Down payment - What is a down payment? | SumUp Invoices

Down payments are advance payments made at the beginning of a sale, commonly involved in purchasing expensive goods or services that will require ongoing ... Downpayment-Whatisadownpayment?Downpaymentsareadvancepaymentsmadeatthebeginningofasale,commonlyinvolvedinpurchasingexpensivegoodsorservicesthatwillrequireongoinginstalments.Learnhowtoinvoicewithadepositordownpayment.Downpaymentsareusedtosecuretheproductorservice,butalsotomitigatetheriskinvolvedinasale.Depositvs.downpaymentTheterms‘downpayment’and‘deposit’areoftenusedinterchangeably.Bothtermsrefertothesameprocessofprovidinganupfrontpaymentasapercentageofatotalsale.Themaindifferenceisthattheterm‘deposit’ismorecommonlyusedintheUK.WhendownpaymentsareusedAsmentionedabove,downpaymentsareoftenusedintheeventofalargepurchase.Property,vehicles,orotherlargeassetssuchasmachinery,oftenrequireadownpayment.Thedownpaymentistypicallyapercentageofthetotalprice.Forexample,thedownpaymentforamortgagemightbe5%.Adownpaymentisusuallyrequiredtobe‘out-of-pocket’meaningit’scashthatisatthebuyer’sdisposalanddoesnotrequireanyborrowing.Whileadownpaymentmightseemtoonlybenefittheseller(inthattheyreceiveanadvancepercentageofcash),theyarealsopositiveforthebuyerinthattheygotowardsthetotalamountowed,canhelptoreducemonthlypayments,andensurethebuyer’sclaimtothesale.Inbusiness,adownpaymentmightberequiredforasaleinvolvingproducts/servicesthatareparticularlylabour-intensiveoraredeliveredinparts.Inotherwords,ifthefulfilmentoftheordermeansalotofworkfortheseller,theymayrequestadownpaymenttoensurethatthebuyerisseriousaboutthepurchase.WhathappenswhenyoumakeadownpaymentAdownpaymentiscommonlypaidbyabuyertoasellerinordertosecureasale.It’snotuncommonthat,intheeventthatthebuyerisunableorunwillingtofinalisetheorder,thedownpaymentisnotrefundable.Ifthebuyercancelsforanyreason,thedownpaymentmightnotbereturned.Theconditionsofthedownpaymentshouldbeclearlystatedintheinvoicepaymentterms.Ifyoucontinuewiththesaleandpaythefullamount,thedownpaymentisusuallysubtractedfromthetotalamountowed,meaningthatitcontributestothefullpaymentforthesale.ExampleofadownpaymentRonaldownsacarpentrybusiness.Heregularlymakescustomfurnitureforcustomers.Heisknownforthehighqualityofmaterialsusedandhisattentiontodetail.Becauseeachpieceiscreatedtoorder,Ronrequiresthatcustomersmakeadownpaymentbeforehebeginsworkonanewitemoffurniture.Cindyordersacustomdiningtabletosuithernewcottage.Sheprovidesmeasurementsoftheroomandvisitshisworkshoptoselectthewood.Shechoosesawalnut,withafarmhouseaesthetic.Ronprovidesaquoteandstatesthatherequiresa20% non-refundabledownpayment.Ronestimatesthatthetotalforthelabourandthetablewillbe£1,200,sothedownpaymentrequiredinorderforhimtostartworkonthetableis£240.HesendsCindyaninvoiceforthisamount.Heinvoicesfortheremainingamountafterthetableiscompleted.