Payment terms: What they are and how they can protect your business in 2025

Payment terms are an agreement that outlines how, when, and by what method your customers or clients provide payment to your business. They’re the backbone of healthy cash flow for any business.

When you're running a business, it's critical that payments owed to you are paid in a timely manner to keep your own bills paid and the lights on. Business owners, self-employed workers, and individuals tasked with managing an operation’s finances need to know how to craft invoices that lay out clear and concise payment terms.

Understanding common payment terms and how to use them in the invoicing process can encourage clients to pay properly and on time. The more you know about payment terms, the easier it will be for you to pick the right approach for your business's sales. 

Payment terms and invoicing are often more relevant for service-based businesses and those that sell goods at high prices. For instance, laying out strict payment terms in an invoice might be the best choice for a lawn care company that provides services on a schedule, but wouldn’t make sense for a coffee shop selling directly to its customers. 

Jump to:

• What are contract payment terms?
• How to use payment terms
• Types of payment terms
• Common invoice words and acronyms
• Example of payment terms on an invoice
• How to choose the best invoice terms and conditions
• How to control payment methods with payment terms
• Optimizing payment terms for faster payment

• FAQs: Payment terms

What are contract payment terms?

Payment terms are an agreement that sets your expectations and outlines how, when, and by what method your customers or clients provide payment to your business. Typically associated with invoice payments, transparent contract payment terms can make it easier for your customers to understand your billing process, including in instances of a late or missing payment. 

Why are contract payments important? 

Contract 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, manage business growth and monitor if you receive payments on time.

Having clear contract payment terms also helps protect your business if there’s ever a disagreement or confusion about payments. You can refer back to them if a customer questions a charge or requests a refund.

How to use payment terms

You use payment terms to outline when and how your clients should pay to ensure clean, consistent transactions. They’re essential when negotiating a contract. An effective set of payment terms should benefit both parties by maximizing how quickly your clients pay and minimizing inconvenience for your customer. To maintain a healthy business, remember that your payment terms should match your business plans and align with your business’s typical sales lifecycle. Always include your payment terms on invoices.

Who determines payment terms?

The business providing the product or service usually sets the payment terms. As the seller, you get to decide what works best for your cash flow, industry standards, and business needs. 

However, for B2B payments or larger projects, there is more flexibility. For example, clients may request terms that better suit their budget, like extended payment timelines or installments. In these cases, negotiating terms is important to ensure both parties benefit, so you give your client reasonable flexibility while maintaining the cash flow your business needs. 

When are payment terms created and updated?

Payment terms should be created prior to sending out an invoice and should be updated any time the payment structure changes. Always include payment terms on your invoices, and make sure the terms outlined in your agreements match those stated on your invoices. This helps avoid confusion and ensures a smooth transaction. Any discrepancies between the two can lead to payment delays or disputes.

Whether you need bookkeeping help or have questions, as you navigate the invoicing process, you can connect with QuickBooks Live Expert Assisted to get coached—or even offload some work.* 

18 Types of payment terms

Setting up an invoicing process with detailed payment terms is an essential part of business accounting. Payment terms make your payments a priority and set expectations for your customers, making client relationships feel more professional and productive. Once you have the payment terms nailed down, the next step is to think about how you could accept these different payment types, like partial payments or advanced payments. 

• CIA: Cash in advance
• CBS: Cash before shipment
• CND: Cash next delivery
• COD: Cash on delivery
• CWO: Cash with order
• EOM: End of month
• PIA: Payment in advance
• 1MD, 2MD: Monthly credit payment of a full month (or two-month) supply
• 21 MFI: 21st of the month following invoice date

1. Cash in advance (CIA)

Cash in advance (CIA) is a payment term where the buyer pays the full amount before you deliver goods or services. This guarantees you get paid upfront and helps reduce the risk of non-payment.

Example: A furniture maker may require full payment before building a custom sofa. Similarly, an online store selling high-end electronics might ask customers to pay before shipping expensive products.

Best for: 

• Businesses with high-value, custom, or made-to-order products that require significant upfront costs.
• International trade transactions where the seller wants to reduce risks associated with cross-border payments.
• Sellers working with new customers without a payment history.

Drawbacks

• Can deter potential customers who may be unwilling or unable to pay upfront.
• Might make a business less competitive compared to those offering delayed payment options.

