What are the payment terms on an invoice?
The payment terms on an invoice refer to the terms that determine when and how payment for a service or product must take place.
Before freelancers and self-employed people, it is an essential part of the invoicing process, as it establishes the framework for when the money should be in the account.
Regardless of whether you have a regular partner or are working with a new customer, it is important to clarify what the payment deadline is and what the consequences of late payment may be.
Payment terms contribute to a clear alignment of expectations between you and your customers, and reduce the risk of misunderstandings.
Why are payment terms important?
Payment terms play a crucial role in your liquidity and financial stability.
When you clearly state payment terms on your invoices, you ensure that both parties have a clear understanding of when payment is due.
This is especially important for freelancers and self-employed people who often work on a project basis and may rely on timely payments to maintain a healthy cash flow.
Lack of clear payment terms can lead to late payments, unpredictable income and, in the worst case, you being left without payment for your work.
By setting clear and reasonable payment terms, you can reduce the risk of financial problems and ensure a stable income.
You can also download our template for your freelance contract. here, which includes the most important things when you need to make an agreement with a customer.
An easier freelance life with Factofly
Be a freelancer without the hassle with Factofly invoice service. We take care of the administrative work while you concentrate on delivering your best.
The most common payment terms
When it comes to payment terms, there are a number of standard terms that are often used by freelancers to invoicing without CVR. or with CVR no.
The most common are:
- Net 8 days: The customer must pay the invoice within 8 days of receipt.
- Net 14 days: The customer has 14 days to pay the invoice, which gives a little more time to secure payment.
- Net 30 days: One of the most commonly used payment terms, where the customer has 30 days to pay the invoice. This term is often standard in many industries, including municipalities.
- Due date: A specific date is specified as the payment deadline, which is useful in cases where a fixed date is more appropriate than a specific period.
- Cash on delivery: Payment must be made immediately upon delivery of services or products. This is often used for smaller tasks or sales of goods.
The choice of payment terms often depends on your relationship with the customer and your own needs. It is important to choose a term that both fits your business model and is realistic for the customer to comply with.
How do you choose the right payment terms?
Choosing the right payment terms is a balancing act between your needs as a freelancer and your clients' expectations and capabilities.
Here are some considerations you should make:
- Customer profile: If you are working with a large company, it is often standard to have longer payment terms, such as “Net 30 days”. However, smaller companies or individuals may find it easier to pay faster, and “Net 8 days” or “Net 14 days” may be more appropriate.
- Project scope: For larger projects where payment covers a longer period, it may be appropriate to have longer payment deadlines, possibly combined with milestone payments. For smaller projects or individual tasks, shorter deadlines may be more practical.
- Your own liquidity needs: Consider how quickly you need the money. Sometimes, it may be necessary to require faster payments. Alternatively, you can offer a discount for prompt payment as a way to secure liquidity.
- Industry practice: It can also be helpful to research what is common in your industry. Following industry standards can help avoid negotiations and conflicts over payment terms.
See also our invoice template.
How to specify payment terms on an invoice
When you create an invoice or electronic invoice, it is important to clearly state the payment terms to avoid misunderstandings and delays.
Here is a step-by-step guide on how to correctly specify payment terms on your invoice:
- Clearly state the payment terms: The payment terms should be easy to find on the invoice, preferably near the invoice amount or at the end of the invoice, where other important details such as payment information are also found.
- Use precise and understandable wording: Make sure your payment terms are clearly stated. For example: “Payment term: 14 days from invoice date” or “Net 30 days.” Avoid ambiguous terms that can create confusion.
- Include consequences for late payment: If you have rules for interest or fees for late payment, this must also be clearly stated on the invoice. For example, “For late payment, interest of 1.5% per month will be charged.”
- Specify payment methods: Specify which payment methods you accept, such as bank transfer, MobilePay, or PayPal. This makes it easier for the customer to complete the payment correctly and quickly.
