Getting paid before the work is finished can feel awkward the first time you ask for it. It becomes much less awkward once the payment schedule is treated as part of the job rather than a special favour.
A deposit gives you commitment before you reserve time, order materials or turn away other work. Progress payments keep a long project from becoming a large loan from your business to your client.
There is no universal percentage that works for every industry. The useful question is not “what deposit do freelancers charge?” It is “how much risk and upfront cost am I taking on before the next payment?”
This article is general information, not legal, accounting or tax advice. Contract, consumer protection and tax treatment can depend on the facts and the province or territory involved. Get professional advice for your situation.
How much deposit should I ask for?
For many service projects, 25% to 50% is a practical starting range.
A small, short project may justify 50% upfront because half the work can be completed before there is a meaningful milestone. A larger project may use a smaller initial percentage because the dollar amount is already substantial.
For example, a $1,500 creative project might reasonably use:
- 50% to book
- 50% on completion
A $20,000 project might work better as:
- 25% to begin
- 25% after the first milestone
- 25% after the second milestone
- 25% on completion
Trades can be different because materials may create a large upfront cost. If you need to order $8,000 of project specific materials for a $14,000 job, a 20% deposit leaves you financing the client’s materials yourself. The payment schedule should reflect the real cash requirements of the work.
The percentage is less important than the reason behind it.
When is a deposit worth asking for?
A deposit is especially useful when accepting the job causes you to commit something that cannot easily be recovered.
That can include:
- Blocking a date in your calendar
- Ordering custom or non-returnable materials
- Hiring subcontractors
- Renting equipment or space
- Beginning substantial planning before the first deliverable
- Turning down other work because capacity is reserved
The more commitment you make before the client has paid anything, the more exposed you are if they disappear.
For a recurring client with years of reliable payment history, you may decide that a deposit creates unnecessary administration. For a new client booking a large project three months in advance, it may be essential.
You do not need one rule for every customer, but inconsistent terms can become hard to manage. It helps to have a normal policy and make exceptions deliberately.
Can asking for a deposit cost you the job?
Yes, particularly when the client has procurement rules that do not allow prepayment, or when your payment request is unusual for the type of work.
That does not automatically mean you should remove it.
A large organisation may have a fixed process such as net 30 payment after an approved invoice. If the project is valuable enough and the client is creditworthy, you may decide the risk is acceptable.
The more concerning situation is a new client who objects to any financial commitment while expecting you to reserve substantial time or spend money on their behalf.
A deposit is partly about cash flow, but it is also a test of commitment. Someone who will not put $500 toward a confirmed $5,000 job may not be as confirmed as the email thread suggests.
Use judgement rather than treating the deposit as a moral issue. The goal is to structure a deal you can safely deliver.
How do progress payments work?
Progress billing divides a project into points where part of the price becomes payable.
The best milestones are objective.
“Halfway through” can create an argument because people may disagree about what halfway means. “After installation of the cabinets” or “on delivery of the approved first cut” is much easier to verify.
A useful milestone has three qualities:
- Both sides can tell when it has happened.
- The payment roughly matches the value or cost accumulated by that point.
- You are not left with most of the money due after most of the leverage is gone.
That third point matters.
If a $30,000 job is 90% complete before the client has paid more than $5,000, the payment schedule is not doing much to reduce risk.
Should you invoice the full job or each stage separately?
Either can work, but the client should always be able to see the original total, what has been paid and what remains.
For a simple project, one invoice with multiple payments recorded against it is easy to understand. A $4,000 invoice can show a $2,000 deposit, then a remaining balance of $2,000.
For long projects with distinct deliverables, separate milestone invoices may fit the workflow better.
Ledger supports multiple payments against an invoice, so a deposit or part payment can reduce the outstanding balance without losing the original invoice total.
Whichever method you use, do not rely on memory or an email search to work out what is still owing.
What should you put in writing before taking a deposit?
At minimum, write down:
- The total project price or how it will be calculated
- The deposit amount
- When the deposit is due
- Whether work or a booking is confirmed before payment
- The remaining payment schedule
- What happens if the client cancels
- What happens if you cannot perform the work
- Whether any part of the payment is refundable
- Any important conditions tied to materials or third-party costs
Be careful with labels. Calling money a “non-refundable deposit” does not automatically settle every legal question about whether you can keep it in every circumstance.
Your contract and the facts matter. Consumer protection rules and provincial law may also apply depending on the transaction.
For that reason, cancellation language should be written for your actual business and reviewed professionally when the amounts or risks justify it.
What happens if a client cancels after paying a deposit?
Start with the written agreement.
If your terms explain what happens on cancellation, you have a much clearer starting point than if the payment was simply described as “50% upfront.”
The answer can depend on why the client cancelled, what costs you have already incurred, whether you reserved capacity, whether the payment was legally a deposit or part payment, and the law that applies to the agreement.
There is also a Canadian tax detail worth knowing if you are registered for GST/HST.
The CRA says you generally do not collect GST/HST when a customer gives you a deposit toward a taxable purchase. GST/HST is collected when the deposit is applied to the purchase price. If the customer does not complete the purchase and forfeits the deposit, the forfeited amount is subject to GST/HST, with the tax calculated from the forfeited amount using the CRA’s prescribed fraction.
That distinction is one reason your bookkeeping should identify what the payment actually represents rather than treating every upfront payment the same way.
Should materials be paid upfront?
If materials are expensive, custom, or difficult to reuse, asking the client to fund them before ordering is often sensible.
You can structure this as a deposit that reflects the material commitment, or as a specific payment milestone such as “materials payment due before order is placed.”
For site work, it can also help to separate labour and materials clearly on the quote and invoice. The client can see why a larger payment is needed early, and you can see how much of the job value is revenue for your work versus money that will immediately leave the business.
If material prices can change quickly, put an expiry date on the quote or state the assumption used.
How many progress payments are too many?
Every payment point adds administration for you and the client.
A $2,000 job probably does not need five invoices. A six month, $80,000 project probably should not depend on one final payment.
Try to make each payment meaningful.
Three stages are common because they map naturally to beginning, middle and completion. Four or five can make sense when a project has expensive phases or third-party costs.
The right schedule is the simplest one that keeps your exposure at a level you can live with.
What if the client is late on a progress payment?
Do not quietly continue indefinitely.
If the agreement says work pauses when a milestone payment is overdue, use that provision consistently. Continuing for another three weeks can turn a manageable overdue amount into a much larger one.
Keep the message factual:
“The second progress payment was due Friday and is still outstanding. We will pause the next stage until it is received. Once payment is in, we can confirm the revised schedule.”
That is much easier than trying to recover the entire project value after delivery.
For more on overdue accounts, see when a client won’t pay and getting clients to pay on time.
A good payment schedule shares the risk
A deposit should not feel like a random percentage copied from someone else’s contract.
Look at what you commit at each stage. Your time, materials, subcontractors and calendar all have value before the final deliverable exists.
Ask for enough upfront that a cancellation does not leave you carrying an unreasonable loss. On longer work, use clear milestones so the unpaid balance never gets too far ahead of the work.
Then put the schedule in writing and keep the running balance easy to see.
Sources: CRA on the GST/HST treatment of deposits, including what happens when a deposit is forfeited.