Setting Payment Terms – A Guide To Getting Paid On Time

Do you want to be paid on time? Of course! After spending hours working on a project, the last thing you want to do is chase down your client for the bill.

Setting the appropriate invoice payment terms can determine when and how you get paid by your clients.

As a small business owner, you are in control of these terms.

The best payment terms to include on your invoice are the ones that get you paid the fastest.

However, you should also make sure you cover all your bases and clearly communicate with your client your terms, the due date, any late/early payment policies and accepted payment methods.

Here are a few tips and templates that you can use in the payment terms section of your next invoice.

Review Them With Your Clients

As you’re setting the payment terms for your invoice, keep it mind that these terms should complement the relationship between you and your clients. It is important to be clear from the get-go and be transparent with options and expectations. Just as they want high-quality work for a reasonable price, you need to be paid without having to chase them down each week.

Include payment terms that best fit each other’s working relationship. You may want to get paid faster and shorten the period to 14 days, however that could harm the relationship if your client is unable to meet those terms.

Remember to keep it simple and take the time to walk through them with your clients.

Invoice Payment Terms

The invoice payment terms depend on your relationship with your customer, common practices in your industry, as well as your cash flow needs. Depending on these factors you may find that certain payment terms make more sense for you. Here are some common payment terms used by many small businesses:

Net 30

Net 30 means that the payment is due 30 days after the invoice date (when the invoice was sent). Other similar terms include net-15, 30 and 60. The number of days you select are completely up to you and your cash flow needs, just make sure the timelines are clear for everyone. For small businesses who run on monthly subscriptions or memberships, this payment term may be best suitable for you. Remember to set reminders as part of your invoicing routine.

Template: All invoices due within Net 30.

Pro Tip: Use clear and concise language so that all parties understand. Net-30 may be industry standard, but, “Due in 30 days” is also easy to understand.

Payment First, Services After

Does your small business have a history of late-paying clients? Try implementing a pay-first policy. Make sure clients either pay in full or leave a specified percentage before starting any work for them.

Template: 100 Percent Upfront

Upon Receipt

This payment term tells the client that you are expecting payment when they receive the invoice. This term may also be helpful for those small businesses who are working on projects for their clients. The client may only want to pay once they’ve seen the final result.

Template: Upon receipt

Due Date

The due date takes into account your invoice date and payment terms that you have laid out to your client. Depending on your terms, you may have set out that the due date is net 30 from the invoice date, i.e. the invoice must be paid no later than 30 days from when the invoice was sent. Including a specific date in your invoice payment terms will help make it clear and align on expectations.

Enforce Your Due Date

It is absolutely important that you are clear when your due date is and enforce it if they are late. This is your money after all!

One method to enforce payment is to include a late payment policy. Including a late fee in your payment terms can help incentivize your clients to pay on time.

Another method is to withhold any current work. Clients who want free work, devalue your services. Therefore, you should include in your payment terms another policy of what will happen if you are not paid on time. This can be as simple as saying, “If payment is not received within x amount of days, the vendor will cease work and withhold any current or on-going work until payment is received.”

Pro tip: Your time and your money are important to your small business which is why your clients need to take them seriously. Enforce your due date by including late payment policies but be sure to go through them with your client first.

Reward Early Payments

Another method to getting paid faster is to incentivize your clients with an early payment policy. Offer them a discount if they make their payment well before the due date. Typically, we see small businesses offer 2% off the total if the invoice is paid within 10 days.

Template: A 2% discount will be applied to the invoice total if paid within 10days. Otherwise, full payment due in net 30.

Get Paid Faster (Payment Methods)

Select payment methods that make it easier for your clients. Combined with your payment terms, flexible payment options will help speed up the process and be sure that you get paid on time. 70% of global customers prefer electronic payment, by offering your client flexible payment options you incentivize them to send payments faster.

Additionally, including a Pay Now button directly on your invoice makes it easier for your clients to take immediate action. On average, having that call-to-action has led to customers getting paid twice as fast.

Pro Tip: This feature is available once you activate payments for TrulySmall Invoices.

In some cases however, you may still need to follow-up with your clients to receive payments.