Hiring guide
Customer deposits: test the cash needed to finish or cancel the order
By CFO Index · Published
A deposit can make today's bank balance look comfortable while leaving a cash gap before delivery. For a bespoke order, the useful question is not simply how much the customer has paid. It is what the business must still pay, when the balance arrives and what changes if the order is cancelled.
Separate receipt, revenue and spending authority
The IFRS Foundation's IFRS 15 overview links revenue recognition to the transfer of promised goods or services. A cash receipt alone is therefore not a complete revenue-recognition analysis under that framework. Ask your accounting adviser which framework and treatment apply to the actual contract. Separately check contractual refund conditions and any legal restrictions on using the deposit. An internal amount earmarked for delivery is not automatically a legally restricted bank balance, and an accounting liability is not automatically equal to the remaining delivery cash cost.
Build a deposit register around each open order
Suggested fields are order ID, contracting entity, deposit received and bank reference, remaining customer payments, delivery milestones, unpaid supplier commitments, cancellation terms and evidence owner. Link costs already paid to the order so they are not counted again as future outflows. Keep expected deposits separate from settled receipts. Record uncertain refund terms as unresolved rather than assuming that a label such as non-refundable settles the question in every country.
Follow the order through its lowest cash point
Hypothetical example in euros: an order has a €30,000 total customer price, a €12,000 deposit in week zero and an €18,000 balance collected in week four. Delivery costs are €8,000 in week one and €10,000 in week three. There is €10,000 of opening company cash and no other movements in this simplified example. Tax, fees, payroll and overhead are excluded and must be added in a real company forecast.
| Week and event | Order cash movement | Cumulative order cash | Company cash including 10,000 opening |
|---|---|---|---|
| 0: customer deposit | +12,000 | 12,000 | 22,000 |
| 1: supplier payment | −8,000 | 4,000 | 14,000 |
| 3: final delivery spending | −10,000 | −6,000 | 4,000 |
| 4: customer balance collected | +18,000 | 12,000 | 22,000 |
Test a cash floor, not just the final surplus
The order needs €6,000 from opening cash before the final customer payment. If management has chosen an €8,000 minimum company cash balance, week three is €4,000 below that floor, even though the example ends with more cash than it started with. That floor is an illustrative management constraint, not a regulatory requirement. Delaying the final receipt to week six leaves the same gap outstanding longer; it does not change the total customer price. British Business Bank's forecasting guidance places receipts when cash is expected to reach the bank and recommends covering the cash-flow cycle.
Model cancellation as an alternative, not an extra cost on top
In a separate hypothetical case, assume cancellation after week one requires a full €12,000 refund in week two, avoids the remaining €10,000 delivery spending and produces a €2,000 supplier recovery in week six. These are assumed negotiated terms, not legal conclusions. Cash becomes €2,000 after the refund: €10,000 opening + €12,000 deposit − €8,000 already paid − €12,000 refunded. It becomes €4,000 after the recovery. Remove the final €18,000 customer receipt from this case. Do not leave both the completed-order inflows and the cancellation refund in one scenario unless the actual contract supports that combination.
Combine orders without counting the same money twice
Roll the order schedules into the company cash forecast, including unrelated payroll, taxes and other commitments. Reconcile the opening cash once; do not give each order its own copy of the bank balance. A new customer's deposit may temporarily cover an older order's shortfall while creating another future obligation. Ask the CFO to show the lowest combined balance, its date, the supporting assumptions and the commitments that are still reversible before suggesting new discretionary spending.
Keep the handover narrow and usable
Request an open-order deposit register, a completed-order case, a cancellation case and a dated list of unresolved terms. Have operations confirm remaining delivery costs, sales confirm payment milestones and the relevant advisers confirm accounting and contractual matters. Update the schedule when a delivery date, cost or refund condition changes. The deliverable is a visible decision boundary and an owner for each assumption, not a blanket assurance that customer advances are safe to spend.