What are payment terms?
Payment terms outline how, when, and by what method your customers or clients provide payment to your business.
Payment terms are typically associated with invoice 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
There are a few other things that you’ll want to include on your invoice. Including an invoice number will allow you and the customer to track invoices chronologically. You’ll also want to provide your contact information. If there are any disputes, the customer knows who to contact, and you can resolve the problem quickly. You can also indicate where you want the client to send a payment receipt.
Invoices with payment terms outline when your organization will receive income. Your invoicing system should benefit your company strategically.