Payment terms come with a lot of handy benefits for your accounts receivable process. Why are payment terms important for your business? Once the supplies have been purchased, the invoice is reduced by the cost of materials. This is common when the supplies are particularly expensive or the client can get a better deal by making the purchase themselves. The client is expected to pay for the cost of these supplies upfront, either through you or directly to the supplier. For example, if you sent an invoice on May 3rd, it would be due on June 3rd.Ī contra payment term is specific to jobs that require materials or supplies. MFI means that payment is due a month after the invoice was received. They’re usually around 50%, but some service providers ask for more or less depending on factors like the value of the job and cost of materials. Percentage upfront means that you require a deposit before any work begins.
READ MORE: Recurring billing definition, types, and how to get started Or, you could bill after specific project milestones. They need to be agreed on by you and your client in advance and are typically used for big or ongoing projects.įor example, if you estimate a project will take three months to complete, you could request payment each month for the work that has been completed. Stage payments are made at predetermined stages during large projects. Most home service providers don’t use longer payment terms, like net 60 or net 90 unless they service large commercial clients.ĮOM payments are due at the end of the month in which they were sent.įor example, regardless of whether an invoice was sent on November 2nd or November 21st, it would be due at the end of the month using an EOM payment term.ĬOD invoices mean that payment is due as soon as a job has been completed.įor example, if you are a landscaper and you use COD invoicing, a client would owe you for mowing their lawn immediately after you finished. After the date passes, interest charges and late fees may be applicable. Net 7 means a week later, net 14 means two weeks, and net 30 means a month. Net payments refer to the number of days a client has to pay an invoice after it has been received. READ MORE: How to offer financing to customers as a small business
They’re also helpful during jobs that have unexpected delays that halt or suspend the work since you won’t be left waiting for payment on a job that relies on a client to move forward. Many home service providers request payment in advance so that they can avoid issues like late and nonpayments in the future. PIA and CIA refer to invoices that require payment of the total invoice amount before a job begins. PIA (Payment in Advance)/CIA (Cash in Advance)
Here are some of the most common payment terms home service providers use when it comes to billing cycles and due dates. The due dates you choose for your invoices affect your billing cycle and cash flow. And while it may seem as simple as including payment dates in your bills, there’s actually more to it. Due dates are one of the most important payment terms for you to include in your invoices.