Deposit and Prepayment Checklist
How to set up deposits or prepayment for a new customer so you reduce credit risk fairly — deciding the amount, agreeing it in writing and invoicing it correctly.
What this checklist covers
- Decide when a deposit or prepayment is appropriate
- Set a fair amount tied to your costs and risk
- Agree the terms in writing before any work or supply
- Invoice and account for the deposit correctly
6 min
Before you start
Deposits and prepayment cut your credit risk by getting money in before you commit. They must be fair and agreed up front to stick. Prepare your approach before you ask. This is general information; deposit fairness is governed by consumer law.
- Your upfront costs for the job or order.
- The customer's risk profile from any credit check.
- Your trading terms and how they reference deposits.
- A way to issue a deposit invoice or request.
Step 1 — Decide if and how much
- Use a deposit or prepayment for new, higher-risk or thin-history customers.
- Base the amount on your genuine upfront costs and the risk you carry.
- Keep the figure proportionate — an excessive deposit can be an unfair term.
- Decide between a percentage deposit and full prepayment based on the situation.
- Consider staged or milestone prepayments for larger jobs.
Step 2 — Agree it in writing
- State the deposit amount and what it covers in the quote and terms.
- Make clear what triggers the deposit and when the balance is due.
- Set out whether the deposit is refundable and on what basis.
- Get the customer's written acceptance before any work or supply.
- Keep the accepted quote or email on file.
Step 3 — Invoice and account correctly
- Issue a clear deposit invoice or request showing the amount and any GST.
- Record receipt of the deposit against the customer and the job.
- Show the deposit applied when you invoice the balance.
- Account for GST on the deposit in line with your obligations.
- Keep tidy records so the deposit reconciles to the final invoice.
Common mistakes
- Springing a deposit on the customer after the job is booked.
- Charging a deposit so large it looks like an unfair penalty.
- Being vague about whether the deposit is refundable.
- Failing to show the deposit applied on the balance invoice.
- Getting the GST treatment of the deposit wrong.
A fair, well-documented deposit is one of the simplest ways to de-risk a new account. See the answers library for detailed guidance on deposits and prepayment. This is general information, not legal or tax advice — confirm consumer-law fairness and GST treatment for your situation.
Key takeaways
- Use deposits to de-risk new or higher-risk customers
- Tie the amount to real upfront costs, and keep it fair
- Agree the deposit in writing before any work or supply
- Show the deposit applied and get the GST right on the balance
Frequently asked questions
How big a deposit can I ask for?
There is no fixed cap for most work, but the amount should be reasonable and reflect your genuine upfront costs and risk. A deposit that looks like a penalty, rather than a real pre-payment, can be challenged as an unfair contract term.
Can I make a deposit non-refundable?
You can, if the term is fair and clearly disclosed before the customer pays, and the amount reflects real costs you commit. Keeping far more than your actual loss risks being treated as an unfair penalty, so be reasonable.
How does GST work on a deposit?
A deposit that forms part of the price is generally treated as a payment for the supply, with GST usually accounted for when received; a true refundable security deposit can differ. Because it turns on the deposit type, confirm your position with your accountant or the ATO.
Work the checklist, then get paid
Use the free Invoice Generator, then let Merion recover anything that goes unpaid — commission-only.