One of the most common ways we see agencies get into trouble is starting work before a deposit is received. The time before work begins is the time when you have the most leverage to protect your agency. So use it smartly to maintain your agency’s cash flow and to ensure client commitment to a project. 

Deposits signal client commitment both financially and operationally toward moving a project forward. This is especially important in creative work, where enthusiasm can fade after initial discussions and the real day-to-day work begins. Deposits also help stabilize cash flow, particularly for long-term or resource-heavy projects. Your agency isn’t a bank and shouldn’t be asked to finance your client’s production needs. 

Determining the Right Deposit Amount

Deposit amounts typically range from 25% to 50% of the project total, depending on the project’s complexity and your relationship with the client. Larger, resource-intensive projects such as event production or video shoots may warrant a higher deposit — closer to 75% is the industry standard for video and event production. For smaller projects or long-term clients with a strong payment history, a lower deposit around 25% may suffice. Just realize that there is no ​“standard” deposit — it needs to flex based on the type and size of the project, your relationship with the client, and other factors.

Nonrefundable vs Kill Fee

Many agencies describe deposits as ​“non-refundable”. This may or may not be appropriate depending on the size of the deposit and circumstances of the cancelation. Imagine a $100,000 project with a $50,000 deposit that the client cancels a couple days into the project due to an emergency. Retaining the entire deposit when little or no work has been done would be an absurd (and maybe unenforceable result).

Rather than describing a deposit as nonrefundable, we recommend adopting a kill fee clause that applies when the client terminates without cause. This more nuanced approach to cancellations avoids absurd results and minimizes the risk of challenge from the client.

We recommend a kill fee calculated as a portion of the project that is killed. So, if a $100,000 project has a $50,000 deposit and the client cancels when only $20,000 of the work is complete, a kill fee using the above formula would be $20,000 (25% of the $80,000 portion of the project that was killed). The agency would deduct their fees and the kill fee from the unused portion of the deposit ($50,000 — $20,000 fees incurred — $20,000 kill fee), refunding the balance of the deposit. 

You might use language like this to create this type of kill fee:

If Client terminates this SOW other than for Agency’s uncured material breach, then, in addition to all amounts due under our agreement, Client shall pay an early termination fee equal to 25% of the fees that would otherwise have been due for the portion of the project that was terminated.

Replenishing Deposits

Deposit also don’t have to be one-time-only. Consider structuring a deposit with a ​“replenishing” feature so that the client has to restore the deposit to its original level once the deposit has been depleted to a certain level. This ensures you are always working against money on hand and can be a necessity for projects with lots of out-of-pocket costs.

Communicating Deposit Terms Clearly

A deposit agreement is only effective if communicated clearly. Introduce your deposit policy early in client discussions and include it in proposals and contracts to avoid confusion later. You should always make clear that work will not begin until the contract is signed and the deposit has been received. Your leverage for ensuring these things is greatest before work begins.

Don’t Get Overextended. Get a Deposit

A well-structured deposit agreement is key to protecting your agency’s finances. By establishing clear terms, appropriate deposit structure, and tailored kill fees, you reduce the risk of non-payment and resulting project delays while also ensuring financial stability for your agency. Look us up if you need help making sure your deposit clauses are best suited for your agency.