2. Payment in advance (PIA)

PIA is an upfront payment before work begins. It can be a full payment, but it can also be a partial payment, like down payments or payments to help cover material costs or other expenses.

Example: A wedding photographer may require full payment before the event to prevent last-minute cancellations. For partial payments, a construction company may require 50% upfront before starting a home renovation, with the remaining 50% due upon project completion.

Best for: 

• Businesses that need money upfront to cover costs, like custom orders or big projects.
• Companies that sell subscriptions or long-term services.
• Reducing the risk of cancellations, especially for service-based businesses.

Drawbacks:

• Some customers may not want to pay upfront before getting the product or service.
• It can make a business less competitive if others offer more flexible payment options.

3. Cash with order (CWO)

CWO means the buyer pays in full when placing the order, allowing you to approve and process the payment before you deliver goods or services to the customer.

Example: An online clothing store requires customers to pay at checkout before shipping their order. Also, a manufacturer may require full payment upfront before producing a large batch of custom machinery.

Best for:

• Custom or high-value products like industrial equipment or tailored clothing, where upfront costs are high.
• International trade to help sellers avoid risks like currency changes or non-payment.
• Industries with high upfront costs, like manufacturing and wholesale, where materials must be purchased before production.

Drawbacks:

• May limit your customer base, as some buyers prefer to pay after receiving goods.
• Can lead to lost sales if competitors offer more flexible payment terms.

4. Cash before shipment (CBS)

CBS means you receive full or partial payment before sending out goods.

Example: If you sell bulk wholesale products, you might require customers to pay in full before shipping large orders to protect your business from financial loss.

Best for:

• High-value or custom products that need upfront costs covered.
• Wholesale suppliers, where bulk orders involve large financial commitments.
• International sales, helping you avoid payment risks with foreign buyers.

Drawbacks:

• May discourage some buyers, especially those used to post-delivery payment terms like Net 30.
• Puts pressure on you to deliver on time since customers expect fast fulfillment after paying.

5. Cash on delivery (COD)

COD means you receive payment when the customer gets their order rather than upfront. This can help attract more buyers, especially those who prefer cash transactions or don’t trust online payments.

Example: If you run an online electronics store, you might offer COD so customers can inspect a smartphone before paying.

Best for:

• Businesses selling to customers who prefer cash payments or don’t have credit cards.
• Companies that want to build trust with new customers who might be hesitant to pay upfront.

Drawbacks:

• Some customers may refuse delivery, leaving you with extra shipping costs.
• You only get paid after delivery, which can slow down your revenue.
• Managing COD orders requires more logistics, security, and tracking, which can increase expenses.

6. Due upon receipt

Due upon receipt is a payment term that means the customer must pay the invoice after receiving it, usually by the next business day at the latest. This helps businesses get paid faster and improves cash flow.

Example:

A freelance graphic designer finishes a project and sends an invoice marked "due upon receipt." The client is expected to pay as soon as they receive the invoice.

Best for:

• Freelancers and small businesses that need fast payments to keep cash flow steady.
• One-time projects or services where immediate payment is expected.

Drawbacks:

• Some clients may struggle to pay right away, especially if they use longer payment cycles.
• Can create tension if customers are used to delayed payment terms.

7. Net 7/10/15/30/60/90

These terms refer to the number of days in which a payment is due. For instance, net 30 means that a buyer must settle their account within 30 days of the date listed on the invoice.

Example:

A construction materials supplier delivers a bulk order of lumber and cement to a contractor and issues an invoice with net 30 terms. The contractor has 30 days to make the payment, allowing time to complete part of the project before settling the bill.

Best for:

• Businesses working with larger companies that need time to process payments.
• Long-term clients where trust is established.
• Industries like wholesale and B2B services, where delayed payments are standard.

Drawbacks:

• Slower cash flow since payment comes after work is done or products are delivered.
• Risk of late payments, which can cause financial strain.
• Harder to manage expenses while waiting for funds.

8. End of month (EOM)

EOM is a payment term where the customer must pay by the last day of the month the invoice was issued. This means if you send an invoice on April 10th with EOM terms, the payment is due by April 30th.

Example:

A wholesale supplier delivers goods to a retailer on May 5th and issues an invoice the same day with EOM terms. The retailer must pay by May 31st, no matter when the order was placed during the month.

Best for:

• Businesses that want predictable cash flow by aligning payments with monthly cycles.
• Clients who close their books at the end of the month, making it easier for them to process payments.

