GlossaryPayments & Finance
Advance Payment
Also called: advance, upfront payment
What is Advance Payment?
An advance payment is money received before delivery — a booking amount, a deposit on a custom order, a retainer. Until the supply happens it is a liability, not income.
Why Advance Payment matters
Advances are the cleanest way to fund working capital, especially for custom or long-lead work. They also filter out customers who were never going to commit.
How Advance Payment works in practice
Record advances against the customer rather than as sales, adjust them when the invoice is raised, and note that GST can apply on advances for services. Ask for advances on anything customised, since the goods have no second buyer.
Frequently asked questions
No. It is a liability until the goods or services are actually supplied.