Customer Deposits and Progress Payments: Fund the Work Before the Final Invoice
A profitable project can still drain cash before the final invoice is paid. Map deposits, milestones and delivery costs before agreeing to the payment schedule.
The customer accepts your quote. The team books the work. Then materials and contractor bills arrive weeks before the final invoice can be issued.
A deposit or progress payment can reduce that gap, but only if the money reaches the bank before the costs it is supposed to fund. A payment milestone on a proposal is not the same as a collected payment.
To plan customer deposits and progress payments, map the cash required to deliver each stage, agree clear payment triggers and test what happens if a receipt arrives late. This guide uses a fictional Australian business example. It does not prescribe a deposit percentage or replace advice about your contracts, industry or tax position.
Start with the work you must fund
Before choosing a payment schedule, list the cash commitments created by the job. These might include materials, subcontractors, additional payroll, travel and delivery. Put each payment in the week it is expected to leave the bank, rather than the week the cost appears in a report.
Then list customer receipts separately: amount, invoice trigger, expected invoice date, agreed due date and realistic receipt date. An invoice raised after approval may involve several waits: finishing the stage, obtaining approval, submitting the invoice and reaching the customer's payment run.
Keep the project view alongside the whole-business forecast. Rent, existing payroll and other jobs still compete for cash. Our 13-week cash flow forecast guide covers that wider weekly view.
A worked example: the same job, different cash gaps
A fictional design business agrees a project with total customer receipts of A$30,000. Its project delivery payments are A$9,000 in week 1, A$6,000 in week 2 and A$3,000 in week 4. Completion is expected in week 4.
Compare two illustrative arrangements. Under the first, the full A$30,000 is collected in week 6. Under the second, the customer pays A$9,000 before work starts, A$12,000 after an agreed stage in week 3 and A$9,000 in week 6. These are assumed collection dates, not promises that issuing an invoice will produce immediate cash.
| End of week | Delivery payments that week | Final-payment-only arrangement | Deposit and staged payments |
|---|---|---|---|
| 1 | A$9,000 | (A$9,000) | A$0 |
| 2 | A$6,000 | (A$15,000) | (A$6,000) |
| 3 | A$0 | (A$15,000) | A$6,000 |
| 4 | A$3,000 | (A$18,000) | A$3,000 |
| 5 | A$0 | (A$18,000) | A$3,000 |
| 6 | A$0 | A$12,000 | A$12,000 |
Each column starts from zero and accumulates project receipts less project payments. With payment only at the end, the business funds A$18,000 before collection. With staged receipts, the largest week-end gap is A$6,000. The timing changes; total receipts and delivery payments do not.
These balances are project cash movements, not the company's bank balance or accounting profit. The example excludes overheads and tax remittances or recoveries. Amounts represent cash paid or received, including GST where applicable. A real forecast must include all relevant business and tax cash flows at their expected dates. Also check movements within each week: a Friday receipt cannot fund a Monday payment without other available cash.
Make the milestone clear enough to invoice
“Halfway through” leaves room for disagreement. A useful milestone identifies a deliverable, the evidence that it is complete, who approves it and how that approval affects invoicing. Record the payment period separately from the work trigger.
Australian Government guidance on payment terms recommends making payment methods, timing, credit conditions and overdue-payment arrangements clear in invoices and contracts. Agree the terms before relying on them in the forecast.
For each stage, ask:
- Does the customer require a purchase order, supplier onboarding or a particular invoice portal?
- Who can approve the deliverable, and who handles the payment?
- What happens to the schedule if the scope changes or customer inputs arrive late?
- Which date is contractual, and which date is our collection estimate?
Do not move an invoice to an earlier week in the model unless the revised arrangement is actually agreed.
Stress-test the receipt that matters most
In the example, move the A$12,000 progress receipt from week 3 to week 5, while leaving delivery payments unchanged. Cumulative cash becomes minus A$6,000 in week 3 and minus A$9,000 in week 4, before recovering to A$3,000 in week 5. The peak week-end funding requirement rises from A$6,000 to A$9,000.
That A$3,000 difference is useful information before signing. It may justify changing the delivery sequence, discussing a different lawful payment schedule or keeping more available cash. None of those responses should be assumed without checking feasibility.
Also test a cost overrun separately. Collecting earlier does not fix an underpriced job. Compare estimated and actual delivery costs using a job-costing review so that payment timing and profitability remain visible as separate decisions.
Check the rules before choosing a deposit
There is no single deposit percentage suitable for every Australian business. The NSW Small Business Commissioner's guidance discusses deposits and progress payments, while warning that deposits must comply with applicable limits and funds must be handled appropriately. It also recommends documenting conditions for returning a deposit if work is cancelled or changed.
Construction and other regulated activities can have specific requirements. Have a qualified adviser check the relevant state, industry and contract rules before adopting a schedule. Confirm the accounting and GST treatment separately rather than treating every receipt as immediately earned profit.
Turn the schedule into a weekly control
Maintain one short register showing the stage, expected receipt, remaining delivery payments, approval status and person responsible for follow-up. Replace estimates with actual receipts as they arrive, and keep the original assumptions for comparison.
Before taking on another job, review the combined low point across all committed work. Several individually manageable projects can require cash in the same week. The practical goal is a payment schedule that customers understand and the business can deliver against, including when one important receipt slips.
Sources checked 4 November 2026, Australian time. General business education only, not accounting, tax, legal or financial advice. All example figures are illustrative.
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