Quick answer
Customer deposits, prepayments, progress billing and pre-sales let customers fund part of the work before it's finished. For New Zealand businesses that make, build, install or book things, they can cover materials, stock or set-up costs without a loan. Set clear written terms, keep deposits proportionate, and remember a deposit received under a contract can trigger GST at that point.
Key points
- Deposits shift part of the cash cycle onto the customer, at no finance cost.
- Progress billing on longer jobs keeps the gap between work and payment short.
- Pre-sales, vouchers and bookings pull future revenue into today.
- Inland Revenue says a deposit received under a contract triggers the time of supply for GST.
- Cost
- Usually none; sometimes a small early-bird discount
- Best for
- Custom work, projects, bookings, pre-orders
- Watch for
- GST on deposits, refund obligations
The cheapest money most businesses will ever use isn’t from a lender — it’s from their own customers. A joiner who takes a deposit before ordering timber, a caterer who takes a booking fee, a retailer who pre-sells a new range: each one is using the customer to fund part of the job. In a funding remix, customer deposits are one of the strongest faders on the desk.
What kinds of customer funding are there?
| Type | How it works | Typical users |
|---|---|---|
| Deposit | Part-payment when the order is confirmed | Trades, joinery, custom manufacturing, events |
| Progress or milestone billing | Invoices at stages of a longer job | Builders, consultants, software projects |
| Prepayment in full | Customer pays before delivery | Online retail, courses, subscriptions |
| Pre-orders and pre-sales | Payment for products not yet in stock | Retail, food producers, makers |
| Booking fees and vouchers | Payment to secure future service | Hospitality, tourism, beauty, events |
| Retainers | Monthly fee paid in advance | Professional services, agencies |
The common thread: money arrives before, or soon after, you incur the cost.
How much deposit can you ask for?
There’s no single right number. Think about:
- What you’ll spend before the next payment. If a job requires $12,000 of specialist materials, a deposit that covers them makes sense.
- Industry norms. Customers compare. A deposit far above what competitors ask can lose work.
- Customer type. Businesses and government agencies may have procurement rules; private customers may be more flexible but need clearer reassurance.
- Risk. Custom-made items that can’t be resold justify a larger deposit than off-the-shelf products.
Put deposit terms in your quote and terms of trade, including what happens if the customer cancels. business.govt.nz suggests clear cost estimates up front and splitting larger jobs into smaller payments — both make deposits feel normal rather than pushy.
How does GST apply to deposits?
This is the part that catches people out. Inland Revenue’s guidance on special supplies states that when a supplier receives a deposit under a contract, the general time of supply is triggered, and that the time of supply is the earlier of when a progress payment was made or when an invoice was provided.
In plain terms: if you’re GST-registered, the GST portion of a deposit usually belongs in the GST return for the period you received it — even though you haven’t finished the work. Spend the whole deposit on materials and the GST bill can arrive before the job’s final payment. Our guide to customer deposits and GST timing works through examples.
Illustrative example: a Napier joinery workshop
Illustrative only; no real business.
A joinery business in Napier builds custom kitchens. Each kitchen needs about $14,000 of materials and hardware ordered up front, and takes six weeks from order to install. Previously the workshop invoiced on completion, so it was funding $40,000 to $60,000 of materials at any time.
It moves to a 40% deposit on order, 40% when cabinetry is delivered to site and 20% on completion. The deposit now covers materials on each job, and the business no longer needs the overdraft it used to run at its limit. It sets aside the GST on each deposit in a separate account so the GST return is covered.
When do deposits stop being enough?
Deposits work best for work that’s custom, booked or ordered in advance. They’re harder when:
- you sell to large businesses or government that pay in arrears on their own terms;
- competitors don’t ask for deposits and customers resist;
- the work is ongoing rather than project-based.
In those cases, invoice funding can help with business customers who pay on 20th-of-the-month or 30-day terms, and supplier trade credit can push the cost side later. If there’s still a gap, a loan or line of credit may be the right piece — you can ask a real person to look at it without a credit check.
What are the risks of relying on deposits?
- Refund obligations. If you can’t deliver, you’ll owe the money back. Don’t spend deposits on unrelated bills.
- Using today’s deposits to finish yesterday’s jobs. It works while orders keep growing, and hurts badly when they slow.
- GST timing. Covered above — set it aside.
- Customer trust. Clear terms, prompt communication and a professional quote make customers comfortable paying up front.
For worked mixes that use deposits heavily, see the big contract remix and the stock remix.
How do you ask for a deposit without losing the job?
The way you present it matters as much as the amount:
- Put it in the quote. Customers accept terms they see up front far more readily than a surprise request.
- Explain what it pays for. “The deposit covers the custom materials we order for your job” makes sense to almost everyone.
- Make paying easy. A payment link on the quote or invoice, clear bank details, and a receipt by return.
- Show your credibility. Your NZBN, a clear business address or service area, and a professional quote reassure customers.
- Be consistent. Ask every customer the same way, so it feels like policy rather than a cash grab.
- Confirm the next step. Tell the customer exactly what happens once the deposit lands — ordering, scheduling, delivery dates.
Done well, a deposit signals a serious business rather than a struggling one.
What if your customers fund part, but not all, of the goal?
That’s the norm, and it’s exactly what a remix is for. Once deposits and supplier terms are doing their share, tell us about the goal and the gap that remains. There’s no credit check to start, we don’t spread your enquiry across a list of lenders, and a real person calls to work out whether a loan or another piece fits. Please be accurate on the form — your deposit terms and payment cycle help us suggest the right route first time.
Frequently asked questions
How much deposit should a business ask for?
Enough to cover the costs you'll incur before the next payment — typically materials, specialist ordering or set-up — without being so high that customers walk away. Many trades and custom manufacturers ask for a deposit that covers materials.
Do I have to pay GST on a deposit?
Inland Revenue states that when a supplier receives a deposit under a contract, the general time of supply is triggered. In practice, a GST-registered business usually accounts for GST on the deposit in the period it's received. Check with your accountant.
What is progress billing?
Invoicing a long job in stages as work is completed — for example at set milestones or monthly — rather than one invoice at the end. It shortens the time you're funding the work yourself.
Can pre-sales fund new stock?
Yes. Pre-orders with a deposit on new ranges, early-bird bookings or vouchers bring cash in before you buy the stock or deliver the service. You must be able to deliver, and refund if you can't.