Invoice due upon receipt: Should you use it? And pros and cons

Cash flow worries keep one out of every four business owners up at night. And for good reason—collecting payment from customers can be one of the more stressful business tasks.  

Dealing with late payments or even non-payment is a challenge. One way to reduce this risk is by implementing invoice due upon receipt payment terms. By requiring payment when the invoice is received, you help ensure you get paid immediately and avoid the hassle of chasing down outstanding payments.

Let’s look at how and when to use due upon-receipt invoicing and its pros and cons:

• When should you use “due upon receipt” on invoices?
• Pros and cons of due upon receipt invoicing
• How to word immediate payment requests
• Additional invoicing terms and conditions to consider
• Tips for effective invoicing and billing
• Get paid with less back-and-forth
• Invoice due upon receipt FAQ

When should you use “due upon receipt” on invoices?

As a business owner, you can set the invoice terms and conditions for payments. Whether you’re a solopreneur or someone running a medium-sized business, you should set invoice payment terms that best serve your business. 

In general, due upon receipt invoicing is best for new clients or one-time clients. That way, you can wrap things up in one clean transaction. However, having invoices due upon receipt isn’t always recommended. It can cause friction with clients who are also trying to manage their own cash flow. You may want to consider other invoicing terms for clients that will need multiple orders or revisions.

Pros and cons of due upon receipt invoicing

There are several advantages to using the due upon receipt payment term on your invoices. For example: 

• Faster payment turnaround: Quick payments are key if you have limited financial resources available. A fast turnaround is important if you need that capital to reinvest and start on your next project.
• Better invoice management: You spend less time sending past-due invoice reminders and reduce the risk of forgetting about outstanding invoices.
• More reliable cash flow: Many businesses struggle with cash flow management, which can have a major impact on overall financial health. By relying on timely payments, you can avoid common financial pitfalls and plan.

Due upon receipt invoicing can help make running your business a smoother process. However, it might not be as advantageous for your clients. Here are some notable disadvantages to consider:

• Can be inconvenient for clients: Some clients, especially those who are fellow small businesses, may have difficulty paying immediately.
• Note ideal for all projects: Clients may not be comfortable paying until the final product is exactly how they want it.
• Might be off-putting: Having all invoices due upon receipt could be a turn-off for clients and make you seem difficult to work with. 

Only you can decide which invoice payment method is best for your business. When selecting your invoice terms, consider relationship management.

How to word immediate payment requests

To maintain great relationships with clients, make sure to word your request for immediate payment appropriately. Use polite but direct language that stipulates payment due date and payment instructions.

Here are some tips on how to write a request for immediate payment:

• Show gratitude for their business, such as “Thank you for your purchase.”
• Explain your payment expectations with something like “Payment must be completed within one business day of receiving this invoice.”
• Provide clear payment links and instructions, for example, “Complete payment by using our online payment portal.”

An invoice requiring immediate payment should not come as a surprise. Clients should understand that payment is due upon receipt before signing the service contract.

Consider using bookkeeping services to help streamline your invoicing and payment collection process

Additional invoicing terms and conditions to consider

Instead of setting your default invoicing payment term to due upon receipt, you could also use other payment terms. For example: 

• Net 7: Payment is due within seven days of the invoice date
• Net 30: Payment due within 30 days of the invoice date
• End of month: Payment is due by the last day of the month

You can also offer incentives for early payment if you choose to use one of these invoicing terms instead. For example, you could offer a 2% discount if the customer pays within 10 days, known as 2/10.

Whichever payment terms you set, make sure to communicate the due date to the client. This makes it more likely that you’ll receive payment promptly. Plus, it helps you contest any disputes that may arise over past-due payments or non-payment.

Tips for effective invoicing and billing

When invoicing, always make sure you have the invoice date and due date clearly labeled. You can also improve your billing process with these best practices: 

• Send invoices electronically: Sending invoices by mail can cause delays. Your accounting software can likely automate your invoicing by sending invoices via email. 
• Offer online payment methods: Having clients who pay with check or cash can draw out the time it takes to receive your money.
• Follow up on outstanding invoices: You want to remind clients of money owed if they miss the payment deadline. 
• Include your late fees policy on your invoices: This can encourage clients to pay promptly. 
• Use a free invoice template: Such templates are great if you need to send a quick one-off invoice.

Get paid with less back-and-forth

If you’re having trouble collecting payments from your clients, changing your payment terms and having an invoice due upon receipt may be beneficial. As with any other business decision, weigh the pros and cons of using due upon-receipt payment terms for some or all of your clients. 

Having a plan for invoicing can significantly streamline your workflow and reduce outstanding payments. Invoicing software like QuickBooks can help you set up and automate invoices and payments so you can focus more on critical business activities that will help you grow.