Can You Send an Invoice Before Work Is Done?

An invoice is a formal request for payment, usually issued after goods are delivered or services completed. While this is the common practice, businesses sometimes issue invoices before work is fully done. Understanding these circumstances is important for both service providers and clients to ensure financial clarity. This practice, known as advance invoicing, carries implications for cash flow, service delivery, and financial reporting.

Typical Invoicing Cycles

Standard business practice dictates that invoices are sent to clients once a service is fully rendered or a product delivered. This approach aligns payment with the completion of the performance obligation. Common payment terms, such as “Net 30” (payment due within 30 days from the invoice date) or “due upon receipt” (immediate payment expected), establish the timeframe within which payment is expected.

Many industries accept this post-service invoicing model as the norm, providing a predictable payment cycle. For example, a consulting firm might invoice after submitting a final report, or a product supplier after goods arrive. This traditional cycle aligns the service provider’s cash flow with delivery expenses and allows the client to verify work quality before payment.

Instances of Pre-Work Invoicing

Issuing an invoice before work is fully completed occurs in several business contexts. These advance payments help businesses manage initial costs, secure client commitment, or maintain consistent cash flow for ongoing projects. The payment received is recorded as “unearned revenue” or “deferred revenue” on the company’s balance sheet, representing a liability until goods or services are delivered.

One common form is a deposit, an upfront payment to secure services or cover initial expenses. For instance, a custom furniture maker might require a deposit to purchase specialized materials before construction. Deposits ensure client commitment for custom orders or large projects, reducing provider risk.

Retainers are another type of advance payment, typically an upfront fee to secure professional services for a specified period. Professionals like legal counsel or consultants frequently use retainers to ensure availability and cover ongoing work. This payment functions as a credit against future services, with the professional deducting fees as work is performed.

Progress payments or milestone billing are common in long-term projects, particularly in construction or large-scale software development. In this model, invoices are issued at predetermined stages of project completion, rather than waiting for the entire project to conclude. For example, a construction project might have payments due upon foundation, framing, and roofing completion. This method helps service providers manage cash flow and aligns payments with tangible progress.

Subscriptions and other pre-paid services also involve invoicing before work is fully completed. This model is prevalent where access to a service is provided over a period, such as annual software licenses or monthly streaming services. Payment is collected in advance for a future service period, providing immediate cash flow while obligating delivery over time.

Elements for Clear Advance Invoicing

When sending an invoice before work is done, clarity and transparency are paramount to prevent misunderstandings and disputes. A comprehensive written agreement or contract is required before any advance invoice is issued. This agreement should detail the full scope of work, the payment schedule, and what each advance payment covers.

The contract must clearly outline refund policies or contingencies. This includes specifying what happens to the advance payment if work is not completed, if the client cancels the project, or if the scope changes. Defining these terms upfront helps manage expectations and provides a framework for resolving potential issues.

The advance invoice must contain a detailed description of the services or goods the payment is for, avoiding vague language. For instance, instead of “deposit,” the invoice should specify “50% deposit for website design project, Phase 1.” This itemization ensures both parties understand the upfront payment’s purpose.

Clear payment terms and a specific due date must be prominently displayed on the advance invoice. This includes stating when payment is due and acceptable methods of payment. Communicating openly with the client about the invoicing schedule and purpose fosters trust and professional handling of the transaction.