What Are Advance Payments?
Advance payments (or down payments) are partial payments collected before goods are delivered or services are rendered. They reduce financial risk, improve cash flow, and demonstrate customer commitment. Odoo Sales supports advance payments natively, allowing you to invoice a percentage or fixed amount upfront and settle the balance later.
When to Use Advance Payments
Advance payments are common in several scenarios: custom manufacturing where raw materials must be purchased before production, large orders where the risk of non-payment justifies securing partial payment, long-duration projects where cash flow needs to be sustained throughout the engagement, new customers without an established credit history, and high-value equipment or machinery orders with extended lead times.
Configuration
Down Payment Product
Odoo uses a special down payment product to handle advance invoicing. Go to Sales → Settings and configure the default down payment product. This product is automatically used when creating advance invoices. It should be a service-type product mapped to an appropriate revenue or deferred revenue account.
Accounting Treatment
There are two accounting approaches for advance payments. The liability approach records the down payment as a customer deposit (liability), recognizing revenue only when the final goods or services are delivered. The revenue approach recognizes the advance payment as immediate revenue. Most accounting standards (IFRS 15, ASC 606) require the liability approach — the advance is not revenue until the performance obligation is satisfied.
Creating Advance Invoices
Percentage-Based
From a confirmed sales order, click Create Invoice and select Down Payment (Percentage). Enter the percentage (e.g., 30%). Odoo calculates the amount based on the total order value and creates an invoice for that amount. The sales order shows the advance payment as a deducted amount on the next invoice.
Fixed Amount
Select Down Payment (Fixed Amount) and enter the specific amount. This is useful when the down payment is a fixed fee regardless of order total — for example, a $5,000 engineering deposit on any custom design project.
The Complete Flow
| Step | Action | Invoice Amount |
|---|---|---|
| 1 | Sales order confirmed ($10,000) | — |
| 2 | Advance invoice (30%) | $3,000 |
| 3 | Customer pays advance | $3,000 received |
| 4 | Goods delivered | — |
| 5 | Final invoice (balance) | $10,000 - $3,000 = $7,000 |
| 6 | Customer pays balance | $7,000 received |
Multiple Advance Payments
Some projects require multiple advance payments at different milestones. Odoo supports this — create multiple down payment invoices from the same sales order. A construction project might invoice 30% at contract signing, 30% at foundation completion, and the remaining 40% at project handover. Each advance invoice is deducted from the final invoice.
Final Invoice and Deduction
When you create the final regular invoice from the sales order, Odoo automatically deducts all previous advance payments. The invoice shows the full order amount, lists each advance payment as a negative line, and the net amount is the remaining balance. This gives the customer a clear picture of total charges minus payments already made.
Refunding Advance Payments
If the order is cancelled after an advance payment, create a credit note for the advance invoice. The credit note reverses the accounting entry. If the payment was already received, process a refund payment to the customer. Odoo links the credit note to the original advance invoice for clean accounting.
Best Practices
- Clear payment terms — State advance payment requirements on quotations and in terms and conditions. No surprises for the customer.
- Prompt invoicing — Send advance invoices immediately after order confirmation so payment is collected before work begins.
- Revenue recognition — Consult your accountant on the correct treatment. Most standards require deferred revenue until performance obligations are met.
- Track outstanding advances — Monitor unmatched advance payments to ensure final invoices are created and balances settled.
DeployMonkey + Advance Payments
Deploy Odoo on DeployMonkey and configure advance payment workflows with AI assistance. Secure cash flow before delivery and manage deposit invoicing accurately from day one.