Drawbacks:

• If you send an invoice late in the month, the customer has only a few days to pay.
• Some clients may struggle to pay on time, especially if they receive multiple EOM invoices from different suppliers.

9. Month following invoice (MFI)

MFI is a payment term where the payment is due on a specified day of the month after the invoice date. 

Example:

If you issue an invoice on January 10th with "21 MFI" terms, the payment is due on February 21st. This provides the client with additional time beyond standard net terms to arrange payment.

Best for:

• Customers who need more time to process payments due to internal approvals or financial cycles.
• Building strong relationships by offering flexible terms that work for long-term clients.

Drawbacks:

• Slower cash flow, since you wait longer to receive payment.
• Higher risk of late payments, as longer terms can lead to delays or missed due dates.

10. 2/10 Net 30

2/10 Net 30 means you offer a 2% discount if the buyer pays within 10 days. If they don’t, they must pay the full amount within 30 days.

Example: You send an invoice for $1,000 with 2/10 Net 30 terms. If the customer pays within 10 days, they get a $20 discount and only pay $980. If they pay later, they must pay the full $1,000 by day 30.

Best for:

• Getting paid faster by giving buyers a reason to pay early.
• Encouraging reliable payments, which reduces late or overdue invoices.
• Building good relationships with customers by offering them savings.

Drawbacks:

• You make less money per sale due to the discount.
• It can hurt profits if your business has tight margins.

11. Installment agreements

An installment agreement lets customers pay over time instead of all at once. This makes high-priced items more affordable for buyers while giving you a steady income stream.

Example: If you sell equipment for $10,000, instead of requiring full payment upfront, you allow the customer to pay $1,000 per month for 10 months.

Best for:

• High-cost products or services, like cars, machinery, or real estate, where customers may need payment flexibility.
• Attracting more buyers by making purchases more affordable through smaller payments.
• Creating a steady cash flow by receiving payments over time rather than in one lump sum

Drawbacks:

• Risk of missed payments, meaning you may have to chase customers for overdue balances.
• More work to manage since tracking multiple installment accounts takes time and effort.
• Slower revenue, as you don’t get the full payment upfront, which could impact your cash flow.

12. Lines of credit

A line of credit offers buyers financing toward products and services. Customers can then repay the balance on the agreed payment schedule.

Example: A wholesale supplier provides a retailer with a $50,000 line of credit. The retailer can order products as needed, up to this limit, and agrees to pay the balance within 30 days of each purchase.

Best for:

• Businesses that want to build long-term relationships by offering flexible payment options.
• Encouraging larger purchases, as customers may buy more when they don’t have to pay upfront.
• Companies working with established, reliable clients who have a history of making on-time payments.

Drawbacks:

• Since customers pay later, your business may have to wait for revenue.
• Some customers may pay late or default, leading to financial losses.
• Tracking credit accounts, sending reminders, and collecting overdue payments require extra time and resources.

13. Partial payment

You may choose to require a partial payment of the total cost of a customer’s purchase, with the remaining balance paid over an agreed-upon schedule. This helps make expensive products or services more affordable while ensuring your business gets some payment right away to cover costs.

Example: A home renovation company charges $20,000 for a kitchen remodel. Instead of requiring full payment upfront, the company asks for a 50% deposit ($10,000) before starting the project, with the remaining $10,000 due upon completion.

Best for:

• Expensive products or services like custom furniture, home renovations, or specialized equipment.
• Keeping cash flow steady by covering initial costs upfront.
• Attracting more customers by offering flexible payment options.

Drawbacks:

• Risk of non-payment if a customer fails to pay the remaining balance.
• More work to manage payments since it requires tracking and follow-ups.
• Slower revenue since full payment isn't received upfront.

14. Cash next delivery (CND)

CND means your customer must pay for their last order before they receive their next delivery. This ensures you get paid for previous shipments before sending new ones so you can manage cash flow and reduce unpaid invoices.

Example: A wholesale food supplier delivers fresh produce to restaurants weekly. Under CND terms, the restaurant must pay for last week’s delivery before receiving this week’s shipment.

Best for:

• Businesses with regular deliveries, like wholesalers or B2B suppliers.
• Managing credit risk, making sure you get paid before continuing business.
• Keeping cash flow steady so your business doesn’t run into payment delays

Drawbacks:

• Extra tracking is needed, as you must make sure past invoices are paid before shipping new orders.
• Possible delivery delays if customers don’t pay on time, which can affect their supply and your sales.

