Choose the Best Invoice Payment Timeframe
What payment timeframe do you use on your invoices? Many of us are tempted to choose payment timeframes arbitrarily, on the basis of what sounds good the first time we send an invoice, and stick with it as a sort of default. But this set-and-forget attitude can be a problem if the value of your invoices varies, or you work for a range of different client types. While I have a “default” payment timeframe, I try to consider the timeframes I put on every invoice I send to make sure they work for me and for my clients.
Invoice payment timeframes matter to freelancers because they can affect:
- your cashflow and ability to fund work
- the progress of the project (if subsequent phases are only started once prior phases have been fully paid for)
- your client and contractor relationships
- your invoicing approach for each new project or contract.
The Problem With a “Default” Timeframe
I’ve endured a number of issues that arise when I blindly put a default timeframe on my invoices without giving any thought to the payment value or client.
Firstly, some clients’ accounts teams work to certain pay cycle timeframes, no matter what. Come hell or high water, my invoice won’t be paid any faster than their established timeframes allow. Hassling those clients before that time is up is only annoying, seeing as they can’t do anything to change the situation.
Secondly, if I’m invoicing a client for a small amount, I’m not usually prepared to wait around for the same timeframe I would for a larger amount. Yet my “default” payment timing approach saw small values and big values take the same amount of time to get paid — at a minimum. If a client delayed payment for some reason, I’d find myself waiting even longer for a small payment.
Last of all, if you’ve agreed on a payment timeframe with your client, then send them an invoice that has different payment terms on it, this can give the impression that you lack attention to detail, are forgetful, and/or aren’t really listening to what the client is saying.
For these reasons, it’s important to consider each invoice and client on their own merits before applying a timeframe to the payment.
How to Set an Appropriate Timeframe
The task of setting an appropriate timeframe for payment involves balancing your needs against the conditions your client is working under. My basic process for determining a suitable payment timeframe looks like this.
1. Have I already agreed on payment terms with the client?
Often clients will specify their payment terms up front, perhaps in a formalized work contract, or simply as we discuss the project’s invoicing plan. So my first consideration is: have I agreed on payment timings and invoice payment timeframes with the client? If so, these guide my invoicing approach with that client.
2. Does the client have a regular payment cycle?
Rather than put in a two-week invoice and find out after two weeks that the client has a monthly pay cycle, I prefer to ask my contact about their payment cycle at the outset.
3. What’s the value of the invoice?
If I can, I like to put a short payment timeframe on an invoice for a small amount. It shouldn’t be difficult for a client to meet an invoice for a couple of hundred dollars. Also, I don’t want to be waiting weeks before I have a chance to follow such a small-value invoice up: I want to receive small payments as soon as possible, so I’m not still chasing them up weeks or months down the track.
4. Will payment need to occur before I undertake further work?
Usually I’m happy to continue working while my invoice is being processed and paid. But if the client and I have agreed that each project phase won’t start until I’ve been paid for the prior phase, I’ll tend to put a shorter timeframe on the invoice so that we can keep the project’s momentum going.
5. How soon do I want to start chasing this invoice up?
As someone who’s faced her fair share of non-paying clients, a large aspect of my invoicing approach revolves around working out how soon I’ll be able to chase overdue payments up. This gives me a sense of security: I won’t be waiting a month for payment to become overdue, then trying to track down my client, who’s energy has long since been diverted to other, more pressing tasks.
These are the considerations I use to work out the timeframes I should put on my invoices. For the record, my default timeframe is two weeks, but if I can, I’ll choose a shorter timeframe for smaller amounts (never shorter than a week) and for new clients I haven’t worked with before.
What are your invoicing timeframes? And how did you work them out?
Image by stock.xchng user iprole.