Customer Deposits

Last updated: June 20, 2026

A customer deposit collects money before an invoice exists, a booking fee, a retainer, a down payment, and holds it as a liability until a real invoice can absorb it. It secures the customer's commitment and puts working cash in your hands up front.

What you will learn
  • Why a deposit is a liability, not income
  • What the deposit screen captures
  • How applied status tracks the deposit being used
  • How it relates to vendor prepayments

Anatomy of the screen

  • Customer and an optional project.
  • Identity – code, date and currency.
  • Deposit amount and account – how much, and which financial account it is paid into (or against receivables).
  • Ledger – the customer-deposit liability the money sits in.
  • Transaction fees, payment status (Pending or Cleared), notes and attachments.

Unlike a bill, a deposit has no line items: it is a single lump sum, because it is money received against nothing yet specified.

How it behaves

A deposit is a liability

This is the idea that matters. Taking a deposit is not earning revenue, it is taking on an obligation to deliver goods or refund the money. So the posting credits a customer-deposit liability and debits the receiving account. Only when you invoice does the liability convert into recognised income.

Applied status

A deposit tracks how much of itself has been used: Unapplied, Partially applied, or Completed. You apply it as payment when you raise an invoice, and any unused remainder can be refunded. The applied status is what stops a deposit being spent twice.

Mirrored on the purchase side

Vendor prepayments are the exact mirror: money you pay a supplier in advance, held as an asset until their invoice absorbs it.

Worked example

You collect a 30% deposit on a proforma invoice, which posts to the customer-deposit liability. When the job finishes you raise the final invoice, apply the deposit against it (applied status moves to completed), and the customer pays the balance. Had they cancelled, you would have refunded the deposit instead.

Edge cases and good practice

  • Never treat a deposit as revenue until it is applied to an invoice.
  • Partial application spreads one deposit across several invoices on a long job.
  • Refund the remainder rather than leaving a stale liability on the books.

Related