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.
Including payment terms in your contracts, quotes, and invoices clarifies your expectations in writing, encouraging clients to respect the due dates and payment methods you stipulate.
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:
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
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 deposit is due
Whether it will be deducted from their next invoice
Whether it is refundable or not
On the other hand, make sure to remove any references to deposits when they aren’t applicable. For example, most of the time, deposits are only required from new clients before their first invoice has been sent. Deposits are not typically required on recurring invoices.
Where to Include Freelance Payment Terms
Payment terms can be referenced in three of your most important freelance documents:
1. Introduce Payment Terms in Quotes
Quotes are a great place to list your payment terms and guidelines. Your quotes tell clients what to expect before you begin working together, setting a clear vision for the working relationship you’ll have together.
In quotes, you don’t necessarily have to spell out all of the details of your payments terms like exact due dates or amounts, but you can cover basics such as:
Your billing cycle
The payment methods and currencies you accept
Whether a deposit is required
How late payments or nonpayments are handled
2. Include Full Payment Terms in Contracts
Your contract is where you should specify your payment terms in more detail. If you used an online template to create your contract, take a look at which payment terms it includes and adjust them as necessary. A lawyer can also help you update the clauses in your contracts related to payments and financial information.
It’s very important to cover payment terms in your contracts and to have your clients review and sign them. In the event of a serious nonpayment issue or dispute, your payment terms in your contract will help to bolster your case if it winds up with a collection agency or in court.
3. Remind Clients of Payment Terms on Invoices
Similar to quotes, your invoices don’t need to include the nitty-gritty details of your payment terms. However, all invoices should have:
The total amount due
A clear and specific due date
The invoice date and invoice number
Accepted payment methods
It’s simple enough to add a line to your invoices detailing this information without getting too complicated. For example:
Invoice Date: May 31. Please make a payment of $700.00 via PayPal within 14 days.
Most invoicing software platforms will include basic payment terms in their invoice templates, making it easy for you to fill in.
Tips for Improving Your Payment Terms
Not all payment terms are made equal. Here are some ways to make sure that your payment terms work for you.
Adhere to and Enforce Your Payment Terms
There’s no point in having payment terms if you don’t stick to them. As a business owner, you rely on prompt payments that are made in full and using the methods that work best for you.
When a client goes against your payment terms, such as by paying late or using a different payment method you don’t prefer, you don’t have to get aggressive or accusatory. Instead, use your payment terms as a reference when you need to send a gentle reminder to use the correct payment method or make payments within a certain time frame.
Your payment terms are meant to help you to run a better freelance business, so make sure you use them to your advantage and enforce them when necessary.
If a client still hasn’t paid their invoice the day before it’s due, send them a reminder. Letting them know before you apply a late fee or interest charge may prompt them to pay and helps you to build stronger client relationships.
No one likes surprise fees and charges on their bills, so a simple courtesy email or text can go a long way.
When developing your payment terms, remember to be reasonable. Think about who your typical clients are and what will work for them, not just for you. If your payment terms are too specific or complicated, you risk setting your clients up for failure.
For example, if you typically work with small-business owners, consider payment terms that work for you both instead of just for you. That may mean accepting different payment methods or extending your due dates by a week.
Alternatively, if you typically work with bigger clients, you may choose to accept whatever payment methods they are already set up to use, or decide not to offer an early payment discount.
If you expect your clients to be timely and consistent when it comes to making payments, you should do the same when it comes to your invoicing.
Your invoices should be sent on a regular basis at predictable intervals. For example, many freelancers bill all their clients at the end of the month.
Consistent billing allows clients to budget for your services in advance and helps you to create a dependable and structured payment schedule.
Use Professional Documents
Payment terms don’t seem as important if they’re scribbled on a sticky note or briefly mentioned in an email. Use professional invoices, quotes, and contracts to add legitimacy and credibility to your payment terms, so that clients are more likely to adhere to them.
There are a variety of platforms you can use to create professional freelance documents, including FreshBooks, Bonsai, and QuickBooks.
Whether you’re a freelance writer, interior designer, or accountant, how and when you get paid directly impacts your ability to cover bills and expenses, update your records, and plan for your future. If you can’t rely on your clients to pay you in full and on time, it’s nearly impossible to have any financial freedom.
Developing and enforcing payment terms is a great way not only to encourage clients to follow your payment preferences but also to demonstrate your professionalism and legitimacy as a business owner.
Keep your payment terms reasonable, let clients know what they are in advance, and include guidelines in your contracts, quotes, and invoices to reap the rewards of having clear and consistent freelance payment terms.