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How should I structure deposits that I receive from my clients?

Example: I build a production for a music festival with audio, lighting, staging, bathrooms, etc. that equals $100k and the production fee is $20k (20% of expenses). With a total of $120k on the full quote, what should the deposit agreement be with the client?

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David C

I help you buy, sell, plan, value a business

A deposit is simply an advance against an amount due under a contract. If the customer owes you $120k for completing a contract for an event, the deposit is recorded as a liability on your books until you complete the contract. Then you record the sale and any balance owing becomes your receivable. You don't need to itemize what part of the contract is covered by the deposit.

If the contract allows the client to cancel the event and forfeit the deposit, then you would simply record that amount as a sale at that time and remove the liability from your balance sheet.

If you'd like to chat about your specific case, just arrange a call.

Thanks

Dave

Answered over 7 years ago