Supplier deposits: the 30/70 structure, what to secure before you pay, and how to book it

"Twenty percent deposit, balance before shipment — everyone works this way." The sales rep's message arrives with the proforma invoice for 400 units of PETCARR-L-01 at $24: a $9,600 order (illustrative), of which roughly $2,880 would sit on a factory floor in another jurisdiction before a single carrier is stitched. A deposit is the normal rhythm of custom manufacturing, and it's also the single largest unsecured exposure most small merchants ever take. This article covers the whole deposit loop: why factories ask, the structures you'll see and what each does to your risk, the checklist to complete before money moves, how to book the deposit so your books don't lie to you, and the levers that keep it recoverable when the order goes sideways.

Channel and structure are different questions, and it pays not to blur them. Whether you pay through Trade Assurance, bare telegraphic transfer, or a card is a channel-risk question — ranked channel by channel in the Alibaba payment methods guide. This piece assumes you've picked a defensible channel and answers the structure question: how much, when, and with what protections.

Why factories want a deposit

The standard 30/70 split exists because it prices both sides' risks — the deposit funds materials while the factory's working capital carries the line until settlement — and the full risk-pricing logic, variant by variant, is laid out in the Alibaba payment methods guide. What that guide doesn't give you is your side of the ledger: how much cash each structure leaves exposed, and what secures it — which is what the rest of this article and the table below are for. One consequence is worth stating here because it shapes your leverage: the percentage moves with the relationship, so the deposit you're quoted is, among other things, a running score of how risky you look.

The structures you'll see, and what each means for your risk

Two rows deserve comment. "Balance against B/L copy" is the variant that converts your balance payment from a promise into a purchase of documented, shipped goods — the variant's risk logic is the payment-methods guide's territory (the document flow follows Incoterms 2020 conventions; International Chamber of Commerce, accessed November 2026). And the net-terms row is where long relationships end up: the mechanics of selling you goods on credit terms are its own topic, covered in the net-30 payment terms guide. Deposits and net terms are the two ends of the same trust spectrum.

What to secure before you send the deposit

Run this checklist before every first deposit with a supplier, and after any change in order value or spec with an existing one:

• A proforma invoice that matches the PO. SKU codes, quantities, unit price, total, Incoterm, ship date, payment structure, and bank details on one document. Any disagreement between the PI and your PO is a reason to pause, not a typo to absorb.
• An approved sample on file. The golden sample, signed and dated, referenced by the PI. Deposit before sample approval means paying for a spec that exists only in an email thread.
• Channel protection active. Trade Assurance, escrow, or card rails where practical. Channel choice compounds with deposit size: 50% by bare telegraphic transfer is a different animal than 50% under escrow.
• Contract clauses that name the deposit. Refund terms if the supplier misses an agreed ship date by a stated margin, tooling ownership, and balance due only against shipping documents. The specific clause language worth requesting is laid out in the supplier contract guide.
• Bank details verified live. Match the PI's bank details against a video call with your contact before the first payment — and again before the balance. Business email compromise scams routinely target exactly these payments by swapping bank details in invoices (FBI Internet Crime Complaint Center advisories, accessed November 2026). A two-minute call defeats the whole scheme.

The checklist costs an hour. The events it prevents — paying against a swapped bank account, depositing against an unapproved spec, funding a shipment with no refund clause — cost thousands.

How to book a deposit in your spreadsheet

The accounting surprise most merchants hit: a deposit is not an expense. It's money the supplier owes you back in goods. Until the goods arrive, it's an asset — a prepayment — and booking it as a cost makes your margins lie for the two months the order is in production.

Worked example, illustrative throughout: PETCARR-L-01, 400 units at $24, order value $9,600. Deposit 30% paid March 3; balance 70% due against the bill of lading copy; goods received April 18.

Read the ledger: cash leaves in March, but inventory cost doesn't exist until April 18. On a cash basis, keep a running "deposits paid, goods not yet received" total instead — it's the number that stops your bank balance from lying about how much of it is already spoken for. When the goods land, set the per-item cost in your store records; Shopify's native profit reports use cost per item, so the $24 unit cost drives the margins you see (Shopify Help Center, accessed November 2026).

