Writing down payment invoices correctly: how to do it for the self-employed and sole traders

What is a down payment invoice – and when do you need it?

A down payment invoice (also known as an advance payment invoice) is issued before a service has been provided – typically for larger projects where you are making advance payments as a self-employed person or sole trader. It allows you to secure your liquidity before you invest time and money.

When does a down payment invoice make sense?

• For long-term projects with high costs

• For individual project work with high material usage

• To safeguard your performance for new customers

What must be included in a down payment invoice?

From a legal point of view, a down payment invoice is a normal invoice. Therefore, all mandatory information must also be included here:

• Name “Down payment invoice” in the title
• Name and address of you and your customer
• Tax number or VAT ID
• Invoice date and number
• Description of the agreed service
• Expected performance period (or note that it has not yet been determined)
• Net amount, VAT amount and gross amount

Important: Your customer can only claim input tax if the mandatory information is complete.

Value added tax & input tax for advance payments

Advance payments are also subject to VAT. If you work according to the principle of actual taxation (which many sole traders do), you only have to pay VAT when the payment is actually received – not when the invoice is written.

At the same time, your commercial customer can only deduct input tax once he has made the payment andthe down payment invoice is available.

Difference to the budget billing

• Advance payment invoice: made before the service
• Partial invoice: is issued after a partial service has already been provided

Both are part of larger invoice sequences – such as project phases with partial payments and final invoices.

Caution with discounts & offsetting

If you offer a discount on a down payment, this discount must be offset correctly in the final invoice – otherwise there is a risk of the discount being taken into account twice. Therefore, document discounts clearly and offset them transparently.

Conclusion

The advance payment invoice is a valuable tool for self-employed people and sole traders to secure projects economically. Make sure that the details are complete, that the VAT is shown correctly and that the booking is correct – this way you are on the safe side legally and fiscally.

Would you like to know how to invoice correctly at the end of a project? Then find out here how to create a correct final invoice at the end of the project.