Deposits on estimates: A guide for small and mid-size businesses

Collecting deposits on estimates is a standard practice for many small and midsize businesses. The upfront payment is particularly helpful in securing a commitment from customers and handling upfront project costs.

Covering costs on an ongoing basis is a serious matter for small businesses: 44% report having cash flow issues, the November 2025 Intuit QuickBooks Small Business Insights survey found. Among midsize businesses, 28% prefer securing upfront payment before the work begins.

Whether you offer professional services, take on construction-related projects, or manage multi-phase contracts, securing upfront payments can be essential for your business's financial health.

Read this guide from top to bottom, or use the jump links to navigate:

• What are deposits on estimates?
• Why do small and midsize businesses require deposits on estimates?
• When should my business not use deposits on estimates?
• How much should my business charge for deposits on estimates?
• How do small businesses set up deposits on estimates?
• Real-world example: How deposits on estimates helped this business in the construction industry
• Strengthen your business with deposits on estimates

What are deposits on estimates?

A deposit on an estimate is an upfront payment, typically a percentage or flat fee, that a business collects from a customer when an estimate (or quote/proposal) is issued. Its purpose is to secure the customer's commitment to the proposed work and provide the business with capital to cover initial project costs, effectively kicking off the service agreement.

An estimate is a quote, bid, or proposal for the work you plan to do and how much it's expected to cost. A business sends an estimate to customers to provide information about the scope of work and what they can expect to pay. Unlike an invoice, an estimate isn't charging a customer—but an estimate can require a deposit for a fixed amount of money or percentage of the total estimated cost.

Collecting deposits on estimates gives your small business a financial commitment up front from your new customer. Once the initial payment is made, the estimate is accepted.

Common use cases for deposits on estimates

Deposits on estimates are especially useful for service-based and project-based businesses—those that do jobs for customers that are generally costly, time-consuming, customized, and might require purchasing materials from a third party. Collecting deposits on estimates might make sense if your business uses project-based accounting already.

Industries where deposits on estimates are common include:

• Construction
• Field service providers and contractors
• Freelancers and consultants
• Creative professionals
• Event services
• Automotive repair
• Commercial cleaning and maintenance
• Other professional services
• Any industry that manages complex or multi-phase contracts

Why do small and midsize businesses require deposits on estimates?

Why require deposits on estimates? The payments can be helpful for service professionals and project-based businesses, particularly when there are upfront costs in materials, labor, and time.

Cash flow is one of the biggest challenges for businesses that invoice incrementally as work on projects is completed. Deposits on estimates provide capital for work to be completed, ensuring businesses can cover early expenses like ordering materials, scheduling workers, and paying third-party vendors.

What are the benefits of upfront payments?

Deposits on estimates can:

• Improve cash flow 
• Cover costs for materials, travel, or labor
• Reduce risk for the business by having a deposit secured
• Increase a customer's commitment level
• Decrease the likelihood of cancellations and no-shows

When should my business not use deposits on estimates?

Some businesses don't need to collect deposits on estimates. If you run a small product-based business, such as a retail store or e-commerce shop, your business model likely doesn't require creating estimates or collecting deposits to begin work. (You might instead accept prepayments, like when a customer pays for an online order before you fulfill it.)

Other jobs for service- and project-based businesses don't necessarily require that you collect deposits on estimates either. You might avoid charging a deposit or waive the deposit when:

• It's a low-risk or low-cost job (e.g., no custom ordering, few work hours required, low total cost) 
• You're working with a longtime customer with a proven history of on-time payments
• The market or competitive landscape requires flexibility to win business

How much should my business charge for deposits on estimates?

How much your business should charge for upfront payments might depend on your industry, the type of job and total cost, the risk you assume in starting the project, and local laws or regulations. Always check government requirements; your local Small Business Development Centers (SBDC) can help guide you if there are limits on upfront payments.

There are two ways you can charge deposits on estimate: by percentage or by a flat fee.

Percentage-based deposits

One way to determine the amount of a deposit is to charge a percentage of the total estimated cost of the project. Your business would likely determine a standard percentage to charge on every estimate—or range of percentages to charge if there's a lot of variability in job sizes. If you're using software to create your estimates, it can automatically determine the exact amount to be paid based on the percentage you set.

In general, percentage rates between 10% and 50% are common for deposits on estimates.

