As a freelancer, getting paid on time and in full comes with many benefits, from improving your cash flow and helping you to pay bills on time to making your accounting a breeze. But it’s not always easy to get clients to pay promptly.
If you aren’t clear and upfront with clients about when and how you want to be paid, there’s a good chance you’ll spend a lot of valuable time chasing your paychecks.
What Are Payment Terms?
Payment terms are the payment instructions you include in your freelance quotes, contracts, and invoices. They help to outline when and how you would like to be paid, giving your clients guidelines to follow. For example, your payment terms may state a check or credit card payment is due within two weeks upon completion of a project.
Payment terms also outline how you will handle late payments, which currencies you accept, and whether you offer discounts.
As a freelancer, you can use payment terms to get paid earlier, in full, and using the payment method you prefer. This saves you from having to send payment reminders and charge late penalties on your invoices, all while keeping your accounting records simple and straightforward.
6 Common Payment Terms for Freelancers
These are the most common payment terms freelancers often include for their clients.
1. Late Payment Terms
Late payment terms refer to how you will handle payments that have not been made in full by the due date included on your invoice.
The most common ways to handle late payments are to add monetary penalties to unpaid invoices and nonpayments after a certain date, such as late fees and interest charges.
When clients know they’ll be faced with a higher bill unless they adhere to the due date you provide, they’re more likely to pay you on time. This makes your billing cycle more reliable and predictable, enabling you to have more financial freedom.
2. Payment Due Dates
Each invoice you send should include a due date so clients know when to make payment by. The most common due date terms are:
- Net 7: Net 7 means that payments are due no later than seven days after receipt of an invoice.
- Net 15: Net 15 payment cycles mean that payments are due no later than 15 days after receipt of an invoice.
- Net 30: Net 30 payment terms mean that payments are due within 30 days of receiving an invoice.
- Due Upon Receipt: Upon-receipt payment due dates mean that payment is due as soon as an invoice has been received. They are also sometimes referred to as cash on delivery (COD) and immediate payments.
- Payment in Advance: Payment in advance means that an invoice must be paid before a service will be provided.
Most freelancers use Net 7, 15, or 30 due dates and stick to a consistent billing schedule to keep payments easy to track and manage.
3. Payment Methods
Different freelancers prefer different payment methods. What may be convenient to one may be a hassle for another. Outline the payment methods you accept in your freelance documents to ensure you get paid via the method you prefer.
Some common payment options include:
- Bank transfer
- Debit or credit card
Clarifying how you would like to be paid prevents you from winding up with a check when you’d rather receive an online payment or a direct deposit that goes straight into your bank account.
It’s not common to offer discounts when freelancing, but sometimes they can help you to get paid earlier and encourage payment in full. Certain discounts can even encourage your clients to network for you or sign bigger contracts.
Some common discounts include reduced rates for:
- New clients on a one-time basis
- Large, ongoing contracts
- Early payments
- Full payments
While these discounts don’t need to be significant, they’re a clever way to handle clients who ask for a lower rate or to build up a larger client base. Just make sure that you clarify the details related to any discounts in your payment terms, including when they’re applicable, how much they’re for, and whether they expire.
As a freelancer, there’s a good chance you may have clients in other countries. For example, you could be a contractor in the U.S. with a client in Canada. If your services extend beyond your own borders, make sure to outline accepted currencies in your payment terms.
For example, as a freelancer in the U.S., you would expect to be paid in US dollars, even if your client is based in Canada. Otherwise, you could end up losing money having to exchange currency.
Make sure to include this information consistently in contracts, quotes, and each invoice that you send out to avoid any miscommunications.
Deposits are an important payment term to outline. If you expect a client to pay a portion of a quote or invoice upfront, you’ll need to let them know in advance. But you should also tell them:
- How much the deposit is for
- When the
Some useful information and links can be found on this complete article.
For the Full Article –
You can Find it Here: 6 Common Payment Terms for Freelancers & Where to Include Them