As a self-employed freelancer or small business owner, knowing how to send an invoice correctly is crucial. Timely payments keep cash flowing, and money in hand now is worth more than it will be in the future. To make sure your clients pay you properly, it helps to understand common payment terms and how to use them. Payment terms outline how, when, and by what method your customers or clients provide payment to your business.
Payment terms are typically associated withinvoice payments. They are an agreement that sets your expectations for payment, including when the client needs to pay you and the penalties for missing a payment. Having transparent payment terms can help ensure you get paid and makes it easier for your customers to understand your billing process.
Components of invoicing payment terms typically include:
- An invoice date
- The total invoice amount due
- The payment date and period of time that your client has to pay the total amount owed
- Stipulations for an advance or deposit
- Payment plan details
- A list of accepted payment methods
Payment terms are important because knowing how much money is going to hit your account, and when, is essential to accurate cash flow projections. Accurate cash flow projections help you plan for taxes, keep your business running smoothly, and manage its growth. A clear,professional invoicecan help you ensure that clients pay in a timely fashion. Clearly communicating terms of payment helps ensure you and your customers are on the same page before work begins.
Payment terms are essential when negotiating a contract. Payment terms should maximize how quickly your clients pay you and minimize inconvenience for your customer. A good set of payment terms should benefit both parties.
As you start to invoice customers, remember that your payment terms should match your business goals. Selecting appropriate payment terms is an important step toward building and maintaining a healthy business. Always include your payment terms on your invoices, but discuss them with your clients first.
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