Deposit Invoices Explained: How They Work + Free Template (2025)
Businesses often ask for a deposit invoice when starting a project that requires a portion of payment upfront. This practice helps cover initial expenses and shows a client’s commitment to move forward. According to a 2022 Invoiced survey, 36% of businesses use deposit invoices for larger projects or orders. If you’re new to deposit invoicing or want fresh insights, keep reading. And if you’d like to learn more about invoicing beyond deposits, take a look at our invoice payments guide.
Why Deposit Invoices Matter in 2025
Deposit invoices aren’t new. However, by 2025, experts anticipate significant growth in automated financial processes:
Automation Trends: Only 9% of AP (Accounts Payable) departments are fully automated today, but that number is expected to rise, with two-thirds of finance professionals predicting full automation in the next few years (Institute of Financial Operations & Leadership).
Global Digital Payments: The worldwide volume of digital transactions is projected to reach $20.37 trillion by 2025, which impacts how quickly and efficiently businesses can request, receive, and track deposits.
Cash Flow Stability: A deposit invoice improves cash flow. You can secure critical funding (covering materials or initial labor) before the bulk of the project begins.
Simply put, deposit invoices in 2025 are vital because they align with broader shifts toward digital, real-time payments. As more businesses adopt automated solutions, presenting clients with an organized deposit invoice becomes a standard—and often expected—practice for professional transactions.
What Is a Deposit Invoice?
A deposit invoice is a document requesting partial payment at the start of a project or before goods are delivered. Instead of invoicing the full amount at once, you break it into two stages:
Initial Deposit: Collected before work begins.
Final Invoice: Issued when the service is completed or product is delivered.
This two-stage payment approach helps reduce the risk of nonpayment, covers upfront costs, and clarifies project expectations. It also promotes smoother project scheduling because both parties understand the financial commitment from the outset.
Key Elements of a Deposit Invoice
Properly drafting a deposit invoice means including the right information. Each invoice should have:
Invoice Header: Your business name, address, and contact details.
Client Information: Name, address, and email of the client or customer.
Invoice Number: A unique identifier for recordkeeping (see invoice number best practices).
Description of Goods/Services: List the work to be done or products supplied.
Deposit Amount: Clarify if it’s a fixed dollar amount or a percentage of the total.
Payment Terms: Due date, acceptable payment methods, and any late fees.
Refund or Cancellation Policy: State whether the deposit is refundable, partially refundable, or non-refundable.
Subtotal, Taxes, and Balance: Outline the subtotal, any applicable taxes or fees, and how much will remain to be paid after the deposit is collected.
Including these elements reduces confusion, supports legal validity, and streamlines your accounting. According to a FreshBooks study, 45% of small businesses rely on a percentage-based deposit—often in the 30%-50% range—when creating their invoice.
How to Create a Deposit Invoice
Drafting a deposit invoice follows a straightforward sequence. Here’s a quick rundown:
Pick a Template
Use a ready-made deposit invoice template in Word, Excel, or PDF. Many businesses find it easier to work off a well-structured format.Add Your Branding
Insert your logo and business information prominently at the top.Itemize the Services or Products
Even for a partial deposit, itemizing helps clients see project details. You might add “Information” line items that describe the complete scope.
Specify the Deposit
Highlight the upfront amount or percentage. For instance, if the total project is $1,000, a 30% deposit is $300.Payment Terms
Indicate the due date and preferred payment method. Clarify whether the deposit is refundable and under what conditions.Final Checks
Proofread, ensure calculations are correct, and send the invoice via email or your chosen channel.
If you’re dealing with large projects, you can also use a tiered approach—where higher total costs could reduce the deposit percentage. A quick example: 50% deposit for services under $5,000, dropping to 30% if the project is above $10,000.
Common Industries That Rely on Deposit Invoices
While deposit invoices can be used nearly anywhere, they are especially popular in:
Construction: High material costs and long project timelines make upfront payments critical.
Event Planning: Securing venues and services often requires a portion of funds early.
Freelance Services: Designers, writers, and software developers frequently request 30%–50% upfront to cover initial work.
