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How to Navigate Net Payment Terms on Your Freelance Projects

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As a new freelancer, you might think that you’ll get paid for your work as soon as it’s complete. Most of the time, your payment structure will be something like 50% upfront and 50% at the end, or a 50/25/25 split.

What you may not know is that when you’re hired by an established company (usually a company large enough to have an accounting team or department), they may use a financial technique called net payment terms.

Net payment terms specify how long your client has to pay you after your invoice has been submitted.

For example, a client with “Net-30” payment terms has up to 30 days to pay you after you submit an invoice. That means you may not see that money hit your account until a full month after you asked for payment. 🤯

Companies use a wide variety of net payment terms ranging from Net-10 to Net-90:

  • Net-10 (payment must be made within 10 calendar days)
  • Net-15 (payment must be made within 15 calendar days)
  • Net-30 (payment must be made within 30 calendar days)
  • Net-45 (payment must be made within 45 calendar days)
  • Net-60 (payment must be made within 60 calendar days)
  • Net-90 (payment must be made within 90 calendar days)

In my experience, the larger the company, the longer you may have to wait to get paid. The most common net payment terms seem to be Net-30, Net-60, and Net-90, but the standard across most companies is Net-30.

As a freelancer, you’ll always want to use “Due on Receipt” for your invoices unless you’ve discussed net payment terms with the client. When you’re working for a startup or small business, you’ll probably get paid right away without any net payment terms (usually within a few business days of submitting your invoice).

Medium-size businesses usually have Net-15 or Net-30 payment terms and large international companies like Marriott International or Bloomberg may have Net-45, Net-60, or even Net-90 payment terms (depending on their vendor).

Why Do Companies Use Net Payment Terms?

You might be wondering why anyone would use net payment terms in the first place. But from the clients perspective, having 30 days to pay an invoice is quite beneficial. This can help the client’s business manage cashflow. Keeping their cash in the bank for a longer period of time gives them financial leverage.

Net payment terms work well for larger businesses that have multiple clients. The reason why this is important is that with a rotating cycle of clients, they have rotating incoming payments. This allows them adequate cash flow to meet their financial obligations consistently.

But net payment terms are bad for freelancers and offer no benefit. Freelancers usually have very few clients and much less cash to work with, so net payment terms are often an inconvenient burden.

Dealing with Net Payments as a Freelancer

Now, if you’re new to freelancing or you’re just hearing about net payment terms, you may be feeling discouraged. Freelancers are service workers and need to get paid when the project is complete — we don’t have the luxury of waiting a month to get paid.

The same is true for most tradespeople. Plumbers, electricians, and home renovation companies all expect to get paid when the job is complete. That’s because you are the client and you don’t have net payment terms.

Unfortunately for freelancers, net payment terms are standard practice at most established companies large enough to have an accounting department. But over the years I’ve found a few clever ways to handle them strategically and professionally.

1. Ask Your Client About Their Payment Policy

It’s your responsibility as a freelancer to ask your potential clients about net payment terms. In my experience, they usually won’t tell you unless you ask. This is something you’ll either find in their contract terms or be surprised by when you have to wait a lot longer than you expected to get paid.

As you can imagine, that can disrupt your cash flow and put you in an uncomfortable financial position. That can quickly lead to resentment or even hostile situations between you and your client.

Make sure you know about any net payment terms before accepting the project. Read the client’s contract if they ask you to sign one. Finally, remember that it’s perfectly reasonable to ask any potential client this question: “are there any net payment terms I should be aware of?”

2. Net Payment Terms Are Negotiable

While most clients will tell you there’s nothing they can do about their companies payment policy, any part of a business deal is negotiable. This is where it really pays to treat yourself as if you’re operating as a business (because you are!)

If the client says they have Net-30 payment terms and you can’t accept that, be honest with them. Ask if they can accommodate Net-15 payment terms or at least expedite the invoice when they send it to their AP (accounts payable) department.

Remember, Net-30 means the client has up to 30 days to pay your invoice, not that it will take 30 days to pay it.

Note: You may have to be quite firm on this point from the beginning if you want the client to budge. Be professional, but insist they speak to their superiors about your concerns.