At Factofly, we can also take care of yours invoicing, and you therefore don't have to worry about payment terms, reminders or collecting payment from your customers. We take care of that so you don't have to worry about it.
What happens if the payment terms are not met?
Even with clearly defined payment terms, it can happen that a customer misses the deadline. When that happens, it is important to act quickly and professionally.
Here are some steps you can take:
- First, send a friendly reminder: Often, late payments are simply due to forgetfulness. A polite reminder via email can often be enough to get the payment done. Make sure to reattach your invoice.
- Send a reminder letter: If the first reminder does not result in payment, the next step is to send a reminder letter. Here you can clarify that payment is overdue and reiterate any reminder fees or interest that you want to impose if payment is not made by a new deadline.
- Imposing interest and fees: If your payment terms include interest or late payment fees, you can start charging these. However, it's important to make sure these are clearly stated on the original invoice.
- Consider legal action: If the customer still does not pay, you may want to consider taking legal action. This may involve sending the matter to debt collection or even considering legal action. However, this should be a last resort as it can be both time-consuming and expensive.
- Prevent future problems: Consider reevaluating your payment terms and relationship with the client. In some cases, it may be necessary to require advance payment or shorten the payment period for future projects.
See our free quote template
Our template gives you all the relevant information that is important to include in a quote. This way you can be sure that you are not missing anything in your quote.
Tips for ensuring faster payments
Ensuring fast payments is crucial, especially for freelancers and self-employed, who may not have a fixed income.
Here are some tips that can help you get your payments faster:
- Be consistent with billing: Make sure to send invoices immediately after the work is completed. The sooner the invoice is sent, the faster the payment can be made. At Factofly, we can handle the invoicing for you, so you don't have to worry about whether your customers get paid.
- Specify clear and short payment deadlines: Long payment deadlines can lead to delays. Consider setting the deadline to “Net 8 days” or “Net 14 days” instead of 30 days, unless industry standards require longer deadlines.
- Get prepayment or deposit: For larger projects, it can be a good idea to require a percentage of the amount to be paid upfront. This ensures that you get some payment before the work begins and shows the client that you are serious.
- Invoicing with Factofly: If you use our invoice service at Factofly, We provide automatic reminders that are sent to the customer when a payment deadline is approaching or has been exceeded.
- Be clear about the consequences of late payment: Make sure your customers know the consequences of late payment, such as late fees and interest. This can encourage timely payment.
Legal aspects of payment terms
When drafting payment terms on your invoices, it is important to be aware of the legal aspects that can affect both you and your customers.
Here are some key legal considerations:
- Statutory payment deadlines: In Denmark, the standard payment period is 30 days, unless otherwise agreed between the parties. It is therefore important to state a specific payment period on the invoice if it is to deviate from the standard.
- Timely delivery of invoice: According to Danish law, the invoice must be issued as soon as possible after the delivery of a good or service. Delays in invoicing may affect your right to demand payment and impose interest.
- Interest and reminder fees: If a customer does not pay within the payment deadline, you have the right to charge interest and possibly a reminder fee. The statutory interest rate for late payment in Denmark is Danmarks Nationalbank's lending rate plus 8 percentage points. You can also charge a reminder fee of up to DKK 100 per reminder letter.
- Inclusion of necessary information: An invoice must contain specific information to be valid, including invoice number, date, description of services or goods, and the total amount including VAT. Payment terms should also be included here.
- Loss protection: If you are concerned that a customer will not pay, you can consider using a credit rating or requiring prepayment. Alternatively, you can insure yourself against losses using debtor insurance.
By complying with these legal requirements, you can ensure that your invoices are valid and protect your right to receive payment, even in the event of disputes or delays.
How Factofly can help you manage payment terms
With Factofly We understand how important it is for freelancers and self-employed people to get control of their payment terms so that you can focus on what you do best – your work.
We offer a number of services that can help you manage your payment terms and ensure you get paid on time.
With Factofly by your side, you can ensure that your payment terms are met, so you can get the payment you've worked for - without hassle.
You're welcome!
