For: Dealers funding factory orders and buyers placing equipment deposits.
The decision: What payment structure and evidence are acceptable before cash is committed.
60-second answer: Read the deposit as one part of the contract. Confirm what it reserves, what locks the price, what permits a refund and when the next payment becomes due. Match supplier outflows with customer receipts without assuming either side funds the other on time.
Start with two payment schedules
Pull the supplier quotation, order acknowledgment, customer order, payment clauses, delivery plan and cancellation terms. Plot the date and amount of each expected payment in both directions. Add freight, storage and installation outflows. The greatest cumulative shortfall is the project cash requirement under those assumptions; repeat the schedule with a delayed customer payment.
Do not assume a deposit buys allocated material, a guaranteed production slot, title or a fixed price. Those rights depend on the agreed terms and applicable law. Ask the supplier to identify exactly what is committed and what evidence it will provide. An invoice marked production start is not independent proof that fabrication has begun.
| Term | Record the answer | Why it changes the decision |
|---|---|---|
| Purpose and amount | What is reserved or authorized; whether the amount applies to the final price | Defines the commitment being funded |
| Milestones | Event, evidence, due date and approving contact | Prevents payment against an ambiguous progress claim |
| Price changes | Validity, permitted adjustments, notice and buyer options | Stops a deposit being mistaken for price protection |
| Delay or substitution | Agreed remedy, approval process and refund conditions | Clarifies what happens when the ordered scope cannot be met |
| Completion and storage | Readiness notice, collection window, storage cost and risk allocation | Avoids an unpriced finished-goods wait |
Trade structure using the real cost of the order
Custom work and difficult-to-resell configurations may justify a different commercial structure from stocked catalog equipment. Evaluate the actual noncancelable commitment and the buyer’s ability to fund it. There is no universal reasonable percentage. Compare total terms from credible suppliers rather than treating an arbitrary range as a market norm.
Staged payments can reduce early exposure, but only when milestones are verifiable and the supplier accepts the arrangement. Escrow, guarantees or security may add cost and need legal review. Holding a customer deposit at the dealer does not itself protect the factory payment or establish what happens in insolvency.
Questions for both sides of the order
- Can the price change after this payment, and by what documented mechanism?
- What happens if the customer site is not ready when the goods are complete?
- Who approves a changed model, finish or delivery window?
- How and when is any agreed refund paid, and by which legal entity?
Red flags include an open-ended surcharge, a supplier milestone due well before the matching customer receipt, and refund language that conflicts between the quote and acknowledgment. Escalate those conflicts before sending funds. A deposit register should identify the order, amount, milestone, expected clearing event and owner, rather than only a supplier-level balance.
Resolve the next deposit request
- Build the two-sided cash timeline, including a realistic delay case.
- Obtain written answers for price changes, milestone evidence and cancellation or refund events.
- Approve the resulting exposure and retain the signed terms with the order-level deposit record.
Continue with FEX
FEX editorial guidance: the decision tools and operating recommendations in this guide are FEX analysis. They are not manufacturer specifications, contractual entitlements or industry benchmarks.
Editorial update, October 7, 2026: Removed the unsourced rack-order anecdote, automatic production-slot claims and unsupported deposit percentage norms. Clarified that staged invoices do not prove progress and deposits do not inherently lock price or create ownership.