3. Ask for Upfront Payment in Exchange for a Discount

This is one of my favorite sales techniques as a freelancer. I offer a 10% discount on the total project fee if the client is willing to pay upfront. So, let’s say I send a proposal to a client for a $20,000 project. A 10% discount would be $2,000 off. So the client has the option to pay $18,000 upfront.

You might be thinking, “who would ever do that?”, but I’ve been shocked at how many first-time clients choose this option (and at even higher price points). It’s a unique offer and it saves them real money while completely eliminating my risk. If you’ve done a good job establishing trust up to this point, it’s a great offer for the client.

Getting paid is by far the riskiest part of freelancing. I’d rather get paid $18,000 today than *hopefully* get paid $20,000 two or three months from now *if* everything goes smoothly.

Offering a discount like this also helps me understand how the client thinks. It doesn’t matter if they choose that option or not — everyone has a reaction to it. Some client’s ears perk up at the sound of saving cash. Other client’s scoff at the idea because they’re absorbing all the risk. Either way, it’s an easy method of determining how much the client is going to trust you.

If nothing else, it helps the client feel like you’ve extended them multiple options for the project when you’ve really only offered them multiple payment options. That’s good because they will be more likely to compare your options than compare you to another freelancer entirely.

4. Submit Your Invoices Early

If there’s no way to avoid your client’s net payment terms, tell them you’d like to submit your invoices a little early to offset the delay. When I worked for Marriott International, they had Net-45 payment terms. Bloomberg and Facebook had Net-30 payment terms. That means I had to wait up to 45 days to get paid after submitting my invoice.

To help offset the delay, I simply asked the client if I could submit my invoices two weeks early. They understood my concerns as a freelancer and that the policy they were enforcing was company policy, not their personal policy. So they allowed me to submit my invoices early to help expedite the payments.

5. Always Get a Down Payment

No matter what, always collect a down payment on freelance projects. The standard for most freelancers seems to be 50% of the total project fee.

Some clients with net payment terms might tell you that they aren’t “allowed” to provide a down payment and that all invoices are subject to their net payment terms. However, you should never start work without a down payment.

In this case, I’d tell the client that we have to delay the start date unless they can accommodate an earlier payment. Starting work without a down payment isn’t acceptable to my business. If the start date is far enough in the future, I’d just submit the invoice right away and the client would be obligated to pay it before the project start date.

When in doubt, your main goal should be to get some kind of financial commitment before starting work. No matter what the contract might say, the client can too easily back out of the project without warning unless you’ve already collected a down payment.

On one recent project, my 50% down payment was supposed to be $7,500. The client couldn’t pay that upfront due to their Net-30 payment policy. However, they agreed to put $2,500 down on a credit card and pay the remaining $5,000 on or before the project start date, which was just under 30 days away.

Rather than losing the project, I was able to find a compromise with the client and move forward. That same client paid their final two invoices within 7 days despite having a Net-30 payment policy!

6. Manage Your Cash Flow

The more successful you become as a freelancer, the more financially stable you should become as well. When you’re financially stable, waiting 30 days for an invoice to be paid becomes less of an issue. You should have more than enough money in the bank to operate comfortably for a month.

As a freelancer, it’s important to manage your cashflow in such a way that provides you financial “runway” for unexpected situations. That could mean net payment terms or simply having a gap in your project calendar.

In simple terms, save as much money as you can for unexpected situations. You’ll avoid the stereotypical “rollercoaster” and “feast and famine” cycles commonly associated with freelancing.

Here’s another article that will help you understand how to do that:

How to Structure Your Bank Accounts for Massive Financial Success As a freelancer, getting paid is at the top of the priority list. But what do you do with the money once you have it? It's…

Conclusion

At some point in your freelancing career, you’ll likely encounter net payment terms on a client project. Remember, net payment terms are standard for most companies that have an accounting department. Don’t act surprised

When that happens, remember these 6 tips and be prepared to offer reasonable alternatives that help you get paid as soon as possible.

About Matt Olpinski
Matt runs his own web design and development company Matthew’s Design Co. and teaches thousands of freelancers how to succeed through his personal blog, newsletter, and community for freelancers — The Freelance Institute.
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