{"id":5183,"date":"2023-10-03T03:51:19","date_gmt":"2023-10-03T03:51:19","guid":{"rendered":"https:\/\/ownrblog-preprod.go-vip.net\/?p=5183"},"modified":"2024-01-31T19:56:20","modified_gmt":"2024-01-31T19:56:20","slug":"payment-terms","status":"publish","type":"post","link":"https:\/\/www.ownr.co\/blog\/payment-terms\/","title":{"rendered":"Making Payment Terms Work For You"},"content":{"rendered":" \r\n

Using the right invoice payment terms can make sending invoices and receiving payment easier and faster. Here are a few tips and tricks to help the process.<\/p> \r\n

Get paid fast with the right payment terms<\/h2>\r\n \r\n \r\n

As an entrepreneur, getting paid is one of the most exciting and frightening parts of the process. You can\u2019t wait to literally get paid for doing what you love\u2014but you\u2019re feeling a little uneasy about asking people to give you money. Especially when they\u2019re a few days late paying up.<\/p> \r\n

You\u2019re not alone. Xero<\/span><\/a> says that invoices are paid late almost half the time, and Inc.<\/span><\/a> says that 16 per cent of invoices will never be paid at all. Luckily, the law is on your side and having the right payment terms on your invoice can help give you the backing you need to get paid quickly and on time.<\/p> \r\n

You deserve to get paid for all of the hard work you do. It\u2019s time to arm yourself with the right information to make that happen. <\/p> \r\n

What are payment terms?<\/h2>\r\n \r\n \r\n

Payment terms are simply the conditions that need to be met when you, as the vendor, complete a sale. They outline when you expect payment, any conditions that exist on the payment (like late fees or early discounts), and any discounts that you\u2019re giving the purchaser.<\/p> \r\n

If you\u2019re selling someone a candle from your physical location, chances are they\u2019ll make payment and walk out of the store with their new item. In this case, you\u2019re using immediate payment. But as a freelance writer<\/a>, you might deliver a blog post to a client then issue an invoice due in 30 days\u2014this is a Net 30 payment terms clause. <\/p> \r\n

Any time you make a sale or purchase a product or service, there are conditions attached to that deal. And, as an entrepreneur, they can help you collect payment from your customers without feeling bad about it.<\/p> \r\n

Common payment terminology<\/h2>\r\n \r\n \r\n

Invoices<\/span><\/a> are only as good as the payment terms that come along with them. If you don\u2019t include them, you aren\u2019t clearly communicating what you expect. That means everything from when payment needs to be made to how it\u2019s done and the consequences for non-payment are up in the air.<\/p>\r\n

Terms of sale<\/td>The overall payment terms that you and the purchaser have agreed on. These include the cost, amount, payment method, delivery, and due date.<\/td><\/tr>
Immediate payment<\/td>Sometimes referred to as \u201ccash on delivery\u201d or \u201cpayable upon receipt,\u201d this means that payment is due upon receipt of the product or service. Think of immediate payment as purchasing a candy bar from the gas station around the corner; it\u2019s an immediate exchange of goods and services.<\/td><\/tr>
Payment in advance<\/td>When payment is made prior to the product delivery, payment in advance ensures that there is no risk of not being paid for your product or service. If you make a purchase off Amazon, you pay in advance then they package and deliver your product.<\/td><\/tr>
Net 7, 10, 30, 60, 90<\/td>Invoice net terms are a fancy way of saying how many days a payment is due. Net 30 terms mean it is due 30 days from the date of the invoice; likewise, Net 7 means payment is due in seven days.<\/td><\/tr>
2\/10 Net 30<\/td>A more complex way of saying that you expect payment 30 days after the invoice date, but if your client pays within ten days they save two per cent of the bill. It\u2019s a great option for incentivizing clients to pay early.<\/td><\/tr>
Line of credit pay<\/td>When someone pays for something over a period of time but gets the product or service immediately, like making monthly or quarterly payments. Line of credit payment is not often seen in small businesses because of the increased risk of not being paid and the decrease in cash flow.<\/td><\/tr>
Recurring invoice<\/td>Used for services that occur on a monthly basis. A marketing consultant might charge a flat rate each month for an agreed upon regular delivery of a service. These are great for predicting cash flow and saves you from having to make a fresh new invoice each month.<\/td><\/tr>
Quote or estimate<\/td>A ballpark or calculated guess at what your goods or services will cost. Most often used as a comparison or bid for a project, this isn\u2019t the final number you\u2019ll bill, but it outlines not only the schedule of work but also an itemized breakdown of what will be done to complete a job.<\/td><\/tr>
Interest invoice<\/td>When you charge a late fee on your invoice. Late fees are calculated based on the number of days the invoice is late\u2014most invoicing software lets you add a late fee onto your invoices. <\/td><\/tr>
Invoice factoring<\/td>When you hand over unpaid invoices to a third-party, and you receive 85 per cent of the payment upfront. These companies charge a fee for their services. <\/td><\/tr><\/tbody><\/table><\/figure>\r\n\r\n \r\n

7 tips for getting paid faster<\/h2>\r\n \r\n \r\n

Having great payment terms is only half the process. You need to know how to use them to your advantage to get the full effect. Getting paid faster is the dream that you have the possibility of actually making a reality, and there are a few things you can do to increase your chances of making it happen. <\/p> \r\n

1. Discuss terms before starting the work<\/h3>\r\n \r\n \r\n

It\u2019s best practice to include any terms and conditions for payment in the initial contract you sign with clients. This helps ensure that everyone is on the same page and your clients understand what you expect from them with regards to payment.<\/p> \r\n

You do good work, and you deserve to be well-compensated for it, so don\u2019t be afraid to talk about it upfront (you\u2019ll thank yourself later).<\/p> \r\n

2. Opt for quicker payment terms<\/h3>\r\n \r\n \r\n

Xero<\/span><\/a> did a study of a million invoices that went through their program and came up with some interesting insights:<\/p> \r\n