15. Subscriptions and retainers

Subscription and retainer payment terms require customers to pay regularly, such as monthly or annually. Typically, businesses on retainer agreements issue invoices to clients on a recurring basis. 

Example: A marketing consultant offers a monthly retainer where clients pay a set fee every month for a certain number of service hours. This guarantees the consultant steady work and ensures the client has consistent support.

Best for:

• Ongoing services, like legal, marketing, or IT support, where clients need continuous help.
• Steady cash flow, so your business has predictable income each month.
• Building strong client relationships, as customers commit to long-term agreements.

Drawbacks:

• You must allocate time and resources consistently, which may limit flexibility for other projects.
• Clients might expect extra work beyond the agreed services.
• Regular payments might lead to decreased motivation to provide exceptional service if not managed carefully.

16. Cash against documents (CAD)

CAD is a payment term used primarily for international shipping transactions. You ship goods, but the buyer can’t get the shipping documents until they pay. The documents are sent to the buyer’s bank, and once payment is made, they can collect the goods.

Example: A textile exporter in India ships fabric to a retailer in Germany. The exporter’s bank sends the shipping documents to the retailer’s bank. The retailer must pay their bank before receiving the documents needed to claim the goods from customs.

Best for:

• International sales, where you want payment security but don’t want the cost of a letter of credit.
• Selling to buyers you don’t fully trust yet since you still control the shipment until payment.

Drawbacks:

• If the buyer refuses to pay, you may struggle to reclaim or resell the goods.
• Once the shipment is sent, it can be hard to get it back if payment issues arise.
• Slow processing by the buyer’s bank can delay payment and shipment release.

17. Contra

A contra payment happens when two businesses owe each other money, and instead of paying separately, they offset the amounts against each other.

Example: Your business sells $1,000 worth of office supplies to a supplier, while you buy $800 worth of raw materials from them. Instead of both making full payments, the $800 is deducted from the $1,000, and the supplier only pays you the $200 difference.

Best for:

• Businesses that buy and sell from each other, like wholesalers and manufacturers.
• Simplifying transactions by reducing the number of payments going back and forth.

Drawbacks:

• Requires careful bookkeeping, as both companies must agree on the amounts.
• If one party disagrees on the balance., there could be potential disputes.
• Only works if both businesses have invoices with each other at the same time.

18. 1MD and 2MD

1MD and 2MD are credit payment terms where customers receive a one-month (1MD) or two-month (2MD) supply of goods and agree to pay at the end of that period. This lets businesses sell on credit while making sure they get paid within a set timeframe.

Example: A wholesale office supplies company provides a retailer with a one-month supply of products under 1MD terms. The retailer must pay by the end of the month. Under 2MD terms, the retailer gets a two-month supply and pays at the end of the second month.

Best for:

• Businesses with regular supply schedules, such as wholesalers and manufacturers.
• Building strong customer relationships by offering flexible credit terms.
• Helping customers manage inventory so they have steady stock without upfront costs.

Drawbacks:

• Risk of late or missed payments, which can affect your cash flow.
• Requires careful tracking since multiple customers may have different payment deadlines.
• If customers order too much and struggle to sell the inventory, there’s potential for overstock.

Common invoice words and acronyms 

When sending invoices, it’s important to set clear payment terms so both you and your customers know when and how payments should be made. Using standard payment acronyms helps businesses avoid confusion, improve cash flow, and reduce the risk of late payments. Let’s review some of the most common terms that small business owners should be aware of when generating invoices: 

• Accumulation discounts: Discounts on large orders
• Forward dating: Invoicing for payment to be made after the customer receives the order
• Partial payment discount: When a seller offers a partial discount due to low cash flow
• Rebate: Refund sent to the buyer after they’ve made a purchase
• Stage payments: Set payments over a period of time, agreed upon by the client and seller

Common invoicing challenges

Invoicing isn’t as cut and dry as some may assume. There can be payment problems as well as management issues that arise. Common invoicing challenges include:

1. Fielding disputes over payment terms

Customers may misunderstand or disagree with payment terms, which could lead to delays and back-and-forth emails. 

For example, say you’re a photographer who finishes a project and invoices the client with net 30 terms. The client insists they thought it was Net 60, which may leave you unpaid for another month.

