How to invoice for a down payment or deposit
In the process of invoicing, there are additional steps that are sometimes included. Depending on your business or industry, you might regularly use quotes, delivery notes, and accept deposits or down payments on orders.
While quotes and delivery notes might be fairly straightforward, as they’re separate from the invoice, a deposit can be a bit more complex.
What is a down payment and how is it treated in an invoice?
A down payment or deposit is typically a partial amount of a total of a sale that is paid by the customer up front, before the goods or service are provided.
A deposit should be reflected on an invoice. A proforma invoice or a quote cannot replace the invoice in terms of indicating that the deposit is expected and then has been paid.
If VAT is applicable, the appropriate VAT should be determined as well for the down payment. This is part of the overall cost, so is included in the VAT calculations. In online invoicing software like Debitoor, you can easily adjust the VAT in line when you create the invoice.
A down payment in Debitoor
Many working with Word or Excel invoice templates will simply edit the deposit and add it to the invoice. Something similar can be done in online invoicing.
When creating an invoice in Debitoor, you can add the agreed-upon deposit as a line of the invoice in the negative. For example, if the deposit for an order is £100, it would appear on the invoice with the description ‘Deposit’ or ‘Down payment’ and the amount would then be £ - 100.00:
Note that when a negative amount is added, the remaining total must be higher than the negative amount - in other words, the invoice cannot have a negative total.