit invoice?	Often yes, calculated on the deposit amount
How is it shown on the final invoice?	Full value with tax, less deposit including its tax
What if the sale does not happen?	A credit note reverses the tax
Are there special rules for exports?	Often, so check before invoicing deposits for overseas sales

Here is how the arithmetic can look with tax at 8% on a $5,000.00 job and a 40% deposit.

Document	Net	Tax at 8%	Total
Deposit invoice (40%)	$2,000.00	$160.00	$2,160.00
Final invoice, full value	$5,000.00	$400.00	$5,400.00
Less deposit paid	-$2,000.00	-$160.00	-$2,160.00
Balance due	$3,000.00	$240.00	$3,240.00

If you are unsure whether tax is due on deposits in your situation, ask an accountant or your tax authority. For general guidance on showing tax, see sales tax on invoices. For US contractors, see the 1099 invoice guide.

Recording staged billing in your books

Staged billing complicates the books a little, because money arrives before the work is complete. A simple routine keeps it tidy.

Event	How to record it
Deposit invoice issued	Record the invoice as a receivable, labelled as a deposit or advance
Deposit received	Record the payment against the invoice; the amount is usually shown as a customer deposit until the work is delivered
Milestone invoice issued	Record as a sale for the completed stage, according to your accounting method
Final invoice issued	Show full value; apply earlier payments
Refund	Record a credit note and the refund payment
Retention held	Track as a separate receivable until released

Your accountant can advise on the right treatment for your accounting method and tax. The main practical point is to keep one list of every staged project showing the total price, the amounts invoiced, the amounts paid and the balance. A table like this is enough.

Project	Total	Invoiced	Paid	Outstanding	Not yet invoiced
Northline rebrand	$12,000.00	$7,200.00	$7,200.00	$0.00	$4,800.00
Oak kitchen	$40,000.00	$21,000.00	$13,300.00	$7,700.00	$19,000.00
Lee table	$3,200.00	$1,600.00	$1,600.00	$0.00	$1,600.00

Deposit invoices versus pro forma invoices

The two are often confused. A pro forma invoice is a preliminary document that is not a request for payment in its own right, though buyers may pay an advance against it. A deposit invoice is a real invoice that asks for a part payment. In many tax systems a deposit invoice is a proper invoice that has tax consequences, while a pro forma generally does not. For more, read pro forma vs commercial invoice.

	Deposit invoice	Pro forma invoice
Status	A real invoice	A preliminary document
Purpose	Collect a part payment	Preview a sale, support finance or customs
Recorded as a sale	Often, as an advance	No
Tax	Often applies	Usually not
Common in	Domestic projects and services	International trade

Wording that works

Clear wording prevents disputes. These examples can be adapted.

Where	Wording
Quote	“A 40% deposit of $2,400.00 is due on acceptance to reserve your start date.”
Deposit invoice	“Deposit for brand identity project, as per quote Q-0031. The deposit will be deducted from the final invoice.”
Cancellation	“Deposits are refundable in full if you cancel before work begins. After that, they cover work completed and costs incurred.”
Milestone invoice	“Milestone 2 of 3: concept approved on 21 November.”
Final invoice	“Project total $6,000.00, less payments received $4,200.00. Balance due $1,800.00.”
Retainer	“Monthly retainer for December: up to 10 hours of advisory support.”

Emails to send with staged invoices

Asking for a deposit

Subject: Quote Q-0031 and deposit invoice

Hi Sam,

Thank you for confirming the project. Attached are the final quote and the deposit invoice (0061) for 40%, $2,400.00. Once it is paid I will reserve your start date of 2 December. The deposit is deducted from the final invoice.

Best, Maya

Milestone reached

Subject: Invoice 0064: concept approved

Hi Sam,

Thank you for approving the concept. As agreed, invoice 0064 for the second payment of $1,800.00 is attached, due 5 December. I will start on the final artwork as soon as it is paid, or tomorrow if you prefer to pay on completion.

Best, Maya

Questions clients ask about deposits

Clients new to staged payments often have the same few questions. Having ready answers makes the conversation smooth.

Question	A clear answer
“Why do you need a deposit?”	“It covers my early costs and reserves your place in my schedule. It is deducted from the final invoice.”
“Is it refundable?”	“Yes, in full, if you cancel before work starts. After that it covers work done and costs incurred.”
“Can we pay in two parts?”	“Yes. I can do 50% now and 50% on delivery.”
“What happens if you are late?”	“The schedule sets dates for each milestone, and we can agree what happens if either side is delayed.”
“Why not pay at the end?”	“For projects this size I bill in stages. It keeps the invoices smaller for you and the risk fair for both of us.”
“Will tax be added to the deposit?”	“If tax applies to the project, it is included on each invoice, and the final invoice shows the total with the deposit deducted.”

Answering in plain language, without defensiveness, is usually all it takes. A client who understands why you bill this way is more likely to respect the schedule.

