Should I require a deposit from new customers before starting work?
Should you require a deposit from new customers?
Short answer
Usually yes. A deposit transfers credit risk from your business to the customer for the deposit portion, gates committed customers from window-shopping ones, and makes the unpaid-balance question much easier if the engagement goes sideways. The right deposit size is industry-dependent: 25-50% upfront is common for contractors and event work, 25-33% retainer is common for professional services, 100% upfront is normal for products. The wrong move is requiring a deposit so large you never close the deal in the first place.
Deposits are a credit-risk lever that small service businesses underuse. The owner usually starts without one because the first few clients are friends or referrals where trust is high, then never adds the requirement back even after the customer mix has broadened. By the time the first material non-payment lands, the absence of a deposit policy means the entire receivable is unsecured.
The math is straightforward. For an engagement worth $5,000, a 25 percent deposit ($1,250) covers the cost of materials and the first sprint of labor. If the customer disappears mid-project, you've kept what was already spent. For an engagement worth $50,000, a 25-50 percent deposit ($12,500-$25,000) plus progress billing on milestones means at no point is more than a few weeks of work unbilled — the credit exposure is bounded by your billing cadence, not by the full project size.
The right deposit size varies by industry. Contractors and remodelers commonly run 25-33 percent at signing, 25-50 percent at delivery of materials or rough-in, balance at completion; this matches the cash-flow shape of the work. Wedding photographers, caterers, and event vendors typically take 50 percent at booking, balance at the event. Marketing agencies, design firms, and consultancies on retainer take 25-33 percent monthly retainer in advance against hours worked. Equipment suppliers often take 100 percent on order because the goods are theirs at risk until delivery.
A deposit also gates seriousness. Customers who balk at any deposit are sometimes the ones who will balk at the final invoice. The friction of writing the deposit check screens out the price-shoppers who were never going to close, leaving you working only with customers committed enough to put cash down. The conversion-rate hit is usually less than feared, and the project-quality and payment-quality both improve.
The rules where deposits don't fit cleanly: very small engagements (under $500), repeat customers with clean payment history, and certain regulated services where deposits are restricted (legal trust accounting, certain medical settings). Outside those, the default answer for a service business should be yes — and once you have the policy, Syntharra integrations recognize the deposit invoice as paid against the engagement and only chase the unpaid milestones, not the deposit itself.