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While payment is in the hands of clients, there are a multitude of ways you, as a business, can have greater control over the dates your invoices are paid. This can have a knock-on positive effect on cash flow and the accuracy of financial projections.
In this post, we’ll explain how you can invoice payment terms to control how quickly you’re paid.
What are payment terms on an invoice?
Payment terms on an invoice are a means for businesses to communicate to clients when they expect payment by. Below are some of the most common payment terms stated on invoices:
Payment In Advance (PIA) - This means you expect the client to pay upfront for a project, prior to beginning any work.
Cash In Advance (CIA) - Again, this lets the client know that you want to be paid upfront, but it also tells the method of payment you require, i.e. cash.
Upon Receipt - This means that payment is due as soon as the client receives the invoice.
Net 7 - This requires clients to pay seven days from the date the invoice was issued.
Net 21 - This requires clients to pay 21 days from the date the invoice was issued.
Net 30 - This requires clients 30 days from the date the invoice was issued. This is the most popular payment term for both small businesses and freelancers.
End of Month (EOM) - Payment is due at the end of the month the invoice is received in.
Clearly stating your payment terms will help ensure you receive your payment by your desired date.
How to get invoices paid faster
1. Set clear due dates for invoices
While it can be useful to use the above-listed payment terms on your invoices, you should be sure to include a clearly stated deadline with the precise date you expect payment by. This is because sometimes clients can get confused trying to calculate 21 days from the invoice date, for example, and end up paying late.
2. Shorten payment periods
The simplest way to get paid faster by clients is to shorten the payment period noted on your invoices. Consider reducing your payment terms from Net 30 to net 21, for example. Small businesses and freelancers, however, may need to negotiate with clients before doing this.
3. Include late fees
To prevent clients paying late, you can add a late fee. This should be a fair amount which accounts for the losses you suffer due to the payment being late. Make sure your clients are aware of these fees beforehand.
4. Reward early payment
In addition to having penalties for late payments, you can also offer rewards for early payments. This can come in the form of a discount of 2% of the overall invoice sum if they pay within 10 days of the invoice date with Net 30 payment terms.
5. Offer flexible and convenient payment methods
The easier it is for clients to pay their invoices, the sooner they’ll do it. Providing a range of payment methods will make it easier for clients to pay on time. Consider accepting alternative payment methods to accommodate a range of preferences.
GoCardless enables businesses to collect invoice payments directly from their customers' bank accounts on a chosen date by scheduling the payment. This can save you time and money. In fact businesses can get paid up to twice as fast by accepting GoCardless payments on their online invoices.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.