Before the First Invoice: Why Deposits and Stage Payments Should Be Standard, Not Exceptional

Late payment is often discussed as a collection problem. The invoice is issued, the due date passes, the reminders begin and the supplier discovers how much time and emotional energy are consumed by chasing money that should already be in the bank. That framing is too late. The cheapest credit control is not a firmer final reminder or a better debt collection agency. It is a deposit paid before work begins.

A 30% upfront payment is not a universal rule, and it is not a sign that every customer is untrustworthy. It is a commercial default that shifts part of the financing burden back to the party commissioning the work. In 2026, with borrowing costs still material for small firms, waiting until the first invoice is overdue before discussing payment behaviour is an expensive way to learn a lesson.

The economics are blunt

When a supplier offers 30 days credit, it is lending working capital to its customer. That lending has a cost: bank interest, overdraft fees, delayed wages, missed supplier discounts and the management time spent chasing. A deposit reduces the exposure from the first day. On a £10,000 project, a 30% deposit leaves £7,000 at risk rather than £10,000. If the final invoice is paid 60 days late, the supplier is financing £7,000 for two months, not the full contract value. The arithmetic is not glamorous, but it is decisive.

Statutory remedies exist. The Late Payment of Commercial Debts (Interest) Act 1998 allows suppliers to claim interest and fixed compensation on late commercial payments. Those rights matter, and they should be written into terms and used. But they operate after the event. They do not pay the wages this month, and they do not remove the time cost of chasing. A deposit is prevention; statutory interest is a backstop. Too many suppliers treat the backstop as a strategy.

Frame the request commercially

The language used to request a deposit matters. A request for a deposit can sound like a judgement about the customer's creditworthiness. A mobilisation payment or commitment fee sounds like what it is: a commercial arrangement that allows the supplier to reserve capacity, order materials, arrange insurance and hold a slot in the diary. Present it as standard in the proposal, not as a special concession extracted after a credit check.

A simple structure works: 30% on acceptance, 40% at an agreed milestone and 30% on completion. For a smaller job, 30% upfront and 70% on completion may be enough. For a retainer, a monthly payment in advance is the equivalent. The key is that the first payment is due before work starts, and that the proposal makes clear that work will not commence until cleared funds are received. That sentence is not aggressive; it is an operational fact.

Use contract wording that does the work

The contract should say what happens, not leave it to interpretation. A clear clause might read: A non-refundable deposit of 30% of the agreed fee is payable on acceptance of this proposal and before any work begins. Work will not commence until cleared funds are received. The balance is payable in accordance with the stage payment schedule set out in this agreement. Where a stage payment is overdue, the supplier may suspend work and retain materials until payment is made.

Suppliers should take legal advice on their own templates, particularly on refundability, cancellation and consumer contracts. For business-to-business work, the clause should be incorporated into the contract before work begins, not added afterwards. It should also sit alongside clear payment terms, a late-payment interest clause and a right to suspend for non-payment. A deposit clause that is buried in a schedule and never mentioned in the proposal is easier to dispute than one that is explained at the outset.

Answer the objections without apologising

The first objection is usually that the customer does not pay deposits. The answer is to offer a structure rather than a concession: a smaller first stage, a milestone payment due immediately, or a mobilisation fee that covers initial costs. The second objection is procurement. Large organisations may insist on 30-day terms, but many can issue a proforma invoice or pay a deposit against a purchase order. Ask early, before the contract is signed.

The third objection is trust: what if the supplier does not deliver? That is a fair question. Point to the milestone schedule, the contract, insurance and references. A smaller first payment can reduce the perceived risk while still removing the worst of the credit exposure. The fourth objection is the customer's own cash flow. That is precisely the argument for stage payments: both parties share the financing of the work instead of the supplier carrying all of it. A customer that cannot pay anything upfront is telling you something about the risk, and it is better to learn that before the work is done.

Waiting until the first invoice is overdue is too late

Once the work is complete and the invoice is overdue, the supplier's leverage is at its weakest. The cost has been incurred, the team has moved on and the customer knows that chasing is expensive. A deposit changes the conversation before it starts. It also sets a precedent for the next project. Suppliers that routinely ask for deposits report fewer overdue invoices not because their customers have become more honest, but because the customers who cannot or will not pay upfront self-select out of the credit risk.

This is not a case for refusing all credit or treating every customer as a bad payer. Long-standing customers with a clean record may earn extended terms. But the default should be a deposit or a stage payment, with exceptions documented and reviewed. The deposit defence is cheap because it costs one conversation at the proposal stage. The alternative costs months of chasing, lost interest and, all too often, a written-off balance. In the current UK market, a 30% upfront payment is the cheapest credit control a supplier can buy.