Question 1

What are the most common payment terms?

Accepted Answer

Net 30 (due within 30 days) is the standard for B2B services. Other common terms: Net 15, Net 60, Due on Receipt (immediate payment), 2/10 Net 30 (2% discount if paid within 10 days), and milestone-based. For freelancers and small businesses, a deposit + milestone structure is safer than Net 30 because it reduces the risk of non-payment on large projects.

Question 2

Should I require a deposit before starting work?

Accepted Answer

Yes — especially for new clients or projects over $5,000. A 25–50% deposit demonstrates client commitment, covers your initial costs, and reduces your financial exposure if the project falls apart. If a client refuses to pay any deposit, that's a red flag. Established corporate clients with Net 30 terms and strong credit history may be exceptions.

Question 3

What's a reasonable late payment penalty?

Accepted Answer

1–1.5% per month (12–18% annually) is standard and generally enforceable. Some contracts add a flat late fee ($25–$50 per overdue invoice) plus interest. Check your jurisdiction — some states cap interest rates on commercial debts. The penalty should be clearly stated in the contract; surprising a client with penalties they didn't agree to rarely ends well.

Question 4

When should I use milestone-based payments?

Accepted Answer

For any project longer than 4 weeks or valued over $5,000. Milestones align payment with progress, reduce risk for both parties, and create natural checkpoints. Define each milestone with a clear deliverable, an acceptance criteria, and a payment amount. Common structures: 3 milestones (start/midpoint/completion) or 4 milestones (25% each).

Question 5

What payment method should I specify in the contract?

Accepted Answer

Specify accepted methods explicitly. Bank transfer (ACH/wire) is standard for business payments. Credit cards work for smaller amounts but come with processing fees (2.5–3.5%). Avoid checks for large amounts — they can bounce. Include your payment details in invoices, not the contract itself (for security). International payments may require specifying currency and who covers transfer fees.

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