Use custom invoices when you need to present detailed information or provide creative solutions. For example, use custom invoices for retainer-based billing, deposits and credits, discounted rates, and administrative markups.
This article will provide several examples so you can get a better understanding of how and when it makes sense to use custom invoicing. First, we’ll create some parameters to set up our scenarios. Then, we’ll provide multiple scenarios based on the parameters.
Note: Subsequent articles in this custom invoicing article series refer to the scenarios in this article.
Deposit Invoice – Parameters
Let’s walk through an example of a deposit invoice. These are the parameters:
- Minimum Deposit Balance is $5,000
- Deposit Payment is $10,000
Your customer gives you $10,000 as a down payment when the contract is signed. Each time I create an invoice against that project, I’ll create a credit for 10% of the fees. If I have $1,000 worth of billable time, I’ll give you a credit for $100. And I’ll work down this deposit that the customer prepaid.
However, I want to have a perpetual deposit. As I create invoices, if my balance falls below $5,000 I want to charge another $10,000.
With these details in mind, let’s consider several scenarios.
Multiple Scenarios
Say we’ve got a T&M (Time and Materials) invoice that has $10,000 in fees and $5,000 in expenses. This invoice is generated monthly with different amounts. Each month the deposit balance will change, as underscored in the scenarios below.
Scenario 1 – Deposit Balance Is $0
In the first month, the balance is zero because there’s no deposit yet. So in month one when we create an invoice, we’ll create it with a deposit amount using a single line time that says “deposit” for $10,000.
Scenario 2 – Deposit Balance Is $10,000
Month one has passed, and we have the $10,000 from the customer. Recall that 10% of the fees are credited back against the deposit. So I have a deposit credit of $1,000 because I have a deposit balance of $10,000. This scenario continues month after month -- until I get below $5,000. Then, I need to add another $10,000.
Scenario 3 – Deposit Balance Is $3,000
The deposit balance is only $3,000 -- it’s fallen below $5,000. Now I have two additional line items in the invoice:
- Deposit credit for $1,000, because I have $10,000 in fees.
- Deposit for $10,000, which is a replenishment amount because the deposit balance is less than $5,000.
Scenario 4 – Deposit Balance Is $500
After a few months, I’ve had a lot of deposit credits and my deposit balance is only $500. Although I have $10,000 in fees, 10% of $10,000 is more than I can afford. I can only afford a $500 credit. But I’ll still bill you $10,000 to replenish the deposit.
A standard invoice template won’t accommodate these scenarios. We need to tell BigTime that in addition to the standard line items, we need some customized line items to accommodate our needs.
Why Didn't My Deposit Apply to an Invoice with Only Expenses?
Deposits and retainers are designed to apply against billable fee lines. When an invoice contains only expense lines and no billable fees, the system does not apply the deposit, and the deposit balance remains unapplied. This happens because an expense-only invoice has no fee lines for the deposit to offset.
Symptoms
- A deposit or retainer was created for the client, but it did not apply to the invoice.
- The invoice contains only expense lines and no billable fee lines.
- The deposit balance still shows as open after the invoice is finalized.
- The full invoice amount is still due even though the client has funds on account.
Resolution Steps
Choose the option below that best fits your billing structure and how the client payment needs to be handled.
- Option A - Add billable fee lines. Open the invoice and add billable fee lines so the deposit has something to apply against, then select Recalculate to refresh the invoice and confirm the deposit applied automatically once billable fees are present on the recalculated invoice.
- Option B - Split the billing. Create one invoice for billable fees, which will consume the deposit, and a second invoice for expenses only. This keeps the deposit application clean while still allowing expenses to be billed separately.
- Option C - Use a Client Credit instead of a deposit. If upfront funds must be applied directly to expenses, create a Client Credit for the client rather than a Deposit or Retainer, and apply it when finalizing the expense-only invoice. Credits can be applied to expense lines where deposits cannot.
Best Practices
- Check WIP before invoicing to confirm billable fees are present if you intend to apply a deposit to that invoice.
- Use a Deposit or Retainer for fee-based invoices.
- Use a Client Credit for expense-only invoices.
After following one of the options above, the client's upfront funds are applied correctly. The deposit offsets billable fees when fee lines are present, and a Client Credit offsets expenses on expense-only invoices, so no unapplied balance is left behind.