Inventory glossary

What is Supplier deposit?

Supplier deposit is the upfront payment a store pays a supplier before an order ships, usually a percentage of the total purchase order value.

Suppliers ask for deposits to cover their own material and production costs, especially on custom orders or new supplier relationships. For a small Shopify store this is a cash flow planning issue, not just a line item on a purchase order. If you commit to a large reorder, part of that cash is gone before any stock or revenue arrives.

Track deposits against each open purchase order so you know how much cash is tied up and when the remaining balance is due. This matters most when you are placing bigger orders to hit case pack minimums or to cover a longer lead time, since the deposit size grows with order size.

Formula

Deposit amount = Purchase order total x Deposit percentage

Example

A candle store places a purchase order for 500 units at $4 per unit, a total of $2,000. The supplier requires a 30 percent deposit before production starts. The deposit is $2,000 x 0.30 = $600. The store pays $600 upfront and the remaining $1,400 when the order is ready to ship.

Common mistakes

  • Forgetting to budget for deposits when planning a large reorder, which creates a cash shortfall.
  • Not tracking which open purchase orders already have a deposit paid, leading to confusion at final payment.
  • Assuming deposit terms are fixed when they can often be negotiated down for repeat orders.

Supplier deposit and SteadyShelf

SteadyShelf drafts the purchase order and quantity so you know the order total and can calculate the deposit before you approve and send it to the supplier.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Purchase order · Net 30 payment terms · Lead time · Minimum order quantity · Supplier

Full inventory glossary

FAQ

Is a supplier deposit refundable?

It depends on the supplier agreement. Some deposits are refundable if the order is cancelled before production, others are not once materials are purchased or production starts. Check the terms before paying.

Do all suppliers require a deposit?

No. Many established suppliers invoice on net terms with no deposit, especially for repeat orders. Deposits are more common for custom products, new supplier relationships, or large first orders.

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