Deposits and advance payments: protect your cash flow

Cash flow is the lifeblood of freelance survival. One way to protect it is to ask clients for deposits or advance payments on big jobs—but many freelancers either never ask, or do it wrong. Asking for money upfront isn't rude; it's sound business. And the Belastingdienst has specific rules about when VAT is due on advance payments, which trip up many freelancers. This guide tells you when to ask, how much, how to invoice it correctly, and what happens if your client never comes back to finish the job.

Why deposits and advance payments matter#

A deposit is a percentage of the total fee, paid before you start work. An advance payment (vooruitbetaling) can mean the same thing, or it can mean paying for something in advance that hasn't been delivered yet—think of a retainer or a prepaid block of hours. Both protect you:

• Cash flow: You have money in hand before you spend time and resources
• Risk mitigation: If a client disappears mid-project, you've already been paid for part of it
• Commitment signal: A client who pays a deposit is usually serious; tire-kickers and scope-creepers are less likely to book you if there's a deposit required

When to ask for a deposit#

Not every job needs a deposit. A small, short project with a trusted client can run on standard payment terms (net 30). But ask for a deposit in these situations:

• Large projects: Anything over €5,000 or 100+ hours should have a deposit to protect your cash
• Long timelines: If the work spans weeks or months, ask for a deposit upfront and perhaps milestone payments
• New clients: A client you've never worked with before is a higher risk; a 25–50% deposit is standard
• Custom or bespoke work: If you're building something unique that has no resale value, you need protection upfront
• Risky scope: Clients who are vague, keep changing requirements, or haggle hard on price are higher risk

How to invoice a deposit correctly#

A deposit invoice is a normal invoice, just for a partial amount. Here's what to include:

1. Date and invoice number — in your normal sequence
2. Your details and the client's details — as always
3. Description: "Deposit for [Project Name]" or "Advance payment – [scope description]"
4. The deposit amount — clearly labeled as the deposit or advance
5. VAT at your standard rate (21%) — charged on the full deposit amount
6. Payment terms — e.g., "Due within 7 days" or "Due upon receipt"

The key point: You charge VAT on the deposit immediately, even though the client hasn't received the final deliverable yet. This is because VAT is due when you invoice, not when you deliver. Many freelancers miss this and under-charge VAT, which costs them money.

The vooruitbetalingsfactuur (advance invoice)#

If you're in a long project and want to bill for work completed so far (not just a flat deposit), you issue what's called a vooruitbetalingsfactuur—an invoice for work done, issued before the final deliverable. It's treated exactly like any other invoice: you charge VAT on it now, and when you issue the final invoice at the end, you don't double-VAT the same work.

Example:

• You quote €10,000 for a three-month project
• After month one, you invoice €3,000 for "Month 1 services" + €630 VAT = €3,630
• After month two, you invoice €3,000 for "Month 2 services" + €630 VAT = €3,630
• At the end, you invoice €4,000 for "Final deliverables and month 3" + €840 VAT = €4,840
• Total: €10,000 + €2,100 VAT, spread across three invoices

Each invoice stands alone for VAT purposes. You report all three in your VAT return for the quarter in which you issued them.

What if the client doesn't pay or disappears?#

If a client pays the deposit and then ghosts you—never responds, cancels the project, or refuses to pay the balance—you're protected on the deposit. You keep it. But here's the VAT twist:

You still owe the VAT to the Belastingdienst, even though the client didn't pay the invoice or never received the service. VAT is not refundable to you if the customer doesn't pay. You must pay it on time.

The only exception: if you later determine the invoice is genuinely uncollectible (after one year of trying to collect, or if the client is insolvent), you can reclaim the VAT as an oninbare vordering (bad debt). But this takes time and documentation.

Practical advice: Keep deposits for small projects or those with high risk. For retainer relationships or regular clients, you might instead negotiate a shorter payment term (net 10 or net 15) rather than a full deposit.

Protecting yourself with terms and conditions#

A deposit policy works best when it's part of your standard terms and conditions (algemene voorwaarden). Include:

• Your deposit requirement (e.g., "25% deposit required to secure the start date")
• The refund policy (if any—e.g., "Non-refundable except in cases of our breach")
• Milestone payment terms for long projects
• What happens if the client cancels mid-project (do they forfeit the deposit, or get a pro-rata refund?)

Putting this in writing, and having the client sign or acknowledge your terms before they pay, avoids disputes later. Many clients expect a deposit and respect clear terms; others will push back and try to negotiate. Written terms make these conversations easier.

See payment terms and how to get paid on time for more on structuring payment and how to make a professional invoice for the mechanics.

Deposits and your VAT return#

When you file your quarterly VAT return (aangifte), you report each invoice—including deposit invoices—in the period you issued it. You declare the gross amount (including VAT) as turnover, and claim back the VAT you paid on your business expenses in the same quarter. Deposits don't get special treatment; they're just regular invoices.

If a client later disputes or returns a deposit, you issue a credit note (creditfactuur) to reverse the original invoice, and report that in the quarter you issue the credit note.

For a full walkthrough of the VAT return process, see how to file a VAT return as a freelancer.

Managing advance payments for cash flow#

Asking for deposits is one part of strong cash flow management. The other parts are:

• Invoice promptly: Don't sit on an invoice. Send it the same day the client approves the scope
• Follow up on unpaid invoices: A friendly reminder at 7 days, a formal notice at 14 days
• Keep a buffer: Even with deposits, maintain 3–6 months of operating expenses in a separate account (see managing cash flow as a freelancer)
• Consider payment plans: For big invoices, offer a deposit + 2–3 milestone payments instead of one lump sum at the end

Frequently asked questions#

Deposits and advance payments are a legitimate, professional way to protect your cash flow. They're not unfriendly or unusual—they're standard in most industries. The key is to ask clearly, invoice correctly (including VAT), and include your terms in writing so there's no confusion. When you do, you avoid the feast-or-famine cash crunch that plagues many freelancers. ZZP Belasting helps you track every invoice, payment, and VAT obligation so you're always on top of your cash and tax position.

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