Shorter payment terms dramatically improve your cash flow as a freelancer
Compare Net 15, Net 30, and Net 45 payment terms to see how each affects when you actually get paid and your working capital needs.
Understanding payment terms
Net 15 means payment is due 15 days after the invoice date. Net 30 gives 30 days. Due on Receipt means immediate payment. Every day of delay requires you to cover expenses from savings or credit, increasing your cash flow stress and working capital needs.
Why payment terms matter for freelancers
Long payment terms force you to finance your client's operations with your own money. If you invoice $10k monthly on Net 45, you're essentially providing a $15k interest-free loan to your clients at all times. Shorter terms mean faster cash, lower stress, less runway needed.
Frequently asked questions
What payment terms should I request?
Start with Net 15 or Due on Receipt. Larger corporations will push for Net 30 as standard. Avoid Net 45 or Net 60 unless the project size or client reputation justifies it. The longer the terms, the more working capital you need.
How do I negotiate shorter payment terms?
State your terms upfront in contracts and proposals. Offer a small discount (1-2%) for immediate payment. Explain that you're a small business and faster payment helps you serve them better. Most clients will accept reasonable terms if asked confidently.
What if a client demands Net 60 or longer?
Consider it a red flag unless they're a large enterprise with reliable payment systems. Factor the delay into your pricing — essentially charge interest for financing their slow payment. Or require partial payment upfront (50%) with the balance on Net 30.
Can I charge late fees if clients don't pay on time?
Yes, if stated clearly in your contract or invoice terms. Typical late fees are 1.5-2% per month (18-24% annually). More importantly, stop work immediately when payments are late — don't do free work hoping they'll eventually pay.
Should I offer early payment discounts?
Maybe. A 2% discount for payment within 10 days can improve cash flow significantly. But only offer it if cash flow is truly constraining your business. Don't train clients to expect discounts — better to just set shorter terms as standard.