I use Freeagent to handle the accounts for my design business. I really like it, but handling deposits can be confusing. This is how I do it.

Let’s imagine a common scenario:
Someone gets in touch and they need a shiny new website - wahey!

Estimate

Ok, after quite a lot of talking, I’ll make a new estimate of the costs for a project. If it’s someone new, I’ll add a new contact for them at this point too.

I tend to send the cost estimate with a proposal or other supporting stuff, so I’ll usually save it out as a pdf and send it myself.

Deposit

If all goes well (fingers crossed) it’s contract and deposit time

I make a new invoice with one line on it that says ”Up front payment/retainer“. The amount is the percentage of the estimate that was agreed (it’s usually 50% unless it’s a massive job).

That then gets sent off to the client.
Once it’s paid, then we can start work.

Work

Lots of design work happens.
I track the time worked and add any outgoings like external contractors or licenses etc. to the project in Freeagent as I go.

Invoice

OK, the project has gone great and it’s time to send out an invoice.

I add a new invoice for the project and in the options at the bottom where it says “Add Unbilled Time, Expenses and Estimates” I add the time and expenses that have been assigned to the project. You can also choose to turn your original estimate into an invoice at this point by selecting it in the drop down here, but I don’t usually bother.

Right, now we need to take account of the deposit that’s already been paid, so your fine client isn’t billed twice.

To do this, I add a line to the invoice that says: ”Upfront payment/retainer - already paid“ and I give it a negative amount to the value of the deposit invoice they’ve already paid.

It should look a bit like this:

Description	Amount
…lots of billable things	£1500
…some more billable things	£500
Upfront payment/retainer - already paid	-£1000
Total outstanding:	£1000

This has the effect of knocking the deposit amount off the final invoice amount and it shows all the figures on one invoice for maximum clarity.

Send the invoice! and you’re done.

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I love Freeagent, it saves me loads of hassle and if you haven’t tried it, I highly recommend it. You’ll get 10% off if you click the button below, and I’ll get 10% off too.

Accountants corner

I’m aware there’s some accounting practice to do with treating up-front payments as a liability on the balance sheet. I don’t think freeagent can currently deal with that.
You may know a better way. Spread the love.