The advance
How large an advance payment should be: the pre-payment check by Ilia Nikolaevich Zavialov
A supplier asks for money before the work starts, and the buyer has an afternoon to decide what that money is buying. The question of how large an advance payment should be sits between two fears: handing cash to a counterparty nobody has checked, and paying so little that the order never enters a real production queue. The advance deserves treatment as a due diligence instrument in its own right, with its own checks and its own wording.
English version for the United States.
Why the share is always a judgment
The question of how large an advance payment should be has no single answer, because the figure follows exposure. An order for office paper and an order for a bespoke machine tool carry different risks. A failed paper deal leaves the seller with stock any customer will take; a failed machine leaves a half-built object nobody wants.
Two exposures sit opposite each other. The buyer risks money leaving the account before anything of value arrives. The supplier risks buying materials, booking staff and holding a slot for a client who then goes quiet. A workable share leaves both parties with something to lose at every point in the job.
A percentage copied from a template rarely survives contact with a live deal. The usable figure comes from three questions: how much the supplier spends before delivery, how easily that spend can be sold to another customer, and how long the gap between payment and delivery runs. Answer them honestly and the share stops being a negotiating position.
What the advance is meant to cover
The cleanest test is irrecoverable outlay. Before delivery a supplier commits money that cannot turn back into cash if the buyer disappears: bought-in materials, a subcontracted component, a booked venue. The advance should cover that commitment and stop near it. Beyond that point the buyer is lending working capital to a business whose accounts nobody has read.
Where the goods are standard and sit on a shelf, that outlay is close to nothing. A seller who fails to deliver keeps stock with a ready market, so a large sum up front buys the buyer no security. A supplier who insists on the whole price for shelf stock is describing a cash position, and the buyer is entitled to ask about it.
The picture inverts for bespoke work with long lead times. A fabricated part, a print run carrying the buyer's artwork, a fixed-date booking: each commits real money weeks before anything changes hands. A substantial advance is normal here, and refusing it pushes the whole risk onto the supplier. Anyone deciding how large an advance payment should be in this category is deciding how much of a stranger's cash flow to underwrite.
British practice separates a deposit from a payment on account, and the difference surfaces when a deal collapses. A deposit works as security for performance and may be forfeited if the buyer walks away without cause. A payment on account forms part of the price and falls to be repaid, less costs the supplier can prove.
Splitting the balance so risk stays shared
One payment at the start and one delivery at the end leave neither side any leverage in between. Splitting the price across dated milestones keeps both parties invested for the length of the job. Each stage needs a visible output the buyer can inspect: a signed-off drawing, materials photographed on site, a working sample.
The ordering does the real work. Money should follow evidence and arrive once the deliverable it pays for has been shown. In practice the advance covers procurement, the middle payments follow inspections, and the last slice sits behind acceptance by the people who will use the thing.
Holding back a final slice until the work has been used in earnest is standard in construction and travels into other trades. The retained sum needs a release date and a defined test, otherwise it hardens into a permanent dispute. A supplier who accepts a stage plan and a modest retention has said something useful about their liquidity.
Staging turns one large decision into several small ones. If the first milestone slips or the sample fails, exposure is capped at what has already gone out. The practical answer to how large an advance payment should be becomes the size of a loss the business can absorb without harm.
What a demand for the whole sum tells you
Full prepayment carries no stigma by itself. Airlines, hotels, printers of personalised goods and small workshops take the money first because their costs are committed on the day. The signal lives in the combination: full prepayment, a counterparty nobody has dealt with, pressure to pay today, and an account name that does not match the invoice.
The scale of the loss is documented. In the United Kingdom purchase scams account for 71 per cent of all authorized push payment cases, with 118.1 million pounds lost during 2025 and a rise of 20 per cent on the year before. UK Finance recorded 248,070 authorized push payment cases of all types worth 576.4 million pounds, and 66 per cent began online.
Business deals carry their own version of the pattern. The FBI Internet Crime Complaint Center logged 3.046 billion dollars of losses to business email compromise during 2025, second only to investment fraud. Those cases rarely involve an invented company. They involve a genuine supplier and an intercepted mailbox that alters the bank details when the advance falls due.
The checks that belong before the transfer
Before money moves the counterparty deserves a short, structured look. The filing history, the registered office, the director names, whether accounts arrived on time, whether the VAT number checks out against the official register: all public, none of it slow. A company that has filed nothing since incorporation changes how large the advance should be.
