What is a Deposit Invoice & How to Create One [w/ Templates]
December 13, 2022
As a business owner, you’re likely to be contracted for work for which you’ll need to request an upfront payment. To make the request, you need to send your client a deposit invoice.
But what is a deposit invoice, and how do you create one?
In this article, we’ll show you how to create this key document easily with a template generator so you can focus on your job rather than on paperwork.
So, without further ado, let’s begin.
What is a Deposit Invoice?
A deposit invoice is a document that enables a business owner or independent contractor to request a deposit from the client before beginning work.
To ensure they won’t be taken advantage of, the business owner could send out a deposit invoice. If a client agrees to pay a deposit, it indicates that they are open to working with you and have the money on hand to pay for further costs down the road.
What is a Proforma Invoice and Can It be Used as a Deposit Invoice?
A pro forma invoice is considered a draft invoice that’s provided to a client after both parties have decided to collaborate. The catch here is that you still need to discuss and decide on a few details.
This type of invoice is not as strong of a legal document as a deposit invoice. It cannot be used as a deposit invoice since it lacks an invoice number, which is necessary for accounting records.
So, make sure to use a deposit invoice whenever a payment is due. Any problems can be avoided, especially if you need to submit taxes.
Types of Deposit Invoices
Besides the deposit invoice, there are also other types of invoices. Here are some of the most common ones:
- Credit invoice. A credit invoice is created by the vendor on the buyer’s behalf. It can be used to exchange the item, gain a discount, or resolve a disagreement that results in a price reduction.
- Freelance invoice. A freelance invoice serves as a binding legal agreement between you and the customer, and also makes filing taxes easier, and can be used for various services.
- Writer invoice. Whether you’re a full-time or a part-time writer, you’ll need an invoice for each service you provide.
- Photography invoice. As its name suggests, photography invoice is used by people who provide various photography services.
- Digital invoice. A digital invoice usually comes in an electronic format such as PDF and can be stored on the cloud or disk.
- Shipping invoice. If your business deals with exporting goods to buyers from different countries, then you’re going to need a shipping invoice.
- Construction invoice. This type of invoice provides a breakdown of the work completed on a construction site and materials provided during a specific time period.
- Small business invoice. A small business invoice serves as a contract between you and the client that ensures payment for the work you have or will complete.
What to Include in a Deposit Invoice
Although invoice components vary from company to company, here are some key elements you should include in your deposit invoice:
Make sure the invoice title contains the phrase “deposit.” If you seek a deposit but do not use the word “deposit,” the clients can find this a little dubious.
#2. Contact Information
On your deposit invoice, always include your contact information. You must list both your own and the client’s contact information side by side, such as:
- Phone number
For greater credibility, include your company’s logo next to the contact details.
#3. Invoice Number and Due Dates
Include the invoice number immediately below the contact details. For accounting and taxation purposes, the document’s legal form is determined by its one-of-a-kind number. You can write the date the document was issued and the deadline for the deposit below it.
#4. Listing of Products and Services
The work description appears immediately after the number and the dates. Here, you can go into greater detail about the services you are offering, the amount (if applicable), and the timing of your delivery.
#5. Deposits and Balances
This section is crucial since it discusses the amount of the deposit you are asking for as well as the ultimate cost of the project you will be working on.
#6. Terms of Payment
In this section, you should mention all the accepted forms of payment. For instance, PayPal, bank transactions, wire transfers, and so forth. To ensure that your client can deal with at least one of them to deliver your payment, the more items you list, the better.
Deposit Invoices Best Practices
Here are some things you should keep in mind that will simplify your invoicing process:
- Negotiate the terms. The conditions in the invoice can be adjusted if necessary. Since you are the one who sets the terms that are most advantageous for you, this will typically happen at the client’s request.
- Provide a variety of payment options. Numerous times, customers won’t pay after the due date simply because they are having trouble using the suggested payment method. Therefore, having more than one will make everything easier for both parties.
- Contact the customer if needed. If the customer hasn’t made a payment by the deadline, you shouldn’t just wait for them. The likelihood is that they either forgot or had some financial difficulties. Whatever the situation, get in touch with them to sort it out so you can get paid for your work.
- Obtain a copy of the signed deposit invoice. This will provide the entire process with an additional layer of protection. Even though the deposit invoice is a legally binding document, it cannot be considered to be in effect without a signature. Therefore, after you have the signatures, be sure to make a copy and store it in case you need it for any reason.
How to Make a Deposit Invoice the Easy Way
Now that you are familiar with deposit invoices, you’re likely wondering how to make these important documents. You have methods for going about this problem.
You can use software such as Word or Excel and make a deposit invoice on your own from scratch. This will take a lot of time, especially if this is your first time making invoices. Keep in mind that you can also make a lot of errors, which is why this method is not recommended.
Arguably, the best way of making a deposit invoice is using an online generator. It’s efficient and simple to use, and most importantly, it’s not time-consuming. With it, you can create numerous invoices for different clients in no time. Here’s how it works:
- Visit the free invoice generator
- Enter the required information
- Review your invoice and download it
Once you’re done, you’ll be able to forward your invoice to the client in no time. Most importantly, you can reuse the invoice template for multiple clients, which will save you a lot of time.
A final invoice needs to be made when the products or services are delivered.
The document that contains all relevant details, including the amount of the paid deposit, is the final invoice. The deposit amount will be subtracted from the total amount due for the project, leaving the client to pay the balance.
To finish the project and tie everything together, you need to issue this invoice. As it gathers even more specific information than the deposit invoice, it also functions as a legal record for accounting and tax purposes.
- A deposit invoice is used by sellers when they want to request a portion of the payment before they deliver their services or goods.
- Using a deposit invoice can be beneficial as it covers project-related costs, lowers your risk of being scammed, and prevents disputes caused by late payments.
- A pro forma invoice is a draft invoice delivered to the client. Since it is not a legal document that can be used for accounting purposes, a pro forma invoice cannot be used in place of a deposit invoice.
- The final invoice is the invoice you use when the project comes to an end. It includes the initial deposit and the final payment amount.
- The easiest way to make a deposit invoice is to use an online generator.
And that’s a wrap!
After reading this article, you should be fully briefed on deposit invoices and how to create them.
Although at first it may appear complicated, once you get going, the process is actually fairly easy. All you have to do is add contact information, the number and due date, the deposit and total amount due, payment options, and other key details to the invoice template, and you’re done!