To help avoid this situation, clearly state your payment terms upfront before starting work and include them in your contract and invoices.

2. Attempting to collect late or delinquent payments

Some customers might pay late or not at all, which makes it harder for businesses to cover expenses and stay afloat. 

For instance, imagine a catering business provides food for an event but waits over 60 days for payment, even though the invoice was due in 30 days. This delay makes it difficult for the company to pay their own vendors.

To encourage customers to pay on time, consider offering discounts for early payments, charging late fees, and sending payment reminders.

3. Managing payments and tracking invoices

If you handle multiple clients, it can be overwhelming to keep up with who has paid and who hasn’t. Without a good system in place, unpaid invoices can slip through the cracks. 

For example, say you’re a construction contractor. You send out multiple invoices to different clients every month but struggle to track which invoices have been paid and which are overdue. Eventually, you discover some invoices have gone unnoticed, which leaves you with unpaid work.

That’s why it’s important to use automated invoicing software so you can generate, send, and track invoices in real time. Additionally, you can set up automatic reminders for customers as payment deadlines approach.

4. Keeping payments secure

Online fraud is a real risk, and sending invoices through email can put your payments in danger. If you do this, a hacker could intercept it and change the payment details. The client unknowingly sends money to the wrong account, and your business never gets paid.

To prevent this from happening, use secure payment platforms like QuickBooks Payments or PayPal, and always double-check large payments with customers.

Clear and legally binding payment terms can help mitigate these issues. If a customer fails to pay you under these terms, there are steps you can take to get your money.

Example of payment terms on an invoice

To get a better idea of why payment terms are essential to your business’s finances, let’s take a look at an example invoice template that shows several payment term elements. Invoices typically include the basics, such as business name, invoice amount, and accepted payment methods. There is also space for personalization, such as a logo and personal message.

How payment terms factor into the invoice process

A clear, professional invoice is the final touchpoint in a successful transaction for you and your customers. It not only details the cost of goods or services but also communicates your payment terms, to ensure you and your customers are aligned from the start. 

Here's how payment terms are integrated into a typical invoice:

Invoice date: This is the date you send the invoice, and it’s important because it starts the payment countdown. For example, If you send an invoice on March 5, 2025, with Net 30 terms, the payment is due by April 4, 2025.

Invoice number:  unique invoice number helps you and your customer track payments. If there’s ever a dispute or a follow-up, having an invoice number makes it easy to find.

Customer information: This information should include the customer’s name, address, and contact details. Having this information ensures the invoice reaches the right person and doesn’t get lost.

Description of goods/services: List exactly what was sold or done, including quantities, rates, and total costs. The clearer this section is, the less likely a customer will delay payment because they don’t understand the charges.

Total amount due: This is the full amount your customer owes, including taxes or discounts. If you offer an early payment discount (e.g., 2/10 net 30), show both the full price and the discounted price if paid early.

Payment due date: This is the deadline for payment, based on the invoice date and the agreed terms. Giving a specific due date makes it easier for customers to plan their payments. For example, if an invoice is dated April 1, 2025, with net 15 terms, the payment is due by April 16, 2025.

Payment terms: This section details how and when payment is expected. It should include:

• The payment terms (e.g., net 30, due upon receipt, or 50% upfront).
• Late payment fees if the customer doesn’t pay on time.
• Discounts for paying early, if applicable.

Accepted payment methods: Make it easy for customers to pay by listing all available options, like credit card, bank transfer, PayPal, or checks. The more options you give, the fewer excuses they have for delaying payment.

Late payment policy: If you charge late fees, state that clearly on the invoice so customers understand the consequences of paying late. For instance, you could say, “A 1.5% late fee per month will be added to invoices overdue by more than 15 days.”

Here are some optional but recommended invoice elements:

• Dispute contact: Include your phone number or email so customers can ask questions quickly instead of delaying payment.
• Purchase order number (if applicable): If your customer uses purchase orders, adding this number helps their accounting team process your invoice faster.
• Notes: A short thank-you message or a reminder about future work can help build good relationships with customers.
• Company logo and branding: A professional-looking invoice with your company logo helps build trust and makes it easier for customers to recognize.

How to choose the best invoice terms and conditions

Choosing your business invoice terms can either offer a strong foundation to your business—or set it on unstable footing. There are a few considerations to ponder before setting your terms.

