How Freelancers Can Get the Most Out of Net Terms

As a freelancer, you might not have much control over when your clients pay you. Try using net terms to prompt action.


One of the trickiest parts about being a freelancer is getting used to being paid at unpredictable intervals. If you’re just starting out, it’s only a matter of time before you realize that there’s not much rhyme or reason to when the companies you work with decide to cut you a check.

Just when you think you’ve figured a client’s payment schedule out, they might throw you a curveball. Maybe their Accounts Payable person is on vacation, maybe the company has encountered a cash flow issue, or maybe they’ve moved to a new payment system. Perhaps they just forgot about your invoice!

Whatever the reason may be, you don’t always get paid when you think you will. And if you’re like a lot of freelancers who struggle to cover emergency expenses, that’s a big deal.

Success as a freelancer requires two very different skill sets. You have to be good at your craft—a writer, a designer, a programmer, a project manager, a salesperson—whatever your specialty is. You also have to be good at donning a hybrid accountant-and-financial-planner hat, too.

Not only does that require you to figure out what kind of rates to charge, but you also need to figure out what payment terms to offer clients, and how you’re going to follow up when checks are late.

mastering cash flow

In an ideal world, you’d send an invoice to a client and get paid immediately. Unfortunately, rarely if ever does it work out like that. In fact, according to Fundbox research 64% of small businesses (which—as a freelancer—is exactly what you are) regularly wait on late payments.

As a freelancer, you’re pretty much bound to your clients’ payment schedules—particularly when you’re just establishing yourself. Still, there are some tricks you can employ to increase the chances you get paid promptly. For example, if you’re simply sending your clients bills and hoping they settle their accounts quickly, you might want to consider adding net terms to your invoices.

What Are Net Terms?

When you go to a restaurant, you are served food and drink without having to reach into your wallet to pay for everything that’s put in front of you the moment it’s served. Still, you’re expected to pay your bill before you leave.

Your utility provider, on the other hand, gives you access to their services every day, billing you at the end of the month and giving you at least a few weeks before payment is due on services you’ve already consumed.

This approach to billing is called offering net terms.

What Do Net Terms Look Like?

Let’s say you get an invoice that says 1/10 n/30. It might look like a typo, but it’s not.

The company that sends you the invoice expects you to pay your full bill within 30 days. And if you pay within 10 days, you’ll get a 1% discount.

On the flip side, companies that offer early payment discounts often tack on late payment penalties that start accruing once you miss the due date.

Continuing the above example, you might incur a 6% interest fee each day after Day 30 until your account is paid. Pay on Day 40 and you’ll owe $3,004.93 on a $3,000 invoice.

While your health insurance provider might not offer you a discount if you pay early, they usually give you a few weeks to settle your account, which means they’re giving you net terms.

How to Use Net Terms to Your Advantage for Invoicing

As a freelancer, you might not have much control over when your clients pay you. If a company settles their AP on the last day of each month, odds are you’re bound to their mercy if you want to work with them.

Still, using net terms can prompt action. Research by FreshBooks indicates that using exact terms like “21 days” on invoices seems to get clients thinking in the right direction because it conveys a specific timeframe—whereas terminology like “n/30” might be hard for some of your clients to decipher.

If you’re just sending clients an invoice with no timetable on it, why should you expect them to pay on any predictable schedule? There’s no harm in adding payment terms to your invoices. It’s how the business world runs, after all.



Once you’ve decided to throw net terms onto your invoices, it’s time to figure out whether to charge clients interest on late payments. Some people will tell you that you should, others will tell you not to. Only you know what’s best for your business.

If you do decide to charge late payment penalties, you should probably also offer early payment discounts. Would you pay your phone bill sooner if your provider gave you 2/10 n/30 terms?

Of course, you might opt not to penalize late payments and to discount early payments. That’ll probably get you paid faster, at least by some accounts.

No matter what you do, though, it’s only a matter of time before you run into the all-too-common late payment problem. Here are some tips from Fundbox for tracking down payments when you need to:

  • Send reminders to notify clients when payments are coming due
  • Once due dates have passed, follow up right away
  • Stay calm; sometimes payments are late because people are on vacation, someone forgot to send a check, or there’s been some other sort of misunderstanding
  • Keep following up via friendly emails
  • If that’s not working, you might have to pick up the phone
  • Be patient because your client might have cash flow problems of their own

Keep in mind that, if you have a good working relationship with your clients and have established consistent payment history, odds are you will eventually get paid on every invoice you send out.

late paying clients

In some cases, it just might take a little bit longer than you’d like.

There are exceptions to every rule. You may want to play it safe by not extending too much credit to a new client. You can always be more flexible with them once they’ve demonstrated they’re a reliable check.

How to Use Net Terms to Your Advantage for Payments

If you’re like most freelance creatives, you probably don’t rely on too many vendors to do your job.

You just need a computer—and, if you work at home, a connection to the internet, which means you have to pay your internet service provider every month. Beyond that, you might use a few SaaS services. Depending on the scope of your operation, you might have a few other freelancers on your payroll, too. And, depending on your specific situation, you might have to pay your own health insurance.

Each of these vendors gives you net terms.

An easy way to extend your cash flow is by waiting until the last minute to pay your bills. Instead of paying an invoice when it appears in your mailbox, wait a few weeks to settle the account. Just make sure you pay by the due date—or ideally a day or two before, just to be safe—to avoid incurring late fees.

Bottom line: Freelancers like you can use net terms to accelerate payments (but not always!). On the flipside, consider holding off on paying your bills until they’re due to have a little bit more of a cash cushion.

Add it all up, and you worry less about money and have more time to focus on growing your business.



about the author

Content Strategist, Fundbox Irene is a writer, marketer, and content strategist with over a decade of experience working with entrepreneurs and mission-driven small businesses to bring stories to life and to create engaging brand experiences. Learn more about Fundbox.