For freelancers and independent workers, getting paid on time is a common challenge.In a study done by The Independent Economy Council, it was found that 72% of independent workers face unpaid invoices, and 59% are owed $50,000 or more in late payments. While late payments are a huge issue, one strategy that you can employ to encourage prompt payments is to use early payment discounts like “1/10 net 30.” If you’re not familiar with this term or strategy, don’t worry. In this blog post, we’ll break down the payment term “1/10 net 30”, starting with its definition and how you can use it to ensure on-time payments. Let’s get started.
Table of Contents:
What is 1/10 net 30?
1/10 Net 30 is a cash discount term used in invoicing. It’s a professional way of telling the client that if the invoice is paid within 10 days, then they will be given a 1% discount on the total amount. However, if the payment is not made within this 10-day period, the full invoice amount is due within 30 days. This payment term is a way to encourage early payments and provide a benefit to the client for settling the invoice promptly.
Here’s the breakdown of 1/10 net 30:
- 1/10: As a freelancer, this means you’re offering the client a 1% discount on the total invoice amount if they make the payment within 10 days of receiving the invoice. It’s an incentive for clients to pay early and demonstrates your willingness to reward prompt payments.
- Net 30: If the client doesn’t take advantage of the early payment discount, they are expected to pay the full invoice amount within 30 days of receiving the invoice. This is the standard timeframe for the payment to be completed without any discount.
1/10 Net 30 Example:
Let’s say a freelance designer completes a project for a client, and the agreed-upon fee is $1,000 with a payment term of “1/10 Net 30.” This means the client has the option to take advantage of a 1% discount if they make the payment within 10 days. Here’s how it works:
- If the client pays within the first 10 days: They can apply a 1% discount to the total invoice amount. In this case, 1% of $1,000 is $10. So, the client can make an early payment of $990 ($1,000 – $10) within the 10-day period.
- If the client pays after the first 10 days but within 30 days: They are still obligated to pay the full invoice amount, which is $1,000, without any discount.
How to create an invoice with a 1/10 net 30 payment term?
You can use invoicing tools like CheckYa to create professional invoices with a 1/10 Net 30 payment term. Here’s a step-by-step process:
- Log in to CheckYa: Sign in to your CheckYa account and navigate to the invoices tab. If you don’t have an account already, you can sign up on CheckYa by using this link.
- Click “Create New Invoice”: Navigate to the dashboard and select “Create New Invoice” to initiate the invoicing process.
- Add Details: Fill in your company information, client details, and list of services provided.
- Set Payment Terms to -1/10 Net 30: In the “Terms” field, input “-1/10 Net 30” to establish a payment term where clients receive a 1% discount if paid within 10 days, with the full amount due within 30 days.
- Preview and Send: Review the details before sending the invoice directly to your client.
Benefits of offering early payment discounts:
Here are some of the benefits that early payment discounts can bring for both freelancers and their clients
Benefits for Freelancers:
- Improved Cash Flow: Early payments mean quicker access to funds, ensuring a steady and predictable income flow for freelancers.
- Peace of mind: Getting paid earlier gives the freelancer peace of mind by making it so the freelancer doesn’t have to think about when they’re going to get paid for the next 30 days.
- Positive Client Relationships: Offering incentives demonstrates professionalism and creates positive relationships with clients, potentially leading to repeat business and referrals.
- Reduced Late Payments: By encouraging prompt payments, freelancers can minimize the risk of late payments, reducing stress and financial disruptions.
- Competitive Edge: Freelancers offering early payment discounts may attract clients seeking efficient and proactive collaborations.
- Better Financial Planning: Predictable income from early payments allows freelancers to plan and allocate resources more effectively.
Benefits for Clients:
- Cost Savings: Clients enjoy cost savings through the offered discount, making services more budget-friendly.
- Positive Freelancer Relationships: Early payment discounts build positive relationships with freelancers, potentially leading to improved service.
- Efficient Transactions: Encouraging prompt payments streamlines financial transactions, creating a smoother and more efficient collaboration.
- Better Preference: Clients who consistently take advantage of early payment discounts may enjoy a preferred status with freelancers, potentially leading to additional perks or priority service.
Other early payment discounts:
Just like that 1/10 Net 30″ early payment discount term, there are several other payment terms that freelancers can consider implementing to incentivize prompt payments. Let’s look at some other common early payment discounts that you can consider using when invoicing your clients:
- 2/10 Net 30: Similar to “1/10 Net 30,” this term offers a 2% discount if the invoice is paid within 10 days, with the full amount due within 30 days. It provides a slightly higher incentive for early payment.
- 5/15 Net 30: For freelancers who want to offer a more substantial discount, “5/15 Net 30” provides a 5% discount for payments made within 15 days, with the full payment due within 30 days.
- 3/7 EOM: This term stands for a 3% discount for payments made within 7 days, with “EOM” indicating “End of Month.” It provides a shorter timeframe for early payment but can be beneficial for freelancers needing quicker access to funds.
Conclusion:
Now that you are aware of the payment terms like “1/10 Net 30” and others, use these terms to ensure prompt payments and build strong client relationships.
Software to create discount invoices:
CheckYa is an all-in-one tool for freelancers and independent workers to create professional invoices quickly. You can add an overall discount to your invoices in just a few clicks. You can also set up automatic payment reminders so your clients can pay instantly online.