Look at cash flow

Are you constantly running low on cash toward the end of the month? Or having a hard time getting started at the beginning of the month due to lack of money? This could be a result of having a cash flow problem. The best invoice terms to consider are the ones that get money in your pocket as soon as possible. 

The following payment options could be a good fit:

• Pay in full upfront
• Pay 50% upfront
• Ask for installments, where the first is due at the time the order is placed

Save time assessing your cash flow with experts by your side. QuickBooks Online users already have access to verified experts who can support their whole business, from books to taxes. Get peace of mind and personalized expertise focused on your success with QuickBooks Live Expert Assisted*.

Take industry standards into account

Different industries have payment term norms that customers expect. 

Consider researching resources to help you better understand the standard payment terms in your industry:

• Industry trade associations like the National Association of Wholesalers-Distributors (NAW) or National Federation of Independent Business (NFIB)
• Market research reports like IBISWorld, Statista, and Forrester Research
• Government resources, such as the U.S. Small Business Administration (SBA) and your local chamber of commerce.
• Forums like Reddit’s r/smallbusiness, LinkedIn industry groups, and QuickBooks Community.
• Reviewing competitor Invoices and contracts can provide insight into standard payment expectations.

Review client history 

The payment terms you offer may vary customer to customer. For instance, you might want to consider stricter terms—such as, upfront payments or cash on delivery—for clients whose payments are notoriously late or delinquent.

Conversely, if you work with a client who has a perfect track record, you might consider rewarding their timeliness with more lenient terms or even discounts in certain cases.

Late fees and interest terms 

Late fees and interest can be strong motivators to getting your invoices paid on time. Documenting your terms gives you legal standing in case your customer doesn’t pay on time. If you don’t receive prompt payment and your customer ignores your invoices past due, you may need to take legal action to recoup the funds. An invoice is typically not considered a legal document on its own, so if you don’t have a contract in place, you won’t have a strong legal standing.

 A contract is also the perfect place to outline any late fees you plan to impose. Being upfront about late fees and interest charges improves transparency and helps prevent misunderstandings. When customers know the consequences of late payments ahead of time, they’re more likely to follow the terms, and you’ll have a stronger case if you need to take legal action.

Before implementing any new payment terms, they must be made known to your clients. Here are some tips to go about it respectfully:

• Send an email update email to your client list—make sure pertinent dates and details are crystal clear. 
• Add the new policy to all your upcoming invoices in very plain sight (barring contract agreements around payment).
• Give a courtesy call to delinquent clients and remind them of their current balance as well as when and how the new terms will impact them.

Determine invoice size

Small businesses may undertake a large invoice for a sizable project. To remedy any risk introduced, it might be wise to ask for a deposit prior to starting. This ensures you have some cash upfront to cover your costs and confirms the client’s commitment to the project. It also reduces the chance of unpaid work so you can keep your cash flow steady.

As a business owner in this situation, it is important to assess the invoice size, analyze your cash flow and make a decision based on facts, not trust alone.

With QuickBooks Live Expert Assisted you have access to trusted small business tech and verified expertise to support your whole business. Real experts with best-in-class tools to support you and your business changes and grows can streamline how you work by automating tedious tasks such as invoice formatting. 

How to control payment methods with payment terms

In addition to controlling the timing of your payment, you also have a say in how customers pay you. Setting expectations for your preferred payment methods in your invoice terms will help ensure you get paid appropriately and avoid confusion later on. 

It’s also a good idea to offer multiple payment options to help speed up payments and keep your cash flow steady. Not everyone pays the same way, so offering a variety of choices makes the process more convenient for them—and helps you get paid faster.

Two of the more modern payment methods you might want to consider are smart invoices and credit cards.

Smart invoices

Software like QuickBooks enables customers to pay online anytime with pay-enabled smart invoices. With smart invoices, customers can pay using credit cards, debit cards, and automated clearing house (ACH) bank transfers.

It is important that you create and send an invoice as soon as you complete an order or service. Delays can result in later payments or cash flow interruptions. You can set up automatic and recurring invoices to streamline this process, which can reduce the guesswork associated with invoicing. Alternatively, you can email invoices with a link for payment directly to the customer. QuickBooks Payments offers a free email and ACH payment merchant service account, and free instant deposits with a QuickBooks Money business bank account. 

