What are payment terms?
They’re the terms which dictate how and when a freelancer will get paid by the client. They include everything related to payment such as whether a deposit is being taken, payment method, when the client must pay by and what happens if the payment is late.
Who sets them?
Payment terms are usually set by the seller, or in this case the freelancer. It’s unusual for the buyer or customer to be the one that dictates payment terms. For example, when you pay for an item in a shop you pay by the shop’s accepted payment methods, such as cash or card. It would be unreasonable for the customer to dismiss those payment methods and insist on paying with Bitcoins.
How are they worked out?
Freelancers usually have standard ways of working which they’ll include in their payment terms. For example, lots of freelancers take an upfront deposit as security and will have a preferred payment method.
It’s essential that the buyer and seller sit down together and discuss the payment terms before work commences. Technically, any payment term that’s drawn up after work has commenced is not enforceable
The buyer can have a say in the payment terms that are drawn up, but at the end of the day it’s the freelancer who gets the final say. If the buyer does not agree to their payment terms they can refuse to work for them.
Can the buyer have their own terms?
The buyer can impose their own purchase terms, but they’re only enforceable if they’re agreed in writing by both parties before the work is done. Purchase terms could include that the buyer will only pay via a certain method or during a certain timeframe.
What if your purchase terms and payment terms conflict?
You could find yourself in an awkward situation if you don’t agree your terms beforehand. Imagine it: The freelancer expects payment within 14 days of the project completion, whereas the buyer’s purchase terms state they can pay up to 90 days after completion. This should never happen if both parties sit down and agree their terms before work commences.
In this situation, in the UK at least, freelancers are protected against this situation. UK law states that:
Unless you agree a payment date, the customer must pay you within 30 days of getting your invoice or the goods or service.
Which means if the buyer doesn’t pay up, the freelancer can issue a formal demand for payment, no matter what purchase terms the buyer has.
Your payment terms should be reasonable and take into consideration the needs of both parties. Freelancers just want to be paid as quickly as possible, but it’s unreasonable for them to demand instant payment as soon as the project is signed off. A more common payment timeframe is between 14 and 30 days.
If the buyer is implementing purchase terms, think of the impact a 90 day payment timeframe could have on your freelancer. If they have to wait that long for their money, it’s unlikely they’ll want to use you again.
Here’s a handy link to some commonly used payment terms and their meanings.