TL;DR

A deposit is an upfront payment that secures your commitment and reduces your financial risk. Requiring 30–50% before starting protects you from clients who disappear mid-project and funds your early expenses.

Key Points

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Standard deposit amounts range from 25% to 50% of the total project value, depending on industry and project size

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Deposits establish commitment — clients who won't pay a deposit are often clients you don't want to work with

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Specify in your contract whether the deposit is refundable, partially refundable, or non-refundable if the project is cancelled

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Deposits improve your cash flow by providing immediate income to cover initial project costs

Why Deposits Protect Your Business

Requiring a deposit before starting work is one of the most effective risk management tools available to freelancers and small businesses¹. It ensures that if a client cancels, disputes the work, or simply disappears, you've already been compensated for a portion of your time. It also demonstrates the client's serious intent — someone who won't put money down upfront is a much higher risk than someone who pays a deposit without hesitation. Deposits also fund your direct costs: if you need to purchase materials, license fonts, hire a subcontractor, or dedicate significant time to discovery before the real work begins, the deposit covers those expenses.

Setting the Right Deposit Amount

The right deposit amount depends on your industry and project context. For creative services (design, writing, development), 25–50% is standard. For custom manufacturing or physical goods with significant material costs, you may request 50–100% upfront. For very small projects under $500, some freelancers invoice the full amount upfront and eliminate the milestone complexity. The key constraint: your deposit should cover your cost of getting started, including any direct expenses you'll incur before completing the first phase. Factor that into your calculation rather than picking a round number.

Including Deposits in Your Contract

Your Contract or Service Agreement should clearly state: the deposit amount, when it's due, whether it's applied toward the final invoice, what happens to it if the project is cancelled at various stages, and the refund policy. Never start work without receiving the deposit — issuing a Pro Forma Invoice for the deposit amount and waiting for payment before beginning is standard practice. For Payment Milestone structures, the initial deposit is typically the first milestone payment, followed by additional payments at later project stages.

References

FreshBooks — Invoice Payment Terms: A Guide to Get Paid Faster ↗

freshbooks.com

FreshBooks — Get Paid Faster with Invoice Payment Terms ↗

freshbooks.com

Last updated: June 9, 2026

Related Terms

Payment Milestone

A defined project stage or deliverable that triggers a payment from the client, linking money received to work completed rather than to calendar dates.

Contract

A legally binding written agreement between two or more parties that defines the terms of an exchange of services or goods, including scope, compensation, timeline, and remedies for breach.

Pro Forma Invoice

A preliminary invoice sent before goods are delivered or services are fully completed, giving the buyer an estimated breakdown of expected costs.

Cash Flow

The net movement of money into and out of a business over a specific period, reflecting the actual cash received from clients and paid to vendors, suppliers, and operating expenses.

Retainer

An upfront fee paid by a client to secure ongoing access to a service provider's time and expertise, typically billed monthly at a fixed rate for a defined scope of work.

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