Invoice Payment

Pros & Cons Of Using ‘Due Upon Receipt’ Method For Invoice Payment Terms

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, business does 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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