📝Key Takeaways:
- A retainer refers to an advance payment, whereas a retainer invoice is a formal document highlighting the requested payment to the client.
- It is completely different from a regular invoice because it is issued prior to the start of the work.
- It is recommended to make a retainer invoice using a ready-made template from Moon Invoice for easy understanding and quick sharing.
In recent times, invoicing isn’t as cumbersome as it used to be a few decades ago. Whether you are creating a proforma invoice, credit invoice, recurring invoice, or retainer invoice, you only need a few taps on your smartphone.
Thanks to tech-driven invoicing software, generating a retainer or regular invoice has become simpler through smart automation and state-of-the-art features.
With more businesses transitioning to online invoicing, the demand for such solutions is rapidly rising. In fact, the automation software market is projected to reach $8,912.61 million by the end of 2031.
Amid this shift, service-based professionals who accept retainer fees to confirm their availability have also breathed a sigh of relief. They neither spend extra time creating a retainer invoice manually nor have to maintain records on paper.
Want to implement a retainer billing process as a part of your business strategy? Let’s delve deeper into this topic and find out what’s so important about issuing retainer invoices.
What Is a Retainer?
A retainer is an advance payment made by your clients before the start of the new project.
Clients dispatch the payment to reserve the service provider’s availability for their project work.
As the name suggests, the client retains the provider for a future project by paying an upfront amount before they take on other work.
So, following successful payment, the service provider is obligated to reserve the agreed date and time, refraining from accepting other work during this period.
Why Would Someone Pay a Retainer?
If someone decides to pay a retainer, they intend to hire a freelancer or contractors for a specific period during which no one else can assign work to them.
👉The service provider’s schedule is set for the date requested by the client.
👉The provider’s time is reserved so that no other work can be done in the retained period.
👉Once the retainer is paid, both parties will have clear expectations of the project assignment.
👉They will start the assigned work as per the pre-decided time and agreement contract.
Example of Retainer
Imagine you launch a new startup company, and within a few months, you require someone to develop website content and look after social media platforms. Now, you want content specialists, but they often remain engaged due to diverse work assignments from other businesses.
So, what you do is pay $550 as a retainer fee in May to reserve their slot for July 15th to July 30th. Here, the advanced payment made is considered as a retainer. That’s how you secure their time to provide content development services in advance using retainer fees.
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What is a Retainer Invoice?
The retainer invoice refers to a formal document that confirms you’ve requested and collected payment in advance to reserve your time slot for a specific date. It helps keep both parties on the same page, providing a clear record of payments for tax purposes or strategic analysis.
So, if you accept retainer fees from any individual, you need to generate an invoice before getting your work off the ground. Remember, a retainer invoice may be akin to an advance invoice payment, but it’s actually not.
This is because the retainer invoice states that you were hired by someone days or months ago with an upfront payment. Whereas issuing an advance invoice means collecting a portion of the payment to purchase required materials and labor services.
What are Retainer Fees?
Fees that have been paid for availing services before even beginning the work are considered retainer fees. However, it can’t be deemed as income for an individual hired to complete the assigned task. Instead, retainer fees are labeled as a liability until the work assignment is finished. If the service professional fails to deliver what was promised, then clients have full rights to claim a refund.
What is the Difference Between a Retainer Invoice and a Regular Invoice?
A retainer invoice is quite different from a regular invoice. Let’s check out in what ways they stand apart.
| Difference | Retainer Invoice | Regular Invoice |
|---|---|---|
| Objective | It is a document issued before starting the work, highlighting advance payment made by clients to reserve services in the future. | A document generated after the product or service has been delivered, requesting due payment for the completed work. |
| Payment | The client makes a full payment in advance to avail services at their desired time in the future. It might be refundable or adjustable against future invoices. | Payments are subject to the terms mentioned in an invoice, such as net 15, net 30, or any other. |
| Common Industries | Retainer invoices are mainly used to avail legal or consultancy services. Apart from that, freelancers, interior designers, and marketing professionals also accept retainer fees by sharing a retainer invoice. | It is a standard invoice that serves as a formal payment request across all industries. A regular invoice is dispatched once the product or service is delivered, regardless of which industry you serve. |
| Refund Claims | Refund claims can be made if the client cancels the service in advance or if the provider fails to deliver service in the given timeline. Clients can receive their money back, adhering to the agreed terms in a contract. | The payment, once made, can’t be refunded because a regular invoice symbolizes the completion of the assigned work. Therefore, clients can’t demand a refund. |
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Conclusion
To sum it up, a retainer invoice is a formal document indicating how much advance payment clients have made to reserve the provider’s availability. It isn’t a regular invoice because it is shared before the work even begins. The main purpose of the retainer invoice is to hire the service provider at the desired time so they don’t accept any other work during the retained period.
Whether it is a retainer invoice or a regular one, if created on paper, they are not only difficult to understand but also boost the chances of misplacement. Therefore, utilizing invoicing software, Moon Invoice can be worthwhile. You neither have to carry invoices in your pocket nor have to suffer from readability issues. Kick-off transforming your invoicing process with a 7-day free trial.
FAQs
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
