Customer deposits: tracking cash received before work is completed

Record the customer, contract, service or goods, deposit amount, receipt date, cancellation rights, and expected delivery. Distinguish an advance payment from a security deposit or refundable amount.

Ask the accountant to confirm treatment under the relevant reporting and tax rules. The fact that money reached the bank does not establish when the company's obligation is satisfied.

Track opening deposits, new receipts, amounts applied to earned invoices or other approved treatment, refunds, and closing balances. Tie the total to the ledger.

Keep the payment reference and contract beside each material balance. A net total without customer detail makes it difficult to answer which obligations remain.

Define what finance needs from operations before changing the deposit's treatment: shipment, accepted milestone, completed service period, or another contractual event. Retain the evidence.

For illustration, a $3,000 advance against a $10,000 project can remain linked to the customer's remaining obligation until the approved billing and revenue process applies it. The specific entries depend on the contract and policy; they should not be determined by the size of the receipt.

When work is canceled or modified, obtain the approved commercial decision and assess the accounting effect. Verify whether the amount becomes refundable, applies to a different service, or remains under the existing terms.

Match cash refunds to the customer schedule. Avoid leaving a deposit liability after the refund or counting both the original deposit and final invoice as new collections.

Show the costs still needed to fulfill the obligation and any refund exposure in the cash forecast. Spending the advance creates no relief from delivering the promised work.

At close, review aged deposits and delayed projects with operations. Assign unresolved amounts an owner and next action. The schedule should explain the cash received, the work or repayment still owed, and the basis for any amounts released into revenue.