An Invoice is not just a form of requesting payment, it’s the backbone of your business and it’s a most essential tool for managing your cash flow. Invoicing involves in the entire process of your business in receiving, approving and paying the amount for your product or service on time. It’s also used to manage your business financial transactions and records and the automation in this makes your business accurate and efficient, it saves you time and money.
A Survey says 74% of freelancers said that they are not getting payment for their projects on time. So, it’s hard to manage small works for the business owners. In this case invoicing is very useful for freelancers to get payments on time because the terms and conditions are already placed in the invoices.
What are payment Terms?
Payment terms are the impacts for your business, good strategy for securing your terms and it’s a best practice for your business management.
Terms and conditions mainly contain the due date of the payments, if they have discounts earlier, penalties for late payments and other conditions that both seller and the buyer must agree with. When sending an invoice to the client, the invoice should be capable of self-explanatory and let your clients know every detail about the future payments that they must pay for the project.
And it is best if you have discussed the payments before sending an invoice to the client over a call or meeting.
The payments must include any penalty that the client must pay in case of delays in the payments if it is necessary. When you are clear with your terms, your customers are more likely to pay on time and thus the cash flow becomes consistent in your business.
As a business owner, getting paid on time will be at the top of your priority list. So, it should also be your priority to set up the right payment terms to avoid late payments and ensure there’s smooth cash flow in your business.
Invoices commonly include the due date, accepted payment methods, and late payment fees or interest.
Here are some important payment terms that every business owner needs to know.
Common payment terms for Invoices:
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Advance Payments
Advance payments are the most usual payment term we use for business. It is mainly used for service-based businesses, you can either charge Half of the advance amount or the full amount in advance before offering your services to your clients.
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2/10 Net 30
Net 30 means you need to make the payment within 30 days of receiving the invoice. And 2/10 states that the payment should be made within 10 days after receiving the invoice. Also, if the payment is made within the date, the client may offer you some % discount.
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Payment at the time of service
In the name it has the definition; in this method you need to pay the seller or services provider once the service is completed. Example in hotels once you completed your meal you need to pay for the bill, as like in the hospital you need to pay the bill once you get discharged from the hospital.
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Due upon receipt
This method is also known as a traditional way of payment, where your client will pay the amount by receiving the payment. And this payment term is usually shared through emails. But make sure that click-to-pay button is added to it for flexible payment options. Also use UPI, credit and debit cards forget the payments easy and secure.
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Deposit Required
It is similar to the advance payment method before receiving the product or service. This method is mostly used in product-based business to ensure the custom order for your clients.
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Recurring Payment
Recurring payment methods used for long-term clients who are providing continuous orders for a long time. It’s sent to the client every month, and the period can change to biweekly or bimonthly based upon the type of product or services.
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Cash on Delivery
Mostly everyone knows these payment terms and those are paid in real time. Also, the payment terms are used much in product-based business when compared to service-based business. Nowadays, Because of having lot of online payment terms, cash on delivery has been reduced.
Conclusion
Receiving payments on time is a big challenge for business owners, that is the reason for implementing new terms and conditions and these terms are very useful for the clients. It is very useful and helps to create a good bond between the sellers and the buyers.
Using online invoicing software helps the business and freelancers to save their time and money. It’s the most secure way, it is having cloud service, automation option. You can create your own template using online invoicing software.
