By Eddie Mugulusi
I used to think an early deposit was the ultimate sign of success in my events photography business.
Clients would book months in advance, sometimes six months out, and happily pay a deposit—anywhere from 30% to a whopping 80% of the total fee.
On paper, it looked beautiful. Cash flowing in long before I had to deliver the service. What could be better?
But I discovered a dangerous truth: that early cash could silently sink my business.
I noticed other service providers falling into the same pattern. They’d collect 70-80% months before a wedding, and by the time the event arrived, that money was gone. Spent. Vanished.
The result? They were left scrambling to finance an event they had already been “paid” for.
The Psychology of “Money That Isn’t Yours”
Six months is a long time in the life of a small business.
When money hits your account, your brain registers it as, “Ours!” It’s a natural reaction. But that 80% deposit isn’t profit. It’s a liability.
That money still has a job to do. It’s earmarked for supplies, assistant photographers, equipment rentals, and album production. It’s not for today’s rent or this week’s payroll.
Spend it on immediate expenses, and you’re setting a trap for your future self.
How the Deposit Trap Springs Shut
This is the cycle that cripples countless small businesses:
- A large deposit lands in your business account.
- You breathe a sigh of relief, thinking, “This covers my bills for the month.”
- You spend it on day-to-day operational costs.
- You reassure yourself, “More bookings will come in to cover the event later.”
But what happens when those new bookings don’t materialize? Or when an unexpected expense pops up?
You’re left with a promise to deliver a service you can no longer afford. I’ve seen it happen. It’s an ugly, preventable crisis.
What is the “Deposit Trap”?
The Deposit Trap is the critical mistake of confusing future-earned revenue with present-day profit.
You begin funding today’s survival with tomorrow’s obligations. It feels like a lifeline in the short term, but when the delivery date arrives, the music stops, and you’re left holding an empty plate.
Businesses don’t fail just from a lack of bookings; they fail from mismanaging the money from the bookings they already have.
4 Practical Steps to Avoid the Deposit Trap
So, how do you protect your business? Here are four essential cash flow management strategies.
- Reframe Your Mindset: A Deposit is a Liability, Not Income.
Until you’ve delivered the service, that money isn’t yours. It’s a debt you owe your client in the form of work. Treat it with the respect and caution it demands. - Don’t Eat Your Seed Corn: Create a “Client Project” Account.
Open a separate business savings account. When a deposit comes in, immediately transfer the estimated cost to deliver that project into this account. Consider that money untouchable. This protects the core funds your business needs to operate. - Rethink Your Payment Structure: Consider Smaller Deposits.
There’s no law saying you must take 80% upfront. It’s often smarter to take a smaller deposit (e.g., 25-30%) to secure the booking, with the balance due closer to the event date. This reduces temptation and aligns cash inflow with your expense outflow. - Build a Sustainable Business Model: Fix Your Core Cash Flow.
If your business can only survive by spending future client deposits, you don’t have a cash flow problem—you have a business model problem. Focus on building a financial buffer so you aren’t reliant on deposits to pay current bills.
The Bottom Line
The Deposit Trap is insidious because it looks like success. It feels like you’re winning with money in the bank and a booked schedule.
But without financial discipline, it will choke your business.
The hard truth is this: Not all money in your account is yours to spend. Ignore that, and you risk being broke on the very day you’re supposed to be delivering your best work.
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