If you have trouble getting paid on time or you’re looking for ways to filter out flakey clients, it may be time to include deposits in your standard billing practices.
From when to ask to how much to request, learn the basics of freelance deposits to help you start off on the right foot.
What Is a Freelance Deposit?
A freelance deposit is similar to a down payment on a car or home. It’s when you ask a client to make partial or full payment before you start work on a project.
When freelancing, deposits are usually based on the amount detailed in your initial quote.
For example, if you were to request a 50% deposit upfront, your client would be required to pay half the amount you outlined in a detailed project estimate at the outset.
Once a client makes a deposit, the amount is deducted from the following invoice.
For example, if the total amount on your quoted estimate was $1,000 and the client makes an upfront payment of $500, you would charge them the remaining $500 on their invoice upon delivery of your service.
Benefits of Upfront Deposits for Freelancers
There are many benefits to asking for full or partial payment upfront. For example, asking for a freelance deposit from new clients can:
1. They Reduce the Risk of Nonpayment
While you don’t want to start a client relationship based on the assumption that they won’t pay you, the reality is that some clients are harder to get paid by than others.
Until you establish a strong working relationship with one another, it’s impossible to say whether you can trust a new client to pay promptly.
Deposits ensure that even if a client cancels a project or completely disappears, you’ll still get something for the work you put in.
Plus, clients who have already invested money into a project are more likely to stay engaged and involved through its completion.
2. They Provide Better Cash Flow
Regardless of your billing cycle, payments for freelance work can be sporadic and difficult to predict. Deposits provide you with cash before you send out an invoice, giving you better cash flow and spreading out incoming payments over a longer period.
This gives you a chance to pay your bills, plan out a budget, and cover any business or project-related expenses that come up.
3. They Filter Out Problem Clients
In certain clients, an unwillingness to pay a deposit upfront is a red flag. If they aren’t willing to pay you now, will they actually pay you when you send a final invoice?
However, if a client refuses to pay a deposit, make sure to consider the reasoning behind the refusal before canceling a contract.
For example, there’s a big difference between a large corporation with specific freelancer payment policies in place and an unknown new client who doesn’t have the funds to cover a deposit.
Use deposits as a factor in determining whether you want to move forward with a client, but not necessarily as the deciding metric.
4. They Make for More Collaborative Clients
Generally speaking, clients who are financially invested in a project from the get-go are more likely to contribute to it in a collaborative way. This is great for contracts where you need a lot of input or back and forth from a client to get the job done.
Deposits encourage clients to be more involved and to keep the project moving along at a steady pace. This makes it easier to keep the work on track and within scope.
When to Ask for a Freelance Deposit
It’s tempting to ask all of your clients for upfront payment, but realistically, it’s not always appropriate. In general, you should be asking for an upfront payment in the following circumstances:
When Working With New Clients
It’s good practice to ask for a deposit from new clients who you’re working with for the first time. Since you don’t have an existing working relationship, a deposit helps to uphold and enforce your contract.
Once you develop a rapport and build trust with each other, a deposit will no longer be necessary, as you will be able to rely on the client to make payments in full and on time.
For Longer and Larger Projects
If you’re signing on to a new project with a distant deadline, asking for a deposit will provide you with some income to keep you going in the meantime so that you aren’t left strapped for cash.
The same goes for large projects. If you’re working on something with a big price tag, it’s fine to ask for at least partial payment upfront instead of the full amount in your final invoice.
In these circumstances, asking for deposits benefits you by keeping your bank account topped up and ensuring that your clients are committed.
When There Are Project-Related Costs
Some freelance work comes with project-related expenses, like materials, equipment, or software. And although clients will sometimes reimburse you for these costs, it doesn’t always make financial sense for you to cover them upfront.
If you’re working on a project that has sizeable expenses, asking for a deposit before you get started will help you to pay for them without dipping into your existing funds.
When You Need the Client to Commit
It’s almost impossible to know whether a potential client will turn out to be a good client or a bad one. Even referrals from friends or other small business owners can turn out to be flakes.
