What it means
Clarify what the payment secures
An upfront amount might reserve capacity, fund future work or pay for a service period in advance. The agreement should explain whether it is applied to the final price and what happens after cancellation, nonperformance or a changed booking.
Records and obligations
Receiving an advance does not automatically mean that the business has earned accounting revenue. Track the amount against the customer and obligation, then record delivery, application to invoices and any refund. A crypto payment also needs agreed valuation and refund terms.
Related concepts
In practice
A concrete example
A venue records a booking prepayment separately from the remaining balance and gives the customer clear cancellation and refund terms.
Technical notes & boundaries
An advance payment is distinct from a bank deposit or security deposit. FAR financing rules are a US procurement example, not universal commercial law.
Go to the source.
Original references used for this definition. Product details and standards can change.