Staged billing in different kinds of business

The idea is the same everywhere, but the details differ with the trade. These patterns are common starting points, to be adjusted to your own costs and risk.

Business	Typical structure	Triggers	Notes
Web designer or developer	30 to 50% deposit, milestones, final on launch	Design approval, build complete, launch	Add a clause for client delays
Writer or content studio	25 to 50% upfront for large batches, rest on delivery	Delivery of batches	Per-piece invoices work for ongoing work
Photographer	Booking fee or 50% deposit, balance before delivery of images	Shoot date, delivery	Deposits often reserve the date and are non-refundable
Builder or renovator	10 to 20% deposit, monthly progress invoices, retention	Percentage complete, certified valuations	Retention and defects period matter
Event planner	Deposit at booking, instalments, balance before the event	Calendar dates	Cancellation schedule is important
Consultant	Monthly retainer or milestone fees	Month start, deliverables	Time caps prevent open-ended work
Manufacturer or maker	50% on order, balance before shipping	Order, completion	Materials are the main risk
Translator or editor	Deposit on large jobs, rest on delivery	Delivery	Word count caps help

Whatever your trade, ask what the largest cost you carry before being paid is, and make sure the first payment covers it.

When the deposit does not arrive

Sometimes a client accepts the quote, but the deposit invoice sits unpaid. How you respond matters, because starting work without it removes your leverage.

1. Do not start. The deposit is the condition for beginning, as agreed.
2. Send a friendly reminder the day after the due date, mentioning that the start date is reserved only once the deposit is received.
3. Offer help. Ask if there is a PO number or a payment method that would make it easier.
4. Set a deadline for the reservation. “I can hold the 2 December slot until Friday. After that, the next available start is 16 December.”
5. Release the slot if nothing happens, and tell the client in writing.

This keeps your schedule full of paying work and shows professionalism without any hostility. Most clients who delay a deposit are simply slow, and a clear deadline brings them round.

Bookings, events and fixed dates

When you are reserving a particular date, such as an event, a shoot or a delivery slot, the deposit has a second job: it compensates you for the work you turn away. This is why booking deposits are so often non-refundable.

Element	What to say
What the deposit reserves	“This deposit reserves 14 March 2027 exclusively for your event.”
What happens if the client cancels	A cancellation schedule, such as “more than 60 days before: deposit retained, balance not due; 60 to 30 days: 50% of the total; under 30 days: 100%.”
What happens if you cancel	Full refund and, if appropriate, help finding a replacement
Rescheduling	“One free date change if requested at least 30 days in advance; later changes are subject to availability.”
Balance due date	“Final balance due 14 days before the event.”

A cancellation schedule that rises as the date approaches is fair and easy to explain: the closer the date, the harder it is to fill the slot with someone else. Put it in the quote, point to it in the deposit invoice and keep a signed or emailed acceptance.

Keeping the client informed as the project moves

Staged billing works best when clients are never surprised by an invoice. A small amount of communication at each stage makes payment almost automatic.

Moment	What to send	Why
Quote accepted	A summary of the schedule and the first invoice	Starts clearly
Before a milestone	A note that the next stage is nearly ready for review	Prepares the client to approve
Milestone delivered	The deliverable and a request for approval	Triggers the invoice
Approval received	The milestone invoice, quoting the approval	Makes payment easy
Payment received	A receipt and a short progress update	Keeps goodwill high
Final delivery	A handover summary with the final invoice	Closes cleanly

A short progress update with each payment shows the client what their money has bought. It reinforces the value, and it turns each invoice into a natural checkpoint instead of an interruption. Over a long project, this rhythm is what keeps the relationship comfortable for both sides.

Mistakes to avoid

Mistake	Why it hurts	Fix
No written payment schedule	Disputes about what is due	Put it in the quote
Unclear deposit refund rules	Arguments on cancellation	State the policy
Final invoice does not show earlier payments	Double payment or confusion	List each payment with number and date
Progress billed on vague percentages	Disagreement about progress	Define milestones or measure
Mixing deposit and final invoice numbers	Messy records	Number each invoice separately
Starting before the deposit arrives	You carry the risk	Begin on receipt
Ignoring tax on advances	Reporting errors	Check the rules
Forgetting receipts	Gaps in records	Issue one for each payment

A staged billing checklist

Check	Done
Schedule agreed in the quote or contract
Deposit amount and due date stated
Refund and cancellation policy written
Milestones or measures defined
Each invoice has its own number and references the quote
Receipts issued for each payment
Final invoice lists all earlier payments
Tax treated consistently
Changes confirmed in writing and billed separately
All documents filed together

Create your staged invoices

The invoice generator lets you add the project total, subtract a deposit or earlier payments, show tax and save a clean PDF in your browser. Use the same tool for the deposit invoice, each progress invoice and the final one, and the receipt generator to confirm each payment. For more ways to bring cash in sooner, read how to get paid faster.

This guide is general information and is not legal, tax or accounting advice. Contract, consumer and tax rules vary, so check what applies to you.