Steady work is the goal for most freelancers and small businesses. A client who books you every month is worth far more than a dozen one-off jobs, and a retainer is often how that relationship gets started. It turns irregular projects into predictable income, which makes everything from cash flow to planning your schedule a lot easier.
Retainers do raise some practical questions, though. What exactly are you invoicing for? When do you charge tax? And what happens when a client doesn’t use all the hours they paid for? Here’s how to set them up cleanly from the start.
Two kinds of retainer
The word “retainer” gets used for two quite different arrangements, and it’s worth being clear about which one you’re offering.
The first is a fee for availability. Your client pays a fixed amount each month to reserve your time, such as ten hours of video editing or ongoing social media content. If your agreement says so, you’ve earned that fee whether or not they use every hour.
The second is money paid in advance. Your client pays a lump sum up front, and you bill your work against it until it runs out. Consultants and lawyers often work this way, and any unused balance is usually refundable.
A deposit is something else again: a one-off amount that secures a booking or a project start date, and it’s normally applied to the final bill.
Put it in writing
Most retainer disagreements come from things nobody wrote down. A short agreement, even a simple email both of you reply to, should cover:
- the monthly amount and what it includes (hours, deliverables or both)
- the day you’ll invoice each month
- what happens to unused hours: lost at the end of the month, or carried over for a set time
- your rate for work beyond the retainer
- how much notice either side needs to give to end it
- whether any money paid in advance is refundable
It takes ten minutes, and it saves a lot of awkward conversations later.
Invoicing a retainer each month
Consistency is your friend here. Invoice on the same day each month, use your normal invoice numbering, and describe the period clearly, for example “Retainer for November 2026: up to 10 hours of video editing.” If you did extra work beyond the retainer, add it as a separate line so your client can see exactly what they’re paying for.
For money paid in advance, send an invoice whenever you apply some of the balance. Show the work you did, the amount taken from the retainer, and what’s left. Your client always knows where they stand, and so do you.
GST/HST on retainers and deposits
If you’re registered for GST/HST, the tax depends on what the money actually is.
- A monthly retainer fee is payment for your services, so charge GST/HST on that invoice like any other.
- A deposit held as security isn’t treated as payment until you apply it to the bill, so the tax applies at that point. If a client cancels and forfeits a non-refundable deposit under your terms, part of that deposit is treated as including tax. You can read CRA’s explanation in its memorandum on deposits.
- Payments made in advance for services are generally taxable when they’re paid or invoiced, whichever comes first.
These rules have plenty of fine print, so if you take sizeable advances, especially near your year end, it’s worth a quick conversation with your accountant about how to report them. This is general information, not tax advice.
Keep track of every balance
With one retainer client, a note in a spreadsheet works fine. With three or four, it gets surprisingly easy to lose track of who has paid what, how much has been applied, and what’s still sitting as credit. For each client, you want to be able to see at a glance what they’ve paid, what you’ve billed against it, and the balance remaining.
Keep the agreement, every invoice and every payment record together. CRA expects you to keep business records for six years, and there’s more on that in our guide to what records the CRA expects you to keep.
How Ledger helps
Ledger records deposits and partial payments against any invoice, holds a credit on a client’s account until you apply it, and lets you duplicate last month’s invoice in a click when it’s time to bill the next one. Every invoice, payment and credit sits together on the client’s history, so the balance is always right there. Take a look at Ledger if you’d like retainers to be the easy part of your month!