If you’re a project-based business you are mostly likely familiar with deposit invoices and progress payments, but you could be offering a product or service and still benefit from creating deposit invoices.
Here are 6 advantages of having deposit invoices or progress payments as part of your business process:
- Consistency in Revenue: You’ll be creating a reliable revenue stream when you request a partial payment upfront. This can lead to a consistent stream of funds which allows you to manage your cashflow and meet any costs or financial obligations.
- A better Accounts Receivable Process: Your AR process should improve through not having to chase outstanding invoices.
- Clients become committed: Deposit invoices demonstrate a commitment to your clients but is also 2-way in that you receive the commitment of the client.
- Cashflow is improved: You’ll notice your cashflow becomes more predictable over time and you’ll be able to make timely payments and avoid cash shortages without being reliant on that final invoice being paid on time. Business decisions get better, and you’ll be able to invest in growth.
- Non-payment risk is reduced: Clients are less likely to default or withhold payment knowing they have paid a deposit.
- Projects or Services become more efficient: delivering projects on time and on budget becomes more achievable as you are enabled to allocate resources more efficiently.
The overarching theme here is that cashflow is greatly improved through each of these advantages providing your business with greater stability. There are benefits for yourself and for your clients.
Project Management Software
Note – deposit invoices require a slightly different setup than standard invoices. You want to make sure any partial payments are linked to the correct job or project. If you aren’t using project management software, you need to make sure costs are linked to the same job/project.
Deposits and Progress Payments are best to manage as part of a job management system. (A manual system can work but we do recommend cloud software for this purpose!)
Xero Projects is a simple project management software, but there are others to explore.
If you would like support in setting up a deposit invoice process, arrange a time with one of our team. We are here to help.
