Deposits and Progress Invoicing
Guide • Canada • last updated October 2026
How to bill a deposit up front and invoice in stages for larger jobs, with tax handled, so your cash flow stays healthy.
For larger or longer jobs, billing everything at the end is risky. Deposits and progress invoicing protect your cash flow and share the risk fairly. This guide shows how to use both. The invoice app handles deposits and milestones.
Taking a deposit
A deposit is an up-front payment, often 20% to 50%, billed before work starts. It funds materials, confirms the client is serious, and means you are never fully exposed. State the deposit and how it applies to the final total in your agreement.
Progress or milestone billing
For long projects, invoice at agreed milestones rather than once at the end. Each milestone invoice bills a share of the total as that stage completes, keeping money flowing and matching payment to delivered value.
Tax on deposits
Sales tax generally applies when you invoice the deposit, not only at the final bill. Check the current rules for your situation, and show the tax on each milestone invoice.
The cash-flow benefit
Deposits and progress billing turn one large, late payment into several smaller, timely ones, which steadies your income and reduces bad debt.
A worked example
A $12,000 project is billed as a 30% deposit ($3,600), then three milestones of $2,800 each, with the applicable tax on every invoice. The client pays as the work lands, and the contractor is never carrying the full cost.
Setting the right deposit
The deposit should cover your up-front costs and signal commitment without scaring off the client. For material-heavy jobs, size it to cover the materials; for service work, a quarter to a third is common. State clearly how the deposit applies to the final total so there is no confusion when the last invoice arrives.
Structuring milestones
Tie each milestone to a deliverable the client can see, not just a date, so payment tracks real progress. A typical split might be a deposit, one or two milestone payments, and a final balance on completion. Define each trigger in writing so everyone agrees when each invoice is due.
Tax and accounting on staged work
Sales tax generally applies when you invoice each stage, including the deposit, not only at the end. Record each milestone invoice as it is issued so your books and tax returns reflect the work as it is billed. Keep the running total visible to the client so the final invoice holds no surprises.
A staged-billing checklist
- Deposit sized to up-front costs, applied to the total.
- Milestones tied to visible deliverables.
- Correct provincial tax on every stage.
- Running balance shared with the client.
Communicating staged billing to clients
Clients accept staged billing readily when it is explained up front. Lay out the deposit, the milestones and the final payment in your proposal, and tie each one to something the client can see, a delivered stage, not just a calendar date. That turns each invoice into a natural checkpoint rather than an unexpected bill, and it keeps the project and the payments moving together.
Show a running total on each invoice so the client always knows what has been paid and what remains, which removes any surprise at the final stage.
Staged billing checklist
- Deposit sized to up-front costs.
- Milestones tied to visible deliverables.
- Tax applied on each stage.
- Running balance shown to the client.
Frequently asked questions
How much deposit should I ask for before starting work?
A deposit of 20% to 50% is common, sized to cover your up-front costs such as materials. It funds the work, confirms the client is serious, and limits your exposure. State clearly how the deposit applies to the final total.
What is progress invoicing?
Progress invoicing bills a project in stages tied to milestones rather than once at the end, so money arrives as the work advances. Each milestone invoice covers a share of the total and includes the applicable tax.
Do I charge sales tax on a deposit in Canada?
Generally yes, sales tax applies when you invoice the deposit, not only at the final bill. Show the tax on each deposit and milestone invoice, and confirm the current rules for your situation with the CRA.