Custom Manufacturing: Unique or bespoke orders often require a material down payment.
Creative Agencies: Branding or marketing campaigns may set a deposit to lock in production schedules.
Looking to explore more ways small businesses handle payments? Check out this overview of the best payment methods for small businesses.
Deposit Invoice vs. Standard Invoice
Timing
Deposit Invoice: Sent before the work begins.
Standard Invoice: Issued once the project is done or product is shipped.
Payment Amount
Deposit Invoice: Partial (often 30%-50%).
Standard Invoice: Usually for the full remaining balance.
Purpose
Deposit Invoice: Secures initial commitment and covers upfront costs.
Standard Invoice: Requests final or entire payment for the completed job.
Follow-Up Steps
Deposit Invoice: Typically followed by a final invoice.
Standard Invoice: Often the last step in billing unless the customer requests adjustments or a payment plan.
For some industries—like high-end design or large-scale manufacturing—both invoices are necessary to keep the project funded at different stages. This approach also helps you track each payment clearly.
Legal and Financial Considerations
Legally Binding Agreement
A deposit invoice can act like a contract, so be diligent about your terms. According to a LexisNexis study, businesses with clear deposit rules are 68% less likely to deal with payment disputes.
Tax Implications
In many jurisdictions, deposits are subject to the same tax rules as standard invoices. Check local regulations around VAT or sales tax. If you charge multiple taxes, you may need to apply the highest tax rate to the deposit line item.
Refund or Cancellation Policy
Spelling out when—or if—a deposit is refundable helps avoid misunderstandings. For example, a custom furniture maker often declares that deposits are non-refundable since materials can’t be reused.
Recordkeeping
Keep comprehensive records of who paid, how much, and when. You’ll also want a clear system for subtracting the deposit in your final invoice, ensuring you don’t overcharge or undercharge.
Applying Mural Pay Invoicing to Streamline Deposit Requests
Modern payment platforms can significantly speed up deposit invoice creation. Mural Pay Invoicing stands out for business owners who require:
Multi-Currency Billing: Ideal when collecting a deposit from international clients, especially if you need local currency conversions in one invoice.
Real-Time Payment Tracking: See when the deposit hits your account, eliminating guesswork about whether funds have arrived.
Batch Invoicing: If you’re sending multiple deposit invoices at once, Mural Pay automates the process, letting you generate all deposit requests with a few clicks.
Compliance-Ready Controls: Built-in KYB/KYC checks for cross-border payments.
Mural Pay is not merely a personal transfer service. It’s designed with business needs (and deposit invoices) in mind.
Access Your Free Deposit Invoice Template
Any well-structured deposit invoice should include the required data points, from business details to deposit amounts. Our suggested approach:
Draft or download a standardized deposit invoice template.
Customize the headings, payment sections, and notes.
Review any special terms like a tiered deposit or extended deadlines.
Use a cloud-based accounting tool—or a solution like Mural Pay—to send, track, and manage everything online.
When your client pays, you can promptly create the final invoice for the leftover balance. This reduces back-and-forth communication and speeds up the process considerably.
Final Insights
A well-crafted deposit invoice clarifies expectations, protects your upfront costs, and organizes your billing workflow—particularly important in an era of growing payment automation. For more guidance on collecting funds from your clients once the deposit clears, see our advice on receipt of payment best practices. By fine-tuning your deposit request strategy, you’ll maintain positive cash flow, boost client confidence, and build a smoother project pipeline.
References
Invoiced. “Deposit Invoicing Trends Explained.” Available at: https://paystub.org/posts/deposit-invoice
FreshBooks. “Deposit Invoice Templates & Small Business Tips.” Available at: https://www.freshbooks.com/invoice-templates/deposit
Institute of Financial Operations & Leadership (IFOL). “AP Automation & Real-Time Payments Survey.” Available at: https://hiverhq.com/blog/10-top-trends-accounts-payable
LexisNexis. “Legal Essentials for Small Businesses.” Available at: https://broadly.com/blog/how-to-create-a-deposit-invoice/
