Should I take deposits on cake orders?

Should I take deposits on cake orders?   That's the question for today.  Once upon a time I decided to do Q&A posts on Rose Bakes - answering questions that I received via email or on Facebook about cake decorating or having a cake decorating business.  As with many things I've tried, that trend didn't last long.

But today through a series of random, unimportant events, I shared this post in the All Thing Cake group and not long after, I had this question waiting for me from Heshani:

My question today is about taking deposits... should I?  If so, how much?  Obviously this will be something that comes up making cakes for strangers who contact you on FB and place an order....

So let's talk about it...

Yes.  Always, always collect a deposit!

So, should you take deposits on cake orders?  In short, YES.  Absolutely, without a doubt, no exceptions, YES.

I talk about this in my How to Charge for Cakes post some, but today I want to dig a little deeper.

If you spend any time - any time at all - working on a cake order without a deposit, only to have it canceled later, then you've lost money because time is money!  If you sketch a design, look at a hundred pictures, work up an estimate, write a contract, shop for ingredients or materials, etc., then you've worked.  If you do any of that before getting a deposit, then you've given away your time for no money.

You don't have a cake customer until you've actually been paid.  If you spend time on them before being paid, then you're working for free.

And I can hear you already... but why would someone pay a deposit before seeing a sketch, having an estimate, etc.?  Well, they will.  Trust me.

Under most circumstances, I can give them this canned response:  "My minimum is $4 per serving and $125 per order.  If you'd like to place an order, I require a minimum $50 deposit to book a cake (or 50% of the total cost if the design is already determined)."

With those 2 sentences, most customers know already if they want to continue with the process to book a cake.  Either they can afford me or they can't.

If they send a picture with their inquiry (where I require information about design, number of servings, etc. - see my the information I gather here), then I can easily do a quick estimate in my head.  I can give them a ballpark number immediately (I always emphasize that the final price might change depending on size and any changes to the design) and ask for a 50% deposit to book the cake.

If they do not send a picture or ideas with the initial inquiry, I give them my canned response and they either reply with a photo and proceed with the order, or they tell me that they cannot afford to order and that's that!

Don't give away your time for free.

Of course you're always going to be giving away a few minutes of your time when answering the phone or emails (or however you take orders) for the initial inquiries, but do not give away hours of time on people who are not yet paying customers.  Your time is more valuable than that.  YOU are more valuable than that!

If you were working at a bakery (not for yourself), would you expect to be paid for time spent on the phone with customers?  For time drawing up sketches or writing up contracts?  Or would you only be expected to be paid when you were baking/decorating cakes?

Of course you'd expect to be paid for all of it!  Show yourself the same respect when you're working for YOU as you would working for someone else!

Earlier on in my cake decorating business, I'd spend time messaging customers who never replied after my quote or calling people back who had asked me to put them on my schedule but never paid a deposit.  I never do that anymore!

If a potential client asks about a cake, I tell them it will not be booked until they've paid a deposit.  If they never pay, I never think about it again.   I don't add it to my spreadsheet until the deposit is paid.  I cannot spend my valuable time chasing down people who may or may not want to book a cake.  If they want to order, they will.

How much of a deposit should I collect?

I've already mentioned it, but here's my policy.   For non-wedding cakes, if I have the design and details (from this form), I require a 50% deposit of the total.  If I don't have a design yet, I require a minimum $50 deposit.

For weddings, I require a $100 "save the date" deposit.  This holds their date on my calendar (because weddings are often booked months in advance vs weeks) and that amount does apply to their order.  After the order is finalized I write a contract with the total order amount.  I require that they send 50% of the balance 6-8 weeks prior to the wedding date and the final 50% must be paid 2 weeks prior to the wedding.

What about cancellations?  Refunds?

In addition to all of that, I make it clear that deposits are non-refundable.  I've heard the argument that that's "not fair" and "you haven't done any work yet" but they don't hold water.  The truth is, I have done work (even if I haven't baked or decorated a cake yet) and there are other reasons to keep a deposit if a cake is canceled.

First, if a deposit is paid and a cake is booked on my calendar, I could potentially turn down other orders and lose other business because I was saving that time/date for that client.

Second, that deposit also covers my time spent replying to emails, shopping for ingredients, doing online research for the design, drawing sketches, etc.

I once had a bride cancel after I'd spent two hours online looking for the best place to order edible gold leaf for her cake.   That's time I couldn't get back when she canceled.  Time that was covered by the deposit.

But let me give you another example that didn't have a happy ending.  Very early on in my business, I took an order for a wedding and groom's cake.  I was super-duper excited about doing the order, but in my excitement, I failed to get a deposit.

A few days into our communications back and forth, she said she was going to mail me a 50% down-payment (on an order that was over $1000).  I was thrilled.  So thrilled that I hopped online and immediately ordered some edible images that were needed for the groom's cake.

Well the check came - and promptly bounced.  When I called the bank, they told me she had put a stop-payment on the check.  I assume she changed her mind, but I never found out exactly what happened because she never replied to any of my emails or messages.   And 4+ years later, I still have those stupid edible images that I paid more than $50 for in the bottom of a drawer somewhere.

Lesson learned.  Collect a deposit.  Wait for it to clear the bank before you start spending it on the cake.  Since that happened, I only make exceptions in very special circumstances with very well-known and/or reliable clients.

I reserve the right to always keep the full deposit, but I do make exceptions in certain circumstances (health reasons, really good friends, it's really, really far out and I haven't lost any time/business on it, etc.).   I haven't had a ton of cancellations over the years, but for the few I've had, I've been covered.

How do I collect deposits?

This was not one of the questions asked, but I thought I'd cover it anyway.   I take deposits 3 ways.

Cash.  Because I live just outside of a very tiny town where lots of people know me personally, often they'll bring me a cash deposit or ask me to pick it up when I'm in town.

Paypal.  This is my favorite way to collect deposits and by and far, the way I'm paid most often.  I either send them an invoice through email (where I can write out specific details) or I send them a Paypal Me link (it looks like this: http://paypal.me/rosebakes).  You can click on that to see how it looks, but I can also add a specific dollar amount to the end... like this one (http://paypal.me/rosebakes/50) requesting a $50 deposit.  You can click on that to look... you won't have to send me $50 unless you just want to 😉

Paypal is my favorite because customers can pay with debit or credit cards (without having to have a Paypal account) and I'm paid instantly.  Also, I can transfer money directly into my bank account without having to drive to the bank.  Yes, there are fees taken out ($.30 per transaction + .029%) but I figure those into my prices so I'm not losing money there.

Check.  This is probably my least favorite payment method, but some people prefer it so I still accept checks in person or through the mail.  I say it's my least favorite because I've been burned more than once with checks that have bounced and I'm always a little on edge when I deposit a check from someone I don't know or have never worked with before.  If a customer pays the deposit by check, I do ask that they pay the balance via Paypal or cash so that I'm not left hanging with a bounced check after the cake is delivered .  Because you can't take a cake back.  Ha!

Okay friends... I think I've covered all the bases on collecting cake deposits.  Do you collect deposits?  What's your policy?  I'd love to hear!!  Also, if you have any questions, please leave me a comment!

 Also, check out these related posts below and please, please pin them:

• Do you want to earn more money with your cake business?  Consider THIS!
• 5 Easy Ways to Grow Your Cake Business
• How to Homeschool & Run a Cake Business
• 5 Simple Ways to Stop Wasting Time & Money in your Cake Business
• How to Charge for Cakes