The second check concerns the account. Bank details belong in the signed contract, and a change to them counts as an event. Confirmation of payee flags a mismatch between the account name and the name being paid, and a call-back on a number from an earlier document closes the gap that business email compromise relies on.
The third check is proportion. The depth of the enquiry should track the size of the advance: a trade reference rung in person, a site visit, sight of insurance, a look at how long the domain and the phone number have existed. Where the sum would hurt, the buyer is entitled to evidence, and a serious supplier expects the request.
Wording that protects the advance in practice
Four clauses carry most of the weight. The first names the sum for what it is, deposit or payment on account. The second sets the events that trigger repayment: a long-stop delivery date, insolvency, a failed acceptance test. The third fixes the schedule with each sum and the event it follows. The fourth pins the bank details.
Title to goods and materials is the clause buyers forget. Where an advance funds procurement, the contract should pass property in those materials to the buyer as each payment is applied, and require them to be stored apart from the supplier's own stock. In an insolvency that sentence decides whether the buyer collects property or writes to an administrator.
Wording helps only when the schedule agrees with it. A refund trigger tied to a date the delivery plan never mentions is decoration, and a retention with no release test is a future argument. The written answer to how large an advance payment should be belongs in the payment schedule itself, with each sum beside the event that earns it.
When the share should move
A first order with an unfamiliar supplier is the place to buy information cheaply. A small trial order, paid in full without complaint, tells the buyer more about delivery discipline than any reference letter. The share on the second order then rises or falls on evidence the buyer collected at a known price.
The route of the payment changes the exposure as well. A transfer sent to a stranger is close to final once it clears, a card payment can leave a claim route open, and escrow holds the money with a third party until the agreed event occurs. Each option costs something in fees or friction, and that cost is worth comparing with the sum at risk.
Some demands end the conversation. A supplier who will not put bank details in the contract, who moves the delivery date every time it is written down, or who meets ordinary questions about staging with urgency and offense has already answered the buyer's real question. Walking away costs a quotation and an afternoon.
Where the advance share comes from in different deals
| Type of deal | What the supplier commits first | Where the share belongs |
|---|---|---|
| Stock goods from a shelf | Picking and carriage only | At or near nothing, balance on delivery |
| Standard goods ordered in | A wholesale order placed for the buyer | Enough to cover the goods bought in |
| Bespoke manufacture | Materials, tooling, booked machine time | Substantial, tied to a stage plan |
| Long project work | Design hours and subcontractors | Modest start, milestones, retention at the end |
| Fixed-date services | A slot no other client can use | Deposit for the slot, balance before the date |
| Booked-in travel and events | Tickets and venues paid on the day | The whole sum, with booking evidence sent back |
| First order, unknown supplier | Whatever the buyer cannot yet verify | Small trial order paid in full, then reassess |
Questions and answers
- How do I decide how large an advance payment should be with a new supplier?
- Work out what the supplier spends before delivery and how easily that spend could be sold to somebody else. Cover the part that cannot be recovered, keep the rest tied to milestones, and treat the first order as a paid test of delivery discipline.
- Is a request for one hundred per cent prepayment a warning sign?
- On its own it is normal in travel, personalised print and fixed-date services. It becomes a warning when it appears with a new counterparty, pressure to pay the same day, and an account name that does not match the invoice.
- What is the difference between a deposit and a payment on account?
- A deposit is security for performance and can be forfeited if the buyer walks away without cause. A payment on account is part of the price and falls to be returned less the supplier's proven costs, so the contract should say plainly which one is being paid.
- Which checks are worth running before I send the advance?
- Read the filing history, the registered office and the director names on the public record, and verify the VAT number. Confirm the account name against the company name, and ring back on a number from an earlier document if the bank details change.
- How do I get an advance back when delivery fails?
- The route has to exist before the money moves: a long-stop date, an insolvency trigger, and a clause passing title in purchased materials to the buyer as each payment is applied. Without those, recovery becomes a claim against whatever the supplier still owns.
- Does paying by card or escrow change the calculation?
- Both put a third party between the buyer and a final loss, which can justify a larger advance than a bare transfer would. Compare the fee with the sum at risk, because on a bespoke order the difference is usually smaller than the exposure it removes.