Credit card or mobile payments

You might also accept credit card payments, for which you can request that the client provide you with a credit card number. Or you can accept mobile payments with the QuickBooks GoPayment app, which comes with the hardware necessary to accept all major credit and debit cards using just your mobile device.

Be aware, however, there are usually higher fees associated with credit card payments. Some business owners choose to pay the fees themselves, while others opt to pass them along to customers. If you choose the latter, you’ll want to indicate this in your contract. The contract should clearly explain that you’ll charge the customer a credit card fee if they elect this payment method. Use our payment processing fee calculator to see how QuickBooks compares to other payment processors.

Make security a priority

Securing invoice payments is also a concern worth noting. It’s entirely possible for fraudulent invoices to be sent in your name, causing significant financial losses for both you and your customer. QuickBooks Online updates automatically, ensuring your work product is protected and giving you peace of mind. 

Optimizing payment terms for faster payment

The faster you get paid, the easier it is to keep your cash flow healthy. Consider these strategies to help get your customers to pay promptly and on time. 

Automate reminders

Manually sending payment reminders or chasing overdue invoices eats up your time and energy. Instead, set up automated reminders through invoicing software like Quickbooks to keep payments top-of-mind for your customers.

Include a late fee

Late fees can give customers the push they need to pay on time. If you take this approach, a small charge, typically 1% to 1.5% of the invoice total, is common. However, be upfront about late fees in your contracts, invoices, and reminders so you don’t risk straining your client relationships.

Offer early payment discounts

Give customers a reason to pay sooner by offering a small discount. For example, you can offer 2% off the total amount if the invoice is paid within 10 days instead of the standard 30. Early payment incentives work well for trusted customers or during cash flow dips when you need funds quickly.

Provide plenty of payment options

Customers are more likely to pay on time when they can choose a method that’s convenient for them. Be sure to offer various options, including credit credits, bank transfers (ACH), online payment platforms (e.g., PayPal) eChecks, and more. However, these options will likely come with processing fees, so decide whether to absorb the cost or communicate upfront with your customer about adding a small convenience fee.

Consider advanced payments

For larger projects or first-time clients, ask for a deposit upfront or structure milestone payments as work progresses. For example, you might request 50% upfront and 50% upon completion to cover initial costs and reduce risk. For payments tied to milestones like project phases or deliverables, you could ask for 30% at the start, 30% at the halfway point, and 40% upon final delivery. Ultimately, this approach helps protect your cash flow and gives your clients a more manageable way to pay you.

Customize payment terms

Not all customers have the same needs or financial situations, so a one-size-fits-all approach to payment terms doesn’t always work. Before settling payment terms, consider talking with your client to see what works best for them. For example, instead of defaulting to Net 30, consider offering terms like Net 15 for faster payments or Net 60 for clients with longer payment cycles. Whatever payment terms you settle on, it’s a win-win — your clients get terms that suit their situation, and you get paid more predictably.

If you’re ready to make invoicing easier and get paid faster, QuickBooks Online has you covered. With QuickBooks, you can create professional invoices, set up automatic reminders, and give your customers multiple ways to pay — all in one place.

Explore QuickBooks Online today.

*QuickBooks Live Expert Assisted requires QuickBooks Online subscription. Additional terms, conditions, limitations, and fees apply.

**Product Information:

QuickBooks Card Reader: Data access subject to cellular/internet provider network availability and occasional downtime due to system and server maintenance. Product registration and QuickBooks Payments account required. Terms, conditions, and features subject to change.

QuickBooks Payments: QuickBooks Payments account subject to eligibility criteria, credit, and application approval. Subscription to QuickBooks Online required. Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services.

QuickBooks Money is a standalone Intuit offering that includse QuickBooks Payments and QuickBooks Checking. Intuit accounts are subject to eligibility criteria, credit, and application approval. Baking services provided by the QuickBooks VisaⓇ Debit Card is issued by Green Dot Bank, Member FDIC, pursuant to license from Visa U.S.A., Inc. Visa is a registered trademark of Visa International Service Association. QuickBooks Checking Deposit Account Agreement Apples. Banking services and debit card opening are subject to identity verification and approval by Green Dot Bank. Money movement services ar eprovided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services.

For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/.

Based on U.S. Intuit Assist Beta customers using outstanding invoice notifications and AI-drafted invoice reminder features, compared to customers sending standard invoice reminders to the same customers, from January 2024 to August 2024. Not available in QuickBooks Online Advanced.