FAQs – Frequently asked questions
What are the payment terms on an invoice?
The payment terms on an invoice refer to the terms that determine when and how payment for a service or product must take place.
Before freelancers and self-employed people, it is an essential part of the invoicing process, as it establishes the framework for when the money should be in the account.
Regardless of whether you have a regular partner or are working with a new customer, it is important to clarify what the payment deadline is and what the consequences of late payment may be.
Payment terms contribute to a clear alignment of expectations between you and your customers, and reduce the risk of misunderstandings.
Why are payment terms important?
Payment terms play a crucial role in your liquidity and financial stability.
When you clearly state payment terms on your invoices, you ensure that both parties have a clear understanding of when payment is due.
This is especially important for freelancers and self-employed people who often work on a project basis and may rely on timely payments to maintain a healthy cash flow.
Lack of clear payment terms can lead to late payments, unpredictable income and, in the worst case, you being left without payment for your work.
By setting clear and reasonable payment terms, you can reduce the risk of financial problems and ensure a stable income.
You can also download our template for your freelance contract. here, which includes the most important things when you need to make an agreement with a customer.
An easier freelance life with Factofly
Be a freelancer without the hassle with Factofly invoice service. We take care of the administrative work while you concentrate on delivering your best.
The most common payment terms
When it comes to payment terms, there are a number of standard terms that are often used by freelancers to invoicing without CVR. or with CVR no.
The most common are:
- Net 8 days: The customer must pay the invoice within 8 days of receipt.
- Net 14 days: The customer has 14 days to pay the invoice, which gives a little more time to secure payment.
- Net 30 days: One of the most commonly used payment terms, where the customer has 30 days to pay the invoice. This term is often standard in many industries, including municipalities.
- Due date: A specific date is specified as the payment deadline, which is useful in cases where a fixed date is more appropriate than a specific period.
- Cash on delivery: Payment must be made immediately upon delivery of services or products. This is often used for smaller tasks or sales of goods.
The choice of payment terms often depends on your relationship with the customer and your own needs. It is important to choose a term that both fits your business model and is realistic for the customer to comply with.
How do you choose the right payment terms?
Choosing the right payment terms is a balancing act between your needs as a freelancer and your clients' expectations and capabilities.
Here are some considerations you should make:
- Customer profile: If you are working with a large company, it is often standard to have longer payment terms, such as “Net 30 days”. However, smaller companies or individuals may find it easier to pay faster, and “Net 8 days” or “Net 14 days” may be more appropriate.
- Project scope: For larger projects where payment covers a longer period, it may be appropriate to have longer payment deadlines, possibly combined with milestone payments. For smaller projects or individual tasks, shorter deadlines may be more practical.
- Your own liquidity needs: Consider how quickly you need the money. Sometimes, it may be necessary to require faster payments. Alternatively, you can offer a discount for prompt payment as a way to secure liquidity.
- Industry practice: It can also be helpful to research what is common in your industry. Following industry standards can help avoid negotiations and conflicts over payment terms.
See also our invoice template.
How to specify payment terms on an invoice
When you create an invoice or electronic invoice, it is important to clearly state the payment terms to avoid misunderstandings and delays.
Here is a step-by-step guide on how to correctly specify payment terms on your invoice:
- Clearly state the payment terms: The payment terms should be easy to find on the invoice, preferably near the invoice amount or at the end of the invoice, where other important details such as payment information are also found.
- Use precise and understandable wording: Make sure your payment terms are clearly stated. For example: “Payment term: 14 days from invoice date” or “Net 30 days.” Avoid ambiguous terms that can create confusion.
- Include consequences for late payment: If you have rules for interest or fees for late payment, this must also be clearly stated on the invoice. For example, “For late payment, interest of 1.5% per month will be charged.”
- Specify payment methods: Specify which payment methods you accept, such as bank transfer, MobilePay, or PayPal. This makes it easier for the customer to complete the payment correctly and quickly.
