Why you should charge an upfront deposit at the beginning of any project

2023/04/17

One thing I’ve done from the relative beginning of being an independent contractor is requiring a deposit upfront of any project. I started doing this because I was seeing that, while most projects do their best to stick to a timeline, projects almost always went past the stated deadline/s that were put in place. Sometimes the project only goes a couple weeks past the original deadline. Others go months past the original deadline. Which depending on how you collect your money. May put you in a pretty pickle.

It gets money into your bank account

The biggest advantage I’ve seen of requiring an upfront deposit is that you get a portion of whats due into your bank account relatively quickly. This gives you the ability to focus more on current projects on hand without having to worry, as much, on when your next invoice will be paid out or if your invoices will be paid out. Luckily I’ve only had to worry about when projects will wrap up vs worrying about if I would be paid by a client.

Project size and it’s effects of keeping money on hand

After implementing an upfront deposit. Another thing I was noticing was that the size of an estimate/quote I would send out for a project has a direct impact on the amount of time a project would take. The larger the estimate, typically the larger the project, which means the more time it would take to complete. Because of this I would find myself working on a project and the monies from the deposit dwindling and the final invoicing would be longer than what the deposit covered. With that, I started implementing invoices at specific times of a project based off the size of the estimate.

It helps keeping clients involved

Most people don’t like parting with money. So having clients payout a deposit upfront, and along the way for bigger projects, should help cut down on them dragging their feet on things and staying involved. It also helps keep you accountable because you’ve already received some money from them. Giving you reason to work on, and complete, said project.

In the end, here’s how I do invoicing on any project

If you’re a fellow independent contractor/freelancer and this is something that’s new to you. I bill my clients an upfront invoice of 30% of the estimated cost of a project that has been approved. From there and based on the size of the project. I send out invoices as follows below.

Upfront 30% deposit

All projects I work on require a 30% deposit that is due upon receipt with all remaining invoices being sent out at net 30 payment terms.

Projects less than $7,999

I invoice the remaining 70% upon completion of a project.

Projects between $8,000 and $15,999

I invoice an additional 30% net 60 days after the project has started with the remaining 40% invoiced upon project completion.

Projects more than $16,000

I invoice an additional 30% net 60 days and an additional 25% net 150 days after the project has started with the remaining 15% invoiced upon project completion.