Asking for a deposit upfront is a great strategy followed in many industries, and you should do it too.
Starting a business is exciting, but landing your first clients and gaining their trust can be tricky. Deposits might seem like a way to celebrate securing a deal and ensure you work with serious customers.
However, asking for money upfront, especially when you’re new, can feel a little awkward.
In this guide, we’ll explore some professional ways to request deposits online and we will also know, when, and which clients you should ask for deposits. This will not only benefit your business but also leave a positive impression on your clients, creating a smooth and successful experience for everyone involved.
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An upfront deposit refers to a payment made in advance before goods or services are provided. It’s typically a portion of the total cost, to secure a service or product.
To ask for a deposit upfront is a challenging approach. But no more now, we are with a step-by-step guide on how to politely ask for a deposit. Also, we do have readymade samples to help you get ahead:
4 Steps to Ask for a Deposit to the Client
When it comes to learning how to ask for a deposit in a contract, be precise about how much you need for an upfront fee and why.
First, you need to determine the price of your services. Then according to the calculated price, figure out how much upfront payment you can ask for. Next, mention these figures in the project contract, and stand firm.
No matter how much deposit you ask for, be prepared to explain why you need that fixed amount so that your customers can understand the whole deal without any discrepancies.
Remember that your projects won’t always go as planned. However, if your client abandons the project in the middle, you’ll want to protect your company. And, of course, you should be reimbursed for the total amount of effort you put into the job since you earned it.
Therefore, include a clause in the upfront payment terms of the contract stating that any funds received are non-refundable if the project is dropped midway for any reason.
This clause in the contract is essential since it will help you avoid wasting time and resources only to have the client cancel the project and refuse to pay you.
Another way to get paid upfront is to inform clients that a 25% deposit amount is required to begin the project. You can offer them a 12-month credit card installment facility for them to pay off the 25%.
This is a win-win for both parties because it ensures that you get your deposit amount in advance. And your customer won’t have to feel financially stressed at the same time.
When you ask for deposit payments from your client, it is standard procedure to send an invoice. This shows clients how much the total cost of the project is and how much they must pay in advance.
However, you cannot simply send an invoice without any context. Instead, include an email outlining:
Recommended: Read this blog to know how to collect payment from customers who won’t pay.
Watch this:
Here are a few email samples to help you get started with it and learn what to do next:
Subject: Deposit Due to [your company’s name]
Hello [name of the client],
Thank you for contacting us for our services; the staff at [your company’s name] is excited to work with you!
Please find the attachment of the invoice [invoice number] for [job description] in this email. The total project cost is [$ project cost], with an upfront deposit of [$ deposit] due by [due date].
Payment can be made using [payment method] and [payment instructions]. We’ll get in touch with you to arrange a start date for the project once you’ve made the deposit or upfront payment .
If you’ve any doubts or queries, please reach out to us at [email address] or [phone number].
[Your name]
[your company’s name]
Subject: Reminder for Deposit or Upfront Payment to [your company’s name]
Hello [name of the client],
I hope you are doing well. This is a gentle reminder that the deposit for the attached invoice [invoice number] for [job description] is due in [time frame] on [due date].
Here are my contact details [phone number, email] if you have any further doubts or concerns.
[Your name]
[your company’s name]
Subject: Reminder for Overdue Deposit Payment to [your company’s name]
Hello [name of the client],
Your deposit payment for the attached is now overdue. The payment due date was [insert date], but as of today, we have not received the funds.
I kindly request that you take care of this matter as soon as possible. If you have any questions or concerns, please do not hesitate to reach out to me.
[Your name]
[your company’s name]
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With InvoiceOwl, it takes only a couple of minutes to create and send an invoice to your client.
Asking for upfront deposit payments from existing or new clients is one of the best strategies to improve your cash flow and can help foster consistent working capital.
When you ask for an upfront payment before a job starts, it ensures you have good cash flow and can cover your expenses before the job is done.
This strategy is especially advantageous when it comes to long-term projects or larger projects that experience delays.
When you have sufficient funds, you can structure your project payment plan, and a feasible budget, clear your pending bills, and even cover unexpected costs, like repairs.
Streamline your cash flow!
InvoiceOwl helps you get paid upfront and manage deposits efficiently.
Unpaid invoices can be a real pain in the neck if you are a small business owner. In addition to worrying about paying your expenses, you also need to come up with a strategy for getting paid from any customers who continue to avoid clearing their overdue invoices.
Therefore, asking for an advance payment ensures that the client is involved in the project from start to finish. Clients who have already paid for a portion of a job are less likely to miss future payments.
If a client isn’t paying for services upon deposit request, it only suggests that you might struggle to collect unpaid bills down the road. This is why filtering out such clients early on and rejecting them is easier than trying to figure out how to fire them later.
Asking for a deposit is always reasonable when it comes to troublesome clients. You might feel uncomfortable rejecting a new project when a client is unwilling to pay the deposit in advance.
But you’ll end up saving yourself from financial stress and won’t waste time running after them to c ollect bills after the payment deadli ne.
Now that you understand why asking for upfront payment is important, let’s learn the polite way to ask for money from new and existing clients.
There are some appropriate times to ask for a deposit and understanding that will increase your chances of getting one. So keep these things in mind.
Deposits are generally requested and received prior to the start of a project. Consider it an upfront payment to assist you in covering the project-related expenses.
Unless it’s specified in your payment terms of the contract and the client is made aware in advance, requesting deposits midway through a job is a terrible practice.
Many business owners only ask for deposits from new clients. It makes no sense to request a deposit from an existing client unless you’re starting work on a new job with them that will cost a fortune or take a long time to finish.
Some projects or clients are riskier to work with given their history. Thus, it is a smart move to ask for a deposit in such instances. This will greatly reduce your risk and increase your chances of getting paid appropriately.
There are various restrictions on the types of deposits that service businesses can demand from customers in each U.S. state. Verify your state’s prerequisites or ask your bookkeeper before deciding on a fixed amount or portion to ensure you’re abiding by the law.
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The amount you charge for a deposit is determined by several variables, including the cost of the project and the job site.
However, there are a few standards used by small business owners to determine job deposits:
As we’ve discussed earlier, you can send invoice emails to clients to obtain your deposits before the job starts.
However, preparing multiple invoices for your client can be time-consuming and challenging when there are several details to take care of.
With InvoiceOwl, you can create customized and professional invoices without errors in minutes. You can send them to your clients anytime from anywhere.
InvoiceOwl also lets you track these invoices and helps you get paid faster.
Isn’t that convenient?
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Author Bio Jeel Patel FounderJeel Patel is the founder of InvoiceOwl, a top-rated estimating and invoicing software that simplifies the invoicing and estimating processes for contractor businesses. Jeel holds a degree in Business Administration and Management from the University of Toronto, which has provided him with a strong foundation in business principles and practices. With understanding of the challenges faced by contractors, he conducted extensive research and developed a tool to streamline the invoicing and estimating processes for contractors. Read More
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