Flat-fee deposits

The other way to charge a deposit on an estimate is with a flat fee. A flat fee means that, regardless of the total amount of the estimated cost, your business is charging a standard amount for the deposit. You might also develop a range of flat fees for different types of jobs, depending on their size, the upfront investment needed, or risk required.

Depending on your industry, a flat fee could be $10, $1,000, $10,000, or more—really, any amount that's a fraction of the total payment and helps your business invest its time and resources in a project.

How do small businesses set up deposits on estimates?

To set up deposits on estimates, your business first needs to clearly define a policy for collecting deposits on estimates. 

Step-by-step guide to creating your deposit policy

1. Do your research. Look into state and local regulations governing deposits. You can consult your local SBDC for guidance.
2. Determine the amount of the deposit. Decide on using a percentage-based or flat fee and whether the policy differs by project type, for example.
3. Define the timing for payment. Include how soon the deposit is due after receiving the estimate and how the deposit affects the start date.
4. Build out the rules for a refund. Clarify whether the deposit is refundable and what affects your ability to refund the deposit, such as ordering materials.
5. Establish the payment process. Set up software or another system for collecting deposits on estimates. Train your staff on the process and how to communicate it to customers.

How do I collect deposits on estimates?

Once you've created your deposit policy, you can start collecting deposits on estimates. There are a two basic ways to collect deposit payments:

• Manual payment collection: This requires building out an estimate, determining the deposit amount, and separately sending out a payment link, emailing the customer, calling for payment information, or waiting on a check to be mailed or dropped off.
• Automated payment collection: This requires paying for a software solution that can automate the process for you. With the right software, you can build out an estimate for a project, set the deposit amount by percentage or fixed fee, and allow customers to pay the deposit online when they accept their estimate.

Automated payment collection can save businesses significant time while keeping projects on schedule and covering costs. Instead of juggling partial invoices, sticky notes, or chasing checks, using a software solution can help small and midsize businesses secure money sooner, ensure client commitment, and move forward with confidence. 

What are the benefits of using software to automate payments for deposits on estimates?

Collecting deposits on estimates through business software can streamline your payments process from start to finish.

Businesses using software that enables payments on estimates stand to gain:

• Stronger cash flow: Secure deposits upfront, ensuring you have the capital to begin work and maintain liquidity
• More on-time projects: Order materials, schedule staff or crews, and start jobs without waiting on payments to be made by mail or in person
• Lower processing costs: Collecting deposits online carries lower merchant fees than keying in card info over the phone—and provides more data security
• Automated bookkeeping: Deposits can post automatically as deferred income and apply seamlessly when invoiced, depending on your software
• Client confidence: A polished, transparent process can build customer trust while making payments easy

How to record deposits on estimates in the books

When you collect a deposit on an estimate, the funds are recorded in a liability account, not in accounts receivable.. QuickBooks and Intuit Enterprise Suite treat the funds as a liability until you complete the work and convert the estimate to an invoice. That's because your business still owes the customer a service for the money collected. The deposit payment can be recognized as revenue and moved to accounts receivable when work is completed.

Real-world example: How deposits on estimates helped this business in the construction industry

Fuller Glass Co., Inc., a commercial and residential glass installation company in Louisiana often takes on custom jobs, requiring orders of nonrefundable custom glass. With a small staff and a manual deposit collection system (deposits mailed in, phoned in, or paid in person), the start of projects was often delayed. Automating online estimates and setting 50% deposits on estimates in its business software provided financial security on custom orders and led to:

• Deposits collected 7 days faster.
• Savings of 100 hours a year in administrative work.
• Increased digital payment collection: 75% of customers paid both estimates and final invoices online.

"Deposits come in much faster now, usually same day or next day, without me taking cards over the phone or waiting on checks," the office manager and bookkeeper said.

Download the full case study to discover how deposits on estimates can improve the way you do business.

Strengthen your business with deposits on estimates

Collecting deposits on estimates can be a powerful step toward securing your small or midsize business's financial health and operational efficiency. By requiring an upfront commitment, you can improve cash flow, cover initial project costs, secure customer commitments, and ease administrative headaches.

Whether you opt for a percentage-based or flat-fee model, using software that automates payment of deposits on estimates can transform a common business challenge into a streamlined process—enabling you to start projects faster and with greater confidence.

Disclaimers:

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