Are you running a small business or working as a freelancer? Then nobody understands better than you the pain of not getting paid on time for product or services already delivered. Some clients might take weeks before your payment is credited to account.

Freelancers usually have to deal with many projects but mostly they all individual project and require to deal with a one-time client only for one-time job work. In such a view, waiting for a longer period of time for the payment can be frustrating especially when your own bills are piling up and need to know when the money is coming in.

The best possible way to avoid such a situation is by setting up payment terms and conditions before you start the project. The one thing that can ensure quick payment is by labeling your invoices with ‘Due on Receipt’. You might have seen such label on sample invoices or possibly if never heard of this invoicing term than let us walk you through the easy guide on ‘due on receipt’.

The ‘Due Upon Receipt’ method

What does ‘Due Upon Receipt’ mean?

The term ‘Due Upon Receipt’ itself comes outrightly and explains the meaning, i.e, that the payment is due as soon as the client receives the invoice.

Placing this invoicing term itself clearly indicates your clients to be ready and make payment as soon as possible. In this age of online payment gateway or digital payment options available, this could also sometimes happen on the same day. However, usually as per the term, clients have to pay you by the next business day.

When to use or mark your invoices with ‘Due Upon Receipt’?

It sounds like a great move and starts putting ‘due on receipt’ on every invoice just to get you paid fast enough. But this invoicing term is actually not to be used for every job. It works best if you have a new client and requires only one-time job work done from you such as a website or mobile app content, designing logo, etc…or if you can sense that the client is not interested in repeat business.

There is no one going to stop you from putting this term on every invoice but then again it doesn’t seem feasible to let know and remind about your payment terms again and again to your regular clients.

Advantages of using the term ‘Due Upon Receipt’:

The obvious benefit of using due on the receipt is the assurance of getting paid fast for the work done. You can expect the payment to be in your bank account by the next business day and in certain situations, on the same day also if the client’s making online payment for the services.

The other advantage of using this invoicing term is that with regular work and invoices lined-up for the payments, you might forget about an invoice or two. Due upon receipt method ensure that you do not bear the brunt of losing the money and prevents few hiccups in your accounting books. This happens because some clients could take up to weeks and in worst case months to pay you, which surges the gap tending you to forget about the invoice you sent in the first place. This happens frequently with the freelancers as they are constantly involved in the current task or acquiring a new one.

Disadvantages of using the term ‘Due Upon Receipt’:

The drawback of using due on receipt method is that first of all there is no assurance that the client will make the payment on the next business day. This is because, at times, clients themselves are waiting for their own payment and hence are incapable of paying you for the services. Moreover, there are clients who would only want to pay yours after checking the work and usually with certain corrections as per their need. Of course, you need to submit the work as per your client’s specifications but this will also delay for you in receiving your payment.

Summary:

To conclude due on receipt, it is an invoice term used to get paid fast so that your own work, the business do not get affected with cash flow. There are few downsides to it, but mostly it benefits freelancers and business owners who need the money right away.

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Recurring Payments Vs Recurring Invoices

Recurring Payments	Recurring Invoices
Recurring payments charge the customer’s credit card account or debit card account on a predetermined schedule for the same amount as preapproved.	Send an invoice to your customer on a regular basis. The client receives the invoice but, money is not paid unless the customer approves.
A business that takes prepayment of money and sells a monthly subscription service and product. Subscription services are excellent examples of this.	A company that provides fixed services with billable hours is an excellent choice for recurring billing. For example law firms and consulting agencies.

Pros and Cons of Recurring Invoices

Pros	Cons
You eliminate the possibility of human error by automating the billing process. If you use a recurring invoice, you will not be concerned about forgetting to charge your customers for the things they ordered.	You must exercise caution while recurring billing to prevent issuing inaccurate pricing. This also holds for price changes that could take place right once an invoice is created.
If you provide your customers with the option for recurring billing, they are more likely to buy products regularly.	It could be difficult to cope with recurring invoices if a transaction fails for any reason.

Net 45	Invoice is due in full within 45 days with no early payment discount offered
2/10 net 45 terms	2% discount if you pay within 10 days; otherwise full payment of the invoice is due in 45 days
1/15 net 45 terms	1% discount if you pay within 15 days; otherwise full payment of the invoice is due in 45 days
1/10 net 45 terms	1% discount if you pay within 10 days; otherwise full payment of the invoice is due in 45 days
1/7 net 45 terms	1% discount if you pay within 7 days; otherwise full payment of the invoice is due in 45 days

Category	Net Method vs. Gross Method	Explanation
Calculation Approach	- Applies tax credits first; reduces taxable income before computing tax liability.	- Doesn't apply tax credits; computes taxable income without considering tax credits.
Tax Credit Eligibility	- Allows for greater likelihood of tax credit eligibility due to reduced taxable income.	- Limits tax credit eligibility because taxable income hasn't been reduced yet.
Itemized Deduction Requirement	- Lowers threshold requirement for itemizing deductions due to decreased taxable income.	- Raises threshold requirement for itemizing deductions due to higher taxable income.
Advantages	- Leads to lower taxable income and increases chances of meeting qualifications for other tax benefits.	- Results in higher taxable income compared to net method.
Disadvantages	- May miss opportunity to reduce tax burden if taxpayer doesn't itemize deductions or take advantage of tax credits.	- Increases taxable income and may result in higher overall tax bill.