9 Payment Terms to Include in Your Proposals & Contracts

payment terms to include in your contracts

As a freelancer or contractor, you have complete responsibility for all aspects of your business, including the financial and legal aspects such as creating contracts.

Even though most accounting packages provide the ability to include them in your proposals and contracts, it’s important to be familiar with common payment terms that you may encounter and how to properly use them in your contracts.

9 Common Payment Terms, and What They Mean

Term of the Sale

A term of sale describes the terms under which you and your client agree to complete the project. Prices, total costs, delivery periods, payment methods, and when payments are expected or due are included in these terms. It is also essential to include these terms on any invoices that you send to your client.

Net 7/15/30/45/60/90

This is one of the most common payment terms that you may encounter. Net 30, for example, states that the payment is expected within 30 days of the invoice date, so if you send an invoice on the 1st of June, that means that the full payment is due by or on June 30th. This period is determined by factors such as the overall cost of the project, the time it took to complete, and your own cash flow needs and expectations. Shorter, less costly projects will generally have shorter payment periods than long-term, big-budget projects. 

Payment terms

Early payment terms

These are the terms that state any incentives, such as discounts, that are available if a client decides to pay you earlier than the due date. For example, if your due date is net 30, but you would like your client to pay you within 15 days, you can offer a 10% discount for doing so. On the contract, this will be written as 10/15 net 30. Similarly, if your due date is net 90, but you offer a 5% discount for paying within 30 days, you can say 5/30 net 90. These terms are optional, and you are not required to include them if you do not benefit from the early payment.

Late payment terms

74% of freelancers have experienced nonpayment or late payment at some point in their careers. Therefore, while early payment terms are optional, it is highly recommended to include late payment terms in all of your contracts. This encourages clients to pay you on time and can settle any late payment disputes

A late payment fee is usually a monthly interest that you will charge for the overdue period. An example of how to include this is by stating: “The full payment is due within 60 days of receiving the invoice. However, any late payments will incur a 1.5% interest per month on late invoices.”

Due Upon Receipt

The term “Due Upon Receipt” means that your invoice is due immediately upon delivery to your client, typically no later than by the following business day. It is important to clarify your payment agreement early in your discussions with your client if you wish to request payment upon receipt. 

Interest invoice

An interest invoice serves as both a reminder of overdue payment and a revised invoice that includes any relevant interest fees as well as the settlement date. This will include the original payment amount plus the interest incurred, based on the amount of time that the payment is overdue. You can charge this per day or month, depending on your late payment terms. 

Interest rates

Stage Payments

It is possible to request stage payments if a project is too lengthy to be paid for all at once. With these terms, you will receive a partial payment at a number of predetermined dates or milestones while the work is ongoing. For instance, you could receive 25% of your payment at four different milestones or dates that are discussed and agreed upon before the commencement of the project. 

End of Month

End of Month, or EOM, simply refers to the last business day of the month. If you request to be paid by End of the Month, it means that you must be paid before or on the last business day of the month that the invoice was received. Note that it is advised to send these invoices during the first week of that month, or as soon as possible after that. 

Payment in Advance

Requesting payment in advance, or payment upfront, means that you would like to be paid before the project has begun.  Receiving your payment in advance is ideal for bigger or long-term projects or when you are working with a new client. This term protects you from clients who are unable or unwilling to pay at the end of the project. 


It is crucial to have a thorough understanding of payment terms and how to use them in your contracts. These terms help ensure that you get paid on time, reduce the risk of nonpayment, and can also help settle any payment disputes that may arise. 

By including payment terms in your contracts, you can protect yourself and your business by establishing clear expectations with your clients. Remember that every project is unique, so it’s essential to determine which payment terms are most suitable for each project and include them in your proposals and contracts from the outset.

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9 Payment Terms to Include in Your Proposals & Contracts

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