Set payment terms

A contract’s payment terms section covers payment terms, late fees, and travel and expense reimbursement. Payment terms specify when payment is due and if there are any discounts for early payment. You may see things like net 45, net 60, 210, net 30, those mean full payment is due in 45 days, 60 days, or the client gets a 2% discount for paying within 10 days or they pay you the full net amount within 30 days. Payment terms are sometimes negotiable and some big companies have provisions for small businesses to get paid more quickly. Be sure to ask your client if that’s a program they offer. Late fees specify when fees begin if the client is late paying you. It also specifies how much the fees are and how they accrue. Note that many large customers will insist that they don’t pay late fees. Accept this provision at your own risk because some clients can take a very long time to pay you. Travel and expense reimbursement policies will usually be set by the client. You should expect to follow the same travel and expense guidelines their employees follow, but also recognize, these terms are sometimes negotiable. At thought LEADERS, we do training. We’ll have an instructor on the platform for up to eight hours a day. In our contracts we stipulate that when we’re traveling internationally, our instructors fly business class. The rationale is, I can’t put an instructor on a plane in economy class for a 12-hour flight half way across the world and then expect them to do a great job on the platform for the client teaching a full day class. Our clients generally accept this term. While some pricing and payment term elements are negotiable, understand when it’s worth negotiating and when it’s not. I have one client that moved from net 60 to net 90, they wanted to hang onto my money for an extra 30 days. Getting an exception to that new policy would’ve required the CFO to sign off on it. This is a Fortune 50 company, they’re massive. I wasn’t going to go to the CFO and ask him to sign off on this, but it did give me a negotiating point. I told the client if you’re going to hang onto my money for an extra 30 days, well, this discount I used to give you on our rates, I’m not going to offer it anymore. It was an effective approach for something that I had no choice in. Be sure you understand every element of the payment terms section. Some companies will stretch out paying you for as long as possible. A clause like that can cause big cash flow issues for your firm if you don’t understand how these provisions really work.