Advance invoicing is a core practice for many businesses. This method of invoicing can help you manage upcoming revenue and project costs without putting your business at risk. When you’re making custom goods or co-ordinating an extensive project, an early deposit can be a lifeline – especially when you consider that businesses wait 59 days on average to be paid for sold goods and services.

Below, we’ll explain what advance invoicing is, why businesses use it, what an advance invoice should include, and what the potential risks are.

What’s in this article?

• What is advance invoicing?
  
• Why do businesses use advance invoicing?
  
• What should an advance invoice include?
  
• What industries commonly use advance invoicing?
  
• How can you manage advance invoices effectively?
  
• What are the risks of advance invoicing, and how can you mitigate them?
  

What is advance invoicing?

Advance invoicing is the practice of issuing a payment request before delivering the product or service.

Imagine you own a catering business. A potential client contacts you to cater their wedding reception next summer, and you spend the next few days or weeks gathering staff, reserving equipment, and designing a menu. Rather than wait until the wedding is over to bill your client, you send an invoice beforehand to request partial or full payment.

Other examples of professionals or businesses that might use advance invoicing are carpenters who build custom furniture, event planners, and photographers. By requesting a partial or full deposit early, you avoid chasing payment after completing the work.

This practice can feel unusual for clients who are accustomed to paying invoices only after the goods or services have been delivered. But in many fields, advance invoicing is standard. If you have ever booked a band for a Chritsmas party or paid a deposit to rent a restaurant for a birthday party, you have experienced an advance invoice (even if it was called a “deposit request”).

Why do businesses use advance invoicing?

One major appeal of advance invoicing is better financial predictability. When you know at least part of the project’s revenue will be delivered soon, you’re less concerned about short-term budget constraints or slowdowns. That’s especially helpful when you have staff to compensate or materials to buy. For businesses that depend on big, custom orders, upfront payments provide a cushion that prevents disruptions in day-to-day expenses.

Advance invoicing can also help set client expectations. Sending that invoice formalises the agreement between you and your customer, signalling commitment and clarity of scope. Sometimes, it weeds out potential no-shows. In service-oriented fields, you invest resources the moment the client says yes – so it’s fair to request a portion or all of the funding at that stage.

Another benefit comes from the momentum it builds. When a client sees that official payment request, it could nudge them to prioritise your project. Their stake is immediate and tangible. Instead of an abstract plan, your collaboration has become a real obligation they’ve already invested in. That sense of shared commitment can fuel a more agreeable project experience.

What should an advance invoice include?

Whether you are requesting partial or full payment, your advance invoice should be detailed. Below are a few components that belong in an advance invoice:

• Invoice number

• Issue date

• Product or service description (e.g. “initial deposit for 50 custom chairs, including labor and raw materials”)

• Quantity and unit price (e.g. hourly rate, individual item prices)

• Sales tax or other applicable charges

• Estimated delivery or completion dates

• Payment terms (due date, whether it’s for partial or full payment, and any late fees)

• Any refund or cancellation policies

Advance invoicing relies on transparency. Each line on the invoice should explain what the client is paying for and why. Attention to detail here can save time and effort later.

Which industries commonly use advance invoicing?

Advance invoicing is widely used across several industries, including:

• Event planning: Booking a venue, arranging caterers, and hiring staff can involve significant costs. A big gathering might take months of preparation, and the organiser is on the hook for deposits to florists, photographers, or DJs. To offset these early expenses, event planners or the event venue might invoice the client for a deposit.

• Construction and contracting: Construction businesses pay for raw materials, machinery, and staff long before a new building or renovation wraps up. Sending an advance invoice on major projects is common. The advance payment normally covers a portion of the total contract amount and lets the contractor buy materials or specialised equipment immediately.

• Custom manufacturing: Consider a furniture workshop that crafts only made-to-order pieces. Each design might require special materials that can’t be resold if the client cancels. An advance invoice is a simple way to protect that workshop from sinking money into something that might never get picked up. It also helps guarantee the customer is serious.

Many freelancers use advance invoicing, too, especially those who work on a per-project basis.

How can you manage advance invoices effectively?

With the right strategy and tools, you can manage advance invoices to keep your business organised. Here’s how to stay on top of advance invoicing:

Centralise your invoicing process

Juggling multiple spreadsheets or email threads can lead to mistakes. Consider using one platform that tracks every invoice, payment status, and due date. Stripe Invoicing gives you a real-time view of all invoices, paid or pending. You can customise invoices with detailed payment terms and track prepayments.

Automate whenever possible

Sending reminders or calculating balances manually takes time and leaves room for mistakes. Automating these tasks frees up your team for other work. Consider automating:

• Invoice reminders (e.g. “Your payment is due in three days”)

• Recurring invoices

• Tax calculations for different jurisdictions

Stripe’s automation features let you schedule reminders and manage recurring invoices easily. Once a payment is received, the platform updates the invoice status automatically.

Allow multiple payment methods

Limiting payment options can delay the payment process. Offering a variety of payment methods, such as credit and debit cards, digital wallets, and bank transfers, lets customers pay in a way that’s convenient for them.

Keep everything transparent

Confusion leads to delays. A detailed, well-crafted invoice prevents misunderstandings and sets clear expectations. Stripe’s invoicing templates are fully customisable so you can add your terms, timelines, and tax rates with a few clicks. All invoices are stored in your account for reference.

Track and manage refunds

If a client cancels or requests a refund, having a clear process means you can handle it with confidence. Stripe lets you process full or partial refunds from the Dashboard. Clients get their money back quickly, and you protect your reputation.

What are the risks of advance invoicing, and how can you mitigate them?

Advance invoicing can have downsides. The most obvious one is that a client might be unhappy and want to back out of your agreement or change their requirements halfway through. If your terms don’t specify how you handle these situations, you risk a dispute that can harm your reputation or finances.

Here are a few tips:

• Outline refund rules at the start: Put your refund policy in writing before any money changes hands. If a client pulls out unexpectedly, will you return the money they’ve paid you? Or will you keep a portion for materials and time spent? Clarifying your policy will help you avoid disputes.

• Include detailed project specs: Provide clients with an itemised list of your deliverables. If you’re a construction business, specify the number of hours dedicated to planning, materials to be purchased, or the structural blueprint you’ll provide. If the scope changes, you can point to the original agreement and renegotiate as needed.

• Be mindful of partial vs. full payment: A partial payment covers some costs but doesn’t make the client feel as though they’re taking on all the risk. Some businesses request the total cost upfront, which might weed out indecisive customers but can lead to complications if the project runs into trouble or the clients claim dissatisfaction.

• Communicate early and often: Let your customers know how the project is progressing. That might mean sending progress photos, email updates, or phone calls at major milestones. People who have paid ahead of time appreciate evidence that you’re meeting the schedule.

• Document everything: Whether it’s a short email recap after a phone call or adding a comment on the invoicing platform, keep a record of any updates or changes. If the client decides they want to revise certain features, log when that happened and how it affects your resources. That kind of paper trail can be invaluable if a disagreement arises.

Stripe can help in these scenarios. You can process refunds from the Dashboard and send real-time updates on invoice status so customers know you’re handling their money responsibly. Stripe provides a structure for tracking financial interactions, which, combined with strong communication and a transparent contract, can help you avoid problems later.