Structuring your payment terms is an individual decision for every consultant, and the specifics can depend on the services you provide and what is customary in your industry of expertise. Regardless of the policies you choose for your business, this section is one of the most important in any agreement.
Payment terms can include:
1.Up-front payment :-
Requiring some payment before you begin working is increasingly commonplace for consultants and highly recommended. In the case of a limited time project, asking for half of the agreed upon fee in advance is customary. For an ongoing monthly retainer, billing a month in advance is the preferred method for many. At a minimum, ask for a deposit before you begin.
2.Retainer vs. Hourly vs. Project :-
Depending on how you structure your client fees, you’ll want to define payment as a monthly retainer, an hourly wage or a project fee. No matter which approach you choose, be sure to set minimum and maximum hours, spell out deliverables and numbers of revisions, etc., to ensure that both you and the client can have clear expectations on what your labor costs include
3.Due date :-
Many successful consultants recommend stating that payment is “due upon receipt.” In some industries, 30 days is more common. You’ll see the phrase “terms net 30” used in contracts, which means payment is due within 30 days. Regardless of your terms, make sure the timeframe for payment is spelled out very clearly (or you’ll have limited recourse later)
4.Interest or Penalties :-
Another way to motivate clients to pay on time is to include language that stipulates late fees and/or interest charges. A common way to phrase this is, “Interest will be charged on overdue invoices at a rate of twelve percent (12%) per annum, or the maximum permitted by law, whichever is less.” So if you charge 12% interest per annum, that’s an interest rate of 1% each month of the total due.
Payment terms can include:
1.Up-front payment :-
Requiring some payment before you begin working is increasingly commonplace for consultants and highly recommended. In the case of a limited time project, asking for half of the agreed upon fee in advance is customary. For an ongoing monthly retainer, billing a month in advance is the preferred method for many. At a minimum, ask for a deposit before you begin.
2.Retainer vs. Hourly vs. Project :-
Depending on how you structure your client fees, you’ll want to define payment as a monthly retainer, an hourly wage or a project fee. No matter which approach you choose, be sure to set minimum and maximum hours, spell out deliverables and numbers of revisions, etc., to ensure that both you and the client can have clear expectations on what your labor costs include
3.Due date :-
Many successful consultants recommend stating that payment is “due upon receipt.” In some industries, 30 days is more common. You’ll see the phrase “terms net 30” used in contracts, which means payment is due within 30 days. Regardless of your terms, make sure the timeframe for payment is spelled out very clearly (or you’ll have limited recourse later)
4.Interest or Penalties :-
Another way to motivate clients to pay on time is to include language that stipulates late fees and/or interest charges. A common way to phrase this is, “Interest will be charged on overdue invoices at a rate of twelve percent (12%) per annum, or the maximum permitted by law, whichever is less.” So if you charge 12% interest per annum, that’s an interest rate of 1% each month of the total due.