Asking for a deposit is a good way to ensure that a client is committed to working with you and that they’re invested in the project. Deposits tend to keep clients more engaged in a project since they’ve already put money into it.
And, if the client does change their mind about the project later on, at least you won’t have worked for free.
When Not to Ask for a Freelance Deposit
Whether you ask for a deposit depends on a variety of factors, from your existing relationship with a client to the size of the project in question. You don’t need to ask for money upfront when you’re working with the following:
When Working With Existing Clients
If you’re already working with a client on an ongoing basis and have sent them at least one invoice, it doesn’t make sense to ask them for a deposit.
The only time it might be appropriate is if an existing client proposed an entirely different project with a long deadline or a large budget.
Even then, if the client has paid you consistently in the past, you have no reason to doubt them now. Asking for a deposit after a working relationship has been established may be met with confusion or refusal.
When Working With Big Clients
Big corporations and companies have their own accounting departments that handle freelance invoicing and payments.
The red tape and extra layers of bureaucracy make unexpected payment requests — like upfront deposits — hard for some big clients to navigate, causing project delays and extended timelines.
When working with a big client, it’s typically safe to assume that they have their ducks in a row when it comes to paying invoices on time and in full. Include any payment terms in your freelance contract and have a conversation about them before you get started to make sure you’re on the same page.
For Small Projects
Small, one-off projects below a certain dollar value usually aren’t worth asking for a deposit on.
For example, something that will only take a couple of billable hours doesn’t necessitate upfront payment.
The same goes for small add-ons to existing projects, like revisions or updates. Although these tasks can affect the amount you charge on your final invoice, it’s not common practice to ask for a deposit on freelance work that is part of a larger contract.
Before requesting a deposit on every project, consider how many hours of work you’ll need to put into it. Determine a reasonable cutoff for yourself and use it to decide when to charge clients a deposit and when not to.
How Much to Ask For Upfront
How much freelancers charge for a deposit varies significantly depending on the type of work you do, how long your contracts last, and what kind of clients you typically work with.
For example, an experienced freelance writer who only takes on long-term projects might request a 50% deposit as a way to filter out unserious clients, while a new freelancer desperate for work may ask for 10% instead.
Either way, most deposits are either a percentage of a quote or payment in full.
Deposits on estimates usually fall somewhere between 10% and 50% of a quote or estimate. The amount you request can even change based on the project or client you’re working with.
However, it’s important to have consistent pricing and payment terms to make accounting tasks like quoting and invoicing easier to track and manage.
If you do choose to request a different percentage based on the size of a project or the amount of the final invoice, make sure that you use the same logic across your client list.
Payment in Full
Payment in full is another way to handle deposits. Some freelancers choose not to ask for a deposit, but the full amount of the quote upfront instead.
This is the best way to avoid issues related to nonpayment, but it isn’t usually what clients want to hear, especially when managing their own monthly budgets and payment schedules.
Before deciding to ask for full payment in advance, talk to other professionals in your industry to see what’s standard practice.
How to Ask for a Freelance Deposit
Ideally, any requirements surrounding deposits will be outlined in your quote or estimate, as well as in your contract. However, it’s important to communicate with a potential client about your billing practices as well.
In a freelance quote, make sure to outline details related to your deposit requirements in your payment terms, such as:
- The amount due upfront as well as the total of the estimate
- The due date of the deposit and of the remainder (if different)
- Accepted payment methods, such as through PayPal or via credit card
- Whether the deposit is refundable and under what circumstances
For the best results, don’t just provide this information in writing. Have a conversation with your client about your expectations and make sure you’re both on the same page.
Getting paid as a freelancer shouldn’t be a headache. Requesting deposits is just one of many preventative measures you can take to save yourself the stress of having to chase after a payment.
Follow best practices and keep your deposit standards consistent to weed out problem clients, improve your cash flow, and encourage clients to be more involved in projects.