Recording a Client Deposit or Prepayment
Overview
Some businesses receive payment from clients before sending an invoice — whether it’s a retainer, deposit, or prepayment for future work. It’s important to understand how to record that payment correctly and track it as a credit on the client’s account.
Properly recording these early payments ensures:
You can easily apply them to invoices later
Your income is not accidentally double-counted
Your client’s account stays accurate and easy to reconcile
✍️ This topic walks you through how to record a client payment when there’s no invoice yet — and how that payment becomes usable credit.
🔍 What’s Your Situation?
Scenario 1️⃣: Client pays a deposit when signing a contract
→ Use: Record the deposit as a payment without an invoice
Scenario 2️⃣: Client prepays for services to be billed later
→ Use: Record the prepayment as credit on their account
💬 Tip: All of these methods create a credit that you can later apply to invoices.
How to Use Each Method
1️⃣ Record a Deposit for Future Work
When to use it: Client makes a partial payment before receiving the first invoice
Hover over the panel on the left side and select Transactions.
Locate the client deposit transaction and click the three dots at the end of it.
Select Edit Transaction.
Select the Invoice Payment check box.
Select client or project from the Client & Projects list.
Optionally, add a note like “Deposit for kitchen remodel”
Click Save.
When asked to record payment to invoice, select Not Now.
✅ This payment is saved as a credit on the client’s account, available to apply to invoices later.
Example
Building Contractor
Mike’s Kitchen Remodeling requires a 40% deposit to secure scheduling and order materials. A homeowner contracts a $25,000 remodel and pays $10,000 upfront. Mike records the deposit with the note “Material deposit for kitchen renovation – Start date March 15.” He applies the credit across progress invoices as work moves forward.
2️⃣ Record a Full Prepayment for Ongoing Services
When to use it: Client pays upfront for monthly work or a retainer-based plan
Hover over the panel on the left side and select Transactions.
Locate the client prepayment transaction and click the three dots at the end of it.
Select Edit Transaction.
Select the Invoice Payment check box.
Select client or project from the Client & Projects list.
Optionally, add a note like “Retainer for social media management.”
Click Save.
✅ The full amount is stored as credit and can be applied gradually to invoices as services are delivered.
Examples
Business Lawyer
Jennifer’s Law Practice requires new clients to pay retainers based on their estimated work scope. A startup client, TechStart Inc., pays a $5,000 retainer upfront. Jennifer records the payment with the note “Legal services retainer – corporate formation and contracts.”
As Jennifer tracks her billable time, she applies portions of the $5,000 credit to monthly invoices — for example, $1,200 for contract review and $800 for corporate filings — until the retainer balance is used up. This process keeps billing smooth and ensures the client’s account is always accurate.
Digital Marketing Studio
David’s Design Studio works on a retainer basis. Client Hype Fitness prepays $6,000 for six months of marketing services. David records the $6,000 prepayment as credit with the note “6-month marketing retainer prepayment.” Each month, he applies $1,000 credit to the invoice, so the client only pays for extra services beyond the retainer.
📌 Best Practices or Common Mistakes
✅ Always enter the payment even if there’s no invoice yet — this creates usable credit
❌ Don’t create a fake invoice just to record a deposit — use the payment method instead
✅ Use the Notes field to track the reason for the payment (retainer, prepayment, etc.)
❌ Don’t apply the credit manually to income again when you invoice — it’s already accounted for