Deposits and progress payments
Payment bases, milestone events, advance credits and retention, with bounded procurement examples and illustrative arithmetic.
Tags: commercial, payment-terms
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Meaning and scope
A deposit is an initial payment toward an agreed price in the example below. Names vary by contract. GANGLOFF SCOMA's machinery terms also call a pre-departure installment a deposit. GANGLOFF SCOMA, General Terms of Sale, §6.
Illustrative arithmetic: cumulative milestones
On an illustrative fixed price of 10,000 currency units (CU), a 20% deposit pays 2,000 CU. The next milestone brings cumulative payment to 50%, so the deposit counts toward the 5,000 CU target and 3,000 CU is due. The final milestone brings cumulative payment to 100%, leaving 5,000 CU due. Assume all prior amounts were paid as scheduled, one unchanged currency and no tax, freight, fees, retention, refunds or price adjustments.
| Event | Cumulative amount permitted | Previously paid | New payment |
|---|---|---|---|
| Initial deposit | 0.20 × 10,000 = 2,000 CU | 0 CU | 2,000 CU |
| Intermediate milestone | 0.50 × 10,000 = 5,000 CU | 2,000 CU | 3,000 CU |
| Final milestone | 1.00 × 10,000 = 10,000 CU | 5,000 CU | 5,000 CU |
The three new payments total 10,000 CU. Adding a further 50% installment on top of the deposit at the intermediate event would produce 7,000 CU paid by that point, contradicting the stated 5,000 CU cumulative amount. Conversely, if a schedule explicitly described each percentage as an additional installment, the cumulative interpretation above would not apply.
The subtraction works only under the stated cumulative-payment assumptions. A percentage of a revised price, a particular line item or a remaining balance has a different denominator. Payment percentages are dimensionless; their monetary result has the currency unit of the stated price base. This example contains no currency conversion or inference about work completed.
Payment bases and variants
Advance, interim, progress and delivery payment can have precise meanings within a particular procurement system. Under the United States Federal Acquisition Regulation (FAR), a commercial interim payment follows some work, whereas a commercial advance payment precedes any work. A delivery payment is for accepted supplies or services, including accepted partial deliveries. These definitions apply within FAR Part 32; they are not definitions for every private sale. FAR 32.001.
A payment schedule describes amounts and triggers. Its wording alone does not establish a particular order's physical completion, acceptance or actual receipt of funds. Refund rights, enforceability, title, risk, tax treatment, accounting control and revenue recognition are outside this reference's conclusions.
The basis determines what a payment amount measures. The following comparison combines source definitions with explanatory distinctions; it does not classify an unspecified customer contract.
| Basis | Meaning in the cited context | Important distinction |
|---|---|---|
| Advance funding | FAR 32.102(a) describes money advanced in anticipation of complete performance, expected to be recovered from payments due during performance. | It is not measured by performance. |
| Costs incurred | FAR 32.102(b) describes progress financing based on costs as work proceeds. | This category excludes percentage/stage-of-completion payments, accepted partial deliveries and performance-based payments. |
| Event or performance criterion | FAR 52.232-32(c)(1) requires successful accomplishment of the specified event or criterion. | A scheduled date alone does not satisfy that criterion. |
| Work accomplished | FAR 52.232-5(b) bases construction progress payments on approved estimates of work meeting contractual quality standards. | This construction clause is a distinct example, not a default for manufactured goods. |
Sources: FAR 32.102(a)–(b), FAR 52.232-32(c), FAR 52.232-5(b).
Synthesis: a percentage of incurred cost, a percentage of the selling price, a percentage of physical work and a percentage of parts delivered measure different things. None can be substituted for another without an explicit relationship. A payment equal to half the price does not, by arithmetic alone, mean half the parts are finished.
The cost base can itself have restrictions. FAR 52.232-16(a) includes specified cost exclusions, subcontract-payment conditions, prior-payment deductions and limits tied to incomplete work and contract price. Consequently, applying a percentage to a supplier's unrestricted total expenditure would not reproduce that clause's calculation. The clause's base text and alternates also differ; its published percentages are not generic deposit or progress-payment rates. FAR 52.232-16(a) and alternates.
Events, requests, approval and payment
An event, a request for payment, approval of that request and payment itself are separate concepts. Under FAR 52.232-32(c), the contracting officer determines whether the event or performance criterion has been achieved and can require substantiation. Approval of a payment request expressly does not constitute Government acceptance of the contracted supplies or services. Paragraph (l) requires the request to contain the documentation specified by the contractual basis for payment. Thus a milestone label alone does not supply its documentary conditions. FAR 52.232-32(c), (l).
GANGLOFF SCOMA §6 distinguishes initial deposit receipt, payment before workshop departure and balance invoicing upon final site receipt. Its offer prevails over contradictory general terms (§2), and prior written agreement can vary those terms (§1). The webpage therefore does not establish a particular order's terms. GANGLOFF SCOMA, §§1–2, 6.
Synthesis: a dispatch record concerns shipment; a site receipt concerns arrival; a payment request concerns a claim for money. A contract can link these events, but their dates and meanings do not become interchangeable. A future due date is also distinct from evidence that funds have been received.
Crediting advances and retaining amounts
Crediting an advance reduces a later amount payable to account for money already paid. FAR uses liquidation for recouping financing by reducing a payment for accepted supplies or services. This use of liquidation concerns payment recovery, not the winding up of a business. FAR 32.001, definitions of delivery payment and liquidate.
Different clauses specify different recovery mechanics. FAR 52.232-16(b) describes deductions from subsequent payments, with a stated exception for termination for convenience and provision for an alternate liquidation rate. FAR 52.232-32(d) instead provides percentage or designated-amount deductions from delivery payments, distinguishing delivery-item and whole-contract bases. These are clause-specific mechanisms, not a universal rule that every deposit is credited entirely against the next invoice. FAR 52.232-16(b), FAR 52.232-32(d).
Retention, retainage or a holdback describes an amount withheld from payment under the applicable terms. Its basis and release condition matter. For example, FAR 52.232-5(e) calls for full progress payment when progress is satisfactory; its retention provision is conditional on unsatisfactory progress. It also has separate rules at substantial completion and for separately priced, completed and accepted divisions of work. This does not establish an automatic retention percentage for every construction payment, much less a machinery sale. FAR 52.232-5(e).
Synthesis: an advance credit accounts for money previously paid; retention accounts for money withheld. Deducting the same advance twice understates the remaining price. Treating retained money as already received overstates cash paid. A contract can combine these mechanisms, but each needs its own basis.
Source versions and coverage limits
The FAR pages consulted display FAC 2026-01, effective March 13, 2026. The cited base clauses are 52.232-16 (November 2021), 52.232-32 (April 2012) and 52.232-5 (May 2014). They concern United States federal procurement in their respective prescribed contexts, including the construction-specific scope of 52.232-5. An incorporated contract clause, alternate, modification or agency provision can differ from the website's base text. 32.001, 32.102, 52.232-16, 52.232-32, 52.232-5.
GANGLOFF SCOMA's English terms have no visible revision date. Section 16 specifies French law and gives binding value only to the French text. The English page supports terminology examples, not conclusions about translation or legal effect. Sources were consulted on October 30, 2026 (PDT). These examples establish no universal schedule, refund rule, ownership transfer, accounting treatment or customer payment policy. GANGLOFF SCOMA, §16.