Today, we're going to dove into
how to establish effective payment
terms to financially
protect your business.
Hey, my name is Morgan Law
and I'm from Finepoints.biz
And my goal is to help business
owners and bookkeepers
better manage their finances.
Today, I am partnering with
QuickBooks on a video series
to help business owners
better run their business.
As a self-employed
freelancer or small business owner,
you know how crucial it is
to get paid on time.
So today we're going to talk
about some common payment terms.
We're going to say what they are
and how to use them.
Before we get any further, I'd love it
if you give this video a thumbs up,
as well as subscribe to QuickBooks'
YouTube channel down below.
If you're more of a reader,
there's also going to be an article
linked in the description box.
Payment terms are an
agreement that sets expectations
for how and when
you're going to get paid.
It also includes penalties
for a missed payment.
Having those clear payment
terms really helps
your customers pay on time.
And it also makes the process
a lot easier for them.
The components of payment terms
typically include
number one, invoice date.
Number two, the total payment
amount do. Number three, the payment date
and the period of time
the client has to pay it.
Number four, stipulations
for an advance or deposit.
Number five, payment plan details.
And number six, a list of accepted
payment methods.
I also recommend
putting an invoice number on your invoice
that just helps you
organize them chronologically.
And then don't forget to include
contact information on there, too.
So clients know how
to get in touch with you.
Payment terms are important
because they accurately
project your cash flow.
Research by QuickBooks shows that
sixty seven percent of small business owners
say that they don't know
how much their customers owe them.
Fifty nine percent of
small business owners
say they've made a bad business decision
because of poor cash flow.
You can learn more
about all this research
linked in the description box below.
Payment terms are essential
when negotiating a contract.
This really helps
maximize how quickly the invoice is
paid and minimize inconvenience.
Always include payment
terms on your invoice,
but make sure you discuss them
with the client first.
Here are some examples of payment terms.
Prepayment using these terms,
customers pay you in advance.
This reduces the risk of losing money
and improves cash flow.
But depending on the
type of your business,
not all customers
may be comfortable paying upfront.
So you also might want to consider
a partial payment.
Fifty percent upfront.
So this is when the customer pays
you half of it before you start.
This is great for customers
because their payments are smaller then,
but just make sure you define
when the other fifty percent
is going to be do.
Installment agreements.
So this is when the total cost
is broken up into smaller installments.
And this can be done in any time.
So maybe every three months
you get another installment
from your client
or it can be done when you complete
certain parts of the project.
Immediate payment
or payment upon receipt.
So this just means that you get paid
as soon as the goods
or services are delivered.
And you can even negotiate
within the contract
that if you don't get paid right away,
you can repossess the goods.
Net seven, 10, 15, 30, 60 or 90.
These terms refer to the number of days
that you have to pay the invoice.
So, for example, net
30 just means that it has to be paid
within 30 days of the invoice date.
Subscriptions and retainers.
So this has your client paying
a regular reoccurring amount
for a set period of time,
such as monthly or annually.
Automating invoicing
for recurring payments
really helps you save time
on collecting those payments.
Early payments.
So you can choose to offer a discount
if customers pay you early.
And this is a win win
because customers get that discount
and you get your cash sooner.
Here are some tips to help
create effective payment terms.
Number one, define
the payment terms in a contract
so you and the client
should work together
to come up with payment
terms that work for both of you.
Do that before the work begins
and then make sure you put that
in writing in a contract.
The contract is also a great place
to outline any late fees
that will be imposed
for past due invoices.
Number two, invoice promptly
for on-time payments.
So as soon as the work is completed,
make sure to invoice
your customer right away.
This is going to avoid late payments
and also help your business
with cash flow.
Putting together
a concise, easy to understand
invoice is going to go a long way
in making sure that they're paid on time.
The right tools can help cash
keep flowing into your business.
As a bookkeeper,
I use QuickBooks to send
and track invoices, to accept payments,
and to automate follow up reminders.
I do this both for my business
and my clients businesses.
QuickBooks makes it super easy,
and I've been using it
for about eight years.
Leave me a comment down below
about one thing that you learn today.
And if you enjoyed this video, definitely
give it a thumbs up
and subscribe to QuickBooks'
YouTube channel down below,
hit the red button.
Thank you so much for watching.