There are many reasons why it’s a good idea to ask your clients for a deposit before starting a job. However, not everyone feels comfortable making a request for a deposit payment, especially to new clients.
Knowing when and how to ask for deposit payments is a great skill to maximize your cash flow and business success. In this article, you’ll learn how to ask for a deposit politely to better instill trust in your clients and better guarantee due payments.
What is a deposit?
Before learning how to ask for a deposit, let’s be clear on what exactly it is. A deposit is a sum that is paid to you by a client before you begin your services.
Deposits typically indicate the formation of a contract and provide assurance to both you and your client that the job will be complete based on the agreed upon terms. The deposit is usually subtracted from the final payment amount at the end of the job.
Deposits are used in all sorts of businesses, from general contractor work to wholesale distribution transactions.
Are there different types of deposits?
You have a few different options when it comes to figuring out how to ask for a deposit. However, the most popular option is to ask for a portion of the total estimate or final amount. Some business owners prefer to ask for a fixed amount as a deposit, while others prefer to ask for a percentage — possibly up to 50%.
What’s more, there are also refundable and non-refundable deposits. For the most part, it’s best to choose to make your deposits non-refundable. However, you may make your deposits refundable up to a certain day to remain flexible for your clients. Be sure to express these terms in your contract.
One of the trickiest parts of learning how to ask for deposits on invoices is when to do it. Let’s take a look at the best times to require a deposit.
When should you ask for a deposit?
Part of knowing how to ask for a deposit is knowing when you should ask for one.
There are several circumstances where it’s a good idea to ask for an invoice. Here are a few times when you should consider it.
Before you start a job
It’s a good idea to ask for a deposit before you start any job, whether you ask for a fixed amount or for a percentage. This is typically an upfront payment that will help you cover the costs of the job.
For a large job
You’ll want to ask for a deposit if you’re planning a large job that will take a lot of time and resources. This assures you that your client is serious and won’t cancel at the last minute, which would leave you biting costs without the expected revenue.
New clients
You don’t need to send a deposit request email to everyone, but you certainly should send one to new clients. This is because you’re still in the process of building trust.
After you complete a job for your client and they’ve demonstrated that they pay in full and on time, it’s up to you whether you think it’s necessary to continue asking them for deposits.
While deposits provide a lot of security, you don’t always need them. There are alternative means that can provide similar security for your business.
Alternatives to deposits
Not every business requires deposits. There are other ways to reduce non-payment without requesting money upfront.
The most common alternative to deposits is a binding contract. While you should have a contract for every job, they’re especially important if you don’t require deposits.
Contracts set out the terms of your agreement, and you can use them to fall back on in case of disputes.
Another option is to require payment halfway through the job. While doing this isn’t as secure as requiring a deposit before the job, it’s still a good way to reduce non-payment.
Whether or not you do require one, knowing how to ask for a deposit is still an important skill. If you do choose to ask for a deposit, there are certain factors that you should consider.
Factors to consider before asking for a deposit
Here are some considerations that affect whether or not you should ask for a deposit:
- The size of the job: Asking for a deposit for a small job may not be worth the effort and might encourage your client to go elsewhere.
- How long your client has been with you: If you have a good relationship with your client, you’ll likely be comfortable enough to eventually waive the deposit.
- Whether a deposit will alienate your client: Some clients are uncomfortable paying a deposit. You may need to explain it to them in advance to avoid disputes.
- How much other businesses are asking for as a deposit: This greatly influences how much you can get away with charging regarding your deposits.
This last point is an important factor when determining how to calculate the deposit. Let’s take a closer look at why that is.
How to calculate the deposit amount
Knowing how to ask for a deposit from your clients also requires you to know how to calculate deposit amounts.
The first step to do so is to identify all of the factors and consider them through the scope of your business. The main elements to consider are where you live and the cost of the job in question.
Where you live will determine the average cost of the job in your area, which should be your starting-off point. It also helps you figure out how much other businesses are charging as their deposits.
However, it’s important to base your final deposit requirement on the quote that you give your client.
Here are some common ways that you can calculate your deposits:
- Use a range of 20-50%, depending on the size of the job. Ask for 50% for large jobs.
- Ask for 100% of the cost of materials before you buy them.
- Require a standard, non-refundable fee.
Now that you know how to calculate deposits, it’s time for the hard part: how do you politely ask for a deposit?
How to ask for a deposit politely
It’s important to know how to ask for deposits from customers in a way that is clear, yet polite.
First, build your deposit into the sales model and include it in all of your payment terms. This way, your clients expect it and it minimizes any surprises.
Even if it is in your payment terms, it’s a good idea to ask for the deposit directly as well. The most common way to do so is through email, so let’s take a look at how to ask for deposit in an email.
How to ask for deposit payment in an email
Learning how to ask for advance payment from clients by email is an important skill for a business owner to have.
When figuring out how to word your email, you want to be firm, but also polite and professional. Your email should have the exact deposit amount required, when this deposit is expected, and how it can be paid.
To illustrate, let’s take a look at a sample email, specifically an email with 50% deposit required wording.
How to ask for a deposit politely sample
Here’s a brief example how to ask for upfront payment email:
Thank you for contacting us for our services. The total project costs are [$ project costs] with an upfront amount of [$ deposit], due by [due date].
Payment can be made by [payment method and instructions].
Managing deposits
Managing deposits is an entire task on its own. For one, you don’t want to be chasing payment, so it’s important to keep track of who paid their deposit and when.
From there, you need to ensure to use your deposits for the right business costs – whether that be directly towards material for the job or covering your overhead.
The best way to manage deposits is through software. For example, if you’re a painter who asks your customers for deposits, there are painting apps for keeping track of each deposit you receive and how it is used.
Let’s look at what not to do when asking for and managing deposits.
How to ask for a deposit: Common mistakes to avoid
A key part of asking for deposits is the delivery. There are times when a deposit may turn a customer away from your business. Make sure to avoid these three mistakes when asking for a deposit:
- Don’t blindside your customer. Make sure they know about the deposit before you reach an agreement.
- Don’t overcharge and be reasonable with your deposit requirement amount. For example, it’s unreasonable for a general contractor to require 100% upfront payment before starting the job.
- Don’t be too flexible. Accommodating customers is great customer service, but a deposit requirement built into your business should always be firm to protect your cash flow.
Key takeaways
Knowing how to ask for a deposit minimizes non-payment and ensures that your customers take your time seriously.
For best results, be sure to direct your customer’s attention to the deposit early on. As long as your requests are polite, deposits can do nothing but good for your business.
How to ask for a deposit FAQs
How should I handle a client who won’t pay a deposit?
If you have a client who doesn’t want to pay a deposit, make sure they know that you will not begin the work without the deposit.
How do I ask for a deposit by email?
To ask for a deposit by email, make sure that it is clearly stated within the body of the email. It also helps to make the subject line “Deposit required.”
How do I know what percentage to charge for a deposit?
The percentage that you charge for a deposit depends on factors such as the size of the job and how much your competition is charging for similar jobs. It’s a good idea to do some research before setting your deposit rates.
Your next step is to learn how to ask for payment. Here’s a guide to do so professionally.
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