A note on cash planning, since deposits are cash events: InventoryX's Monday Buying List tells you what to reorder and when, but V1 doesn't track money already sent as deposits on open orders — cash-in-transit lives in your spreadsheet. The "deposits paid" column above is the necessary companion to any reorder plan, and we'd rather point at that gap than pretend the app watches your bank.

Keeping the deposit recoverable

The deposit is only as good as what you can prove later. Four levers, in the order you pull them:

• Production checkpoints. Agree — in the PI — that the supplier sends photos at material-in and mid-production. Ten minutes of their time; your evidence for any later dispute.
• Third-party inspection before the balance. For orders large enough to matter, an inspector visits the finished goods before you release the 70%. A typical inspection runs an estimated $150–$300 (illustrative) — cheap against a $6,720 balance payment to a factory that maybe didn't finish, or didn't finish correctly.
• Balance against documents, never against mood. "Balance after goods ready" is a mood. "Balance against B/L copy" is a document. Same for any progress payment: tie it to evidence.
• Deposit refund clauses with teeth. "Deposit refundable in full if the agreed ship date slips by more than 15 days" converts your deposit from goodwill into an instrument — one more reason the clause list belongs in the contract before the money moves, not after.

When the deposit goes wrong

Delays first: a slipped ship date with your 30% already paid is an amendment conversation, not yet a cancellation — extend the date, extract a concession, keep the order. When it truly dies, the deposit's fate follows the settlement math: credited against materials and completed labor, or disputed if the supplier's story doesn't hold up. That endgame — the settlement email, the fee claims, the conversion-to-smaller-order option — is walked through in the PO cancellation guide.

If the relationship broke rather than the order, the dispute window is your clock. Trade Assurance disputes, chargebacks, and card disputes all run on deadlines measured from delivery or discovery, and all run on documents (Alibaba Trade Assurance Help Center, accessed November 2026). The checklist earlier in this article is, read in hindsight, the evidence file those disputes consume.

Common questions

What does a 30/70 payment term mean with a factory? You pay 30% of the order value upfront to start production — it funds materials — and the remaining 70% when the order completes, typically against shipping documents. The deposit covers the factory's material outlay and the balance pays for completion; the split shifts toward 50/50 or 100% on first orders and toward terms as trust builds.

How do I account for a supplier deposit? As a prepayment asset, not an expense. When you pay the deposit, debit "prepayment to supplier" and credit cash; when goods arrive, debit inventory for the full order value and release the prepayment against it. On a cash basis, track a running "deposits paid, goods not received" total — it's money already committed and shouldn't read as spendable.

How much deposit is normal for a first order? Thirty percent is the standard ask on custom production; fifty percent or full payment appears on small first orders, sample runs, and buyers with no verifiable history. Anything above fifty is a signal to slow down and strengthen channel protection rather than walk — escrow or Trade Assurance matters more as the percentage climbs.

How do I protect a deposit from a bad supplier? Four layers: pay through a protected channel rather than bare transfer, verify bank details by video call before every payment, get production photo checkpoints and an inspection before releasing the balance, and put a deposit-refund clause for missed ship dates in the PI or contract. Documents beat promises — a deposit with no paper trail is a gift.

Can I get a deposit back if I cancel the order? The unearned portion is recoverable when little work has happened; otherwise the deposit credits against documented claims for materials purchased and labor completed. Get the supplier's written settlement — units completed, materials spend, fees — before any payment either way, and channel protection like Trade Assurance is the fallback when the supplier's numbers don't match the evidence.

Next step

Who knows where every in-flight deposit sits right now? If the truthful answer is a memory rather than a column, open your spreadsheet and add two columns to your open-orders sheet: "deposit paid" and "goods received" — then book every in-flight deposit against its order so the prepayment total is a real number, not a memory. Before you send the next deposit on a new order, pressure-test the order economics first with the quote comparison worksheet, because the cheapest way to protect a deposit is not to overpay for the goods it's attached to.