At Factofly, we can also take care of yours invoicing, and you therefore don't have to worry about payment terms, reminders or collecting payment from your customers. We take care of that so you don't have to worry about it.
What happens if the payment terms are not met?
Even with clearly defined payment terms, it can happen that a customer misses the deadline. When that happens, it is important to act quickly and professionally.
Here are some steps you can take:
- First, send a friendly reminder: Often, late payments are simply due to forgetfulness. A polite reminder via email can often be enough to get the payment done. Make sure to reattach your invoice.
- Send a reminder letter: If the first reminder does not result in payment, the next step is to send a reminder letter. Here you can clarify that payment is overdue and reiterate any reminder fees or interest that you want to impose if payment is not made by a new deadline.
- Imposing interest and fees: If your payment terms include interest or late payment fees, you can start charging these. However, it's important to make sure these are clearly stated on the original invoice.
- Consider legal action: If the customer still does not pay, you may want to consider taking legal action. This may involve sending the matter to debt collection or even considering legal action. However, this should be a last resort as it can be both time-consuming and expensive.
- Prevent future problems: Consider reevaluating your payment terms and relationship with the client. In some cases, it may be necessary to require advance payment or shorten the payment period for future projects.
See our free quote template
Our template gives you all the relevant information that is important to include in a quote. This way you can be sure that you are not missing anything in your quote.
Tips for ensuring faster payments
Ensuring fast payments is crucial, especially for freelancers and self-employed, who may not have a fixed income.
Here are some tips that can help you get your payments faster:
- Be consistent with billing: Make sure to send invoices immediately after the work is completed. The sooner the invoice is sent, the faster the payment can be made. At Factofly, we can handle the invoicing for you, so you don't have to worry about whether your customers get paid.
- Specify clear and short payment deadlines: Long payment deadlines can lead to delays. Consider setting the deadline to “Net 8 days” or “Net 14 days” instead of 30 days, unless industry standards require longer deadlines.
- Get prepayment or deposit: For larger projects, it can be a good idea to require a percentage of the amount to be paid upfront. This ensures that you get some payment before the work begins and shows the client that you are serious.
- Invoicing with Factofly: If you use our invoice service at Factofly, We provide automatic reminders that are sent to the customer when a payment deadline is approaching or has been exceeded.
- Be clear about the consequences of late payment: Make sure your customers know the consequences of late payment, such as late fees and interest. This can encourage timely payment.
Legal aspects of payment terms
When drafting payment terms on your invoices, it is important to be aware of the legal aspects that can affect both you and your customers.
Here are some key legal considerations:
- Statutory payment deadlines: In Denmark, the standard payment period is 30 days, unless otherwise agreed between the parties. It is therefore important to state a specific payment period on the invoice if it is to deviate from the standard.
- Timely delivery of invoice: According to Danish law, the invoice must be issued as soon as possible after the delivery of a good or service. Delays in invoicing may affect your right to demand payment and impose interest.
- Interest and reminder fees: If a customer does not pay within the payment deadline, you have the right to charge interest and possibly a reminder fee. The statutory interest rate for late payment in Denmark is Danmarks Nationalbank's lending rate plus 8 percentage points. You can also charge a reminder fee of up to DKK 100 per reminder letter.
- Inclusion of necessary information: An invoice must contain specific information to be valid, including invoice number, date, description of services or goods, and the total amount including VAT. Payment terms should also be included here.
- Loss protection: If you are concerned that a customer will not pay, you can consider using a credit rating or requiring prepayment. Alternatively, you can insure yourself against losses using debtor insurance.
By complying with these legal requirements, you can ensure that your invoices are valid and protect your right to receive payment, even in the event of disputes or delays.
How Factofly can help you manage payment terms
With Factofly We understand how important it is for freelancers and self-employed people to get control of their payment terms so that you can focus on what you do best – your work.
We offer a number of services that can help you manage your payment terms and ensure you get paid on time.
With Factofly by your side, you can ensure that your payment terms are met, so you can get the payment you've worked for - without hassle.
You're welcome!
