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If you deliver, you want to get paid. Preferably fast, and without risk. The most rigorous way to arrange that is advance payment: the customer transfers the money before you deliver. It sounds ideal for your cash flow, but there are legal limits, and it often creates friction in the customer relationship. In this article we cover what advance payment actually is, which rules apply in the Netherlands, and when a smarter invoicing flow gets you further than asking for money upfront.

What is advance payment?

Advance payment means the buyer pays (part of) the purchase price before the supplier has delivered the goods or services. Think of a webshop order you pay for with iDEAL before shipping, or a project that is invoiced in full before the work starts.

The terms are often used interchangeably, but there is a difference:

• Full advance payment: the entire amount (100%) is paid upfront.

• Down payment or deposit: part of the amount is paid upfront, for example so the supplier can order materials. The rest follows on or after delivery.

For the seller, advance payment is attractive: no payment risk and immediate liquidity. For the buyer it is exactly the other way around: they risk losing their money if the supplier fails to deliver or goes bankrupt before delivery.

The legal rules: consumers versus business

This is where it gets interesting, because the rules differ fundamentally depending on the type of customer.

Selling to consumers? The 50% limit applies

In a consumer sale under Dutch law, you cannot oblige a customer to pay more than half of the purchase price in advance. This follows from Article 7:26(2) of the Dutch Civil Code. A consumer may therefore always refuse to pay more than 50% upfront, even if your general terms and conditions say otherwise. A clause in the small print is not enough.

There are two important nuances:

1. Webshops. With online purchases, virtually everyone pays the full amount immediately, for example via iDEAL. That is allowed, because the consumer actively chooses and consents to it at checkout. The difference lies in obliging versus offering: you may offer full advance payment as an option, but you may not impose it as the only mandatory route.

2. Individual agreements. More than 50% upfront is possible if you agree on it individually and explicitly with the customer, as part of the conversation and the quote, not tucked away in standard terms.

For consumers, the mirror-image advice applies as well, something the Dutch regulator ACM and the Consumentenbond regularly point out: be careful with large down payments, because if the seller goes bankrupt, you as a consumer are at the back of the line of creditors.

Selling B2B? (Almost) everything is negotiable

Between businesses there are no statutory rules for advance payment. In B2B, freedom of contract applies: you may ask for 100% advance payment if your customer agrees. The only question is: will your customer agree? Large clients often work the other way around, with payment terms of 30, 60 or even 90 days. If you then demand advance payment, you quickly price yourself out of the market.

The real issue: advance payment solves a cash flow question at a commercial cost

Let's be honest about why businesses ask for advance payment. It is rarely about principle and almost always about cash flow: you don't want to wait weeks or months for your money, and you don't want to carry debtor risk. Advance payment solves that, but at a price:

• You create a hurdle in the sales process; customers drop off or negotiate it away.

• You unintentionally signal that you don't trust the customer, or that your financial buffer is thin.

• With consumers, you run into the statutory 50% limit as soon as you want to make it mandatory.

• Administratively, prepaid revenue has to be booked separately: you already have the money, but the performance has not yet been delivered.

For one-off, high-risk or custom projects, (partial) advance payment remains a perfectly good instrument. But as a structural solution for your working capital, it is a blunt instrument.

The alternative: simply invoice after delivery and still get paid the same day

The core of the cash flow problem is not the moment of delivery, but the gap between invoicing and getting paid. You can close that gap without asking your customer for money upfront.

That is exactly what Finqle was built for. You (or the freelancers and suppliers on your platform) simply invoice after the work is done, and Finqle pays out the invoice the same day. Your customer keeps their familiar payment term, you have your money immediately. No discussions about down payments, no 50% limit, no hurdle in your sales conversation. The debtor risk and the waiting shift from your balance sheet into the invoicing flow.

Think of it this way: advance payment moves the problem to your customer, same-day payment simply removes it.

In summary

• Advance payment means paying (partly) before delivery; at 100% it is full advance payment, at a partial amount it is a down payment or deposit.

• Under Dutch law, consumers cannot be obliged to pay more than 50% in advance (Art. 7:26(2) Dutch Civil Code); webshop payments and individual agreements are the exceptions.

• In B2B everything is negotiable, but commercially, advance payment is a sensitive ask.

• If you mainly ask for advance payment because of cash flow, you can also solve that problem with same-day payment on invoices, without straining the customer relationship.

Want to know how same-day payment works for your platform or business? Discover what Finqle can do for your invoicing flow.