Revised 16 September, 2024
Deposit invoices or prepayments are an effective way to secure upfront payments, ensuring financial commitment from the client before the project work begins. In this article, we'll walk you through the process of creating a prepayment for a T&M (Time and Materials) project, and how to apply it to subsequent invoices as the project progresses and billing occurs.
Create a Deposit/Prepayment for a T&M Project
Follow these steps to create a deposit invoice for a project:
1. Navigate to your project
Access the Projects menu and select Projects. From the list select the project where you want to set up a deposit/prepayment.
2. Add a Deposit Contract Line:
Click on Add line and add a new line to the project.
Set the contract line to Fixed Fee. For this example, we'll set the deposit amount to $2000.
Set the Budget (Sales) to $0, as this amount will not be linked to a specific portion of work.
Save the contract line.
3. Generate the Deposit Invoice:
After saving, click on Create Invoice to generate the deposit invoice.
The invoice will now be created and can be sent to the client for payment.
4. Track Time and Materials:
Team members on the project can book hours and expenses as usual. In this case we have time and expenses booked on the project to a value of $4075.
5. Review the Deposit:
Before generating an invoice for the billable hours, edit the deposit line.
To apply the deposit to the T&M invoice, edit the deposit line and set the amount to $0.
6. Generate the invoice and apply the deposit:
Next, generate the invoice. Since the deposit amount has been adjusted to $0 in the project, the deposit line will appear as a negative value on the invoice, reducing the total amount owed for the time and expenses. The invoice will show the difference as the Total.
7. Decide when to apply the deposit:
You have flexibility in deciding when to apply the prepayment. It can be applied at any point during the project, depending on the project manager's preference or the agreed-upon payment schedule with the client. To avoid applying the deposit to the invoice, simply exclude it from the list of contract lines when creating the invoice.
