For freelancers and independent contractors, getting paid on time is an important aspect of running a successful business. Clearly defined payment terms specifying when and how invoices will be paid is crucial to maintaining a successful client relationship. To encourage fast payment, many freelancers offer “2/10 net 30” payment terms. In this blog post, we’ll break down what “2/10 net 30” means, exploring how it can benefit both freelancers and clients in the payment process and how you can include “2/10 net 30” in your invoices. Let’s begin.
Table of Contents:
What is a 2/10 net 30 payment term?
The “2/10 net 30″ payment term is a credit term commonly used in business transactions to specify the terms under which a client can avail an early payment discount.
Here’s the breakdown of the terms:
- 2/10: “2” means clients get a 2% discount if they pay the invoice early within 10 days. Freelancers can encourage on-time payments by offering a 2% discount for settling invoices before the deadline.
- Net 30: The “30” indicates clients have 30 days to pay the full invoice amount if they don’t take advantage of the early payment discount.
2/10 net 30 Example:
Imagine you’ve completed a writing project for a client, and the total fee for your services is $500. If you offer a “2/10 net 30” payment term, it would look like this:
- Total Amount Due: $500
- Early Payment Discount: 2%
- Discount Period: 10 days
- Net Payment Period: 30 days
Now, here’s the breakdown:
- Early Payment Option:
- If the client pays within the first 10 days, they can take advantage of a 2% discount.
- Calculated discount: 2% of $500 = $10
- Amount due with early payment discount: $500 – $10 = $490
- Standard Payment Option:
- If the client doesn’t opt for the early payment discount, the full amount of $500 is due within 30 days.
In summary, the client has the choice to pay the full $500 within 30 days or take advantage of a 2% discount by paying $490 within the initial 10 days.
Advantages of offering 2/10 net 30:
Advantages for Freelancers
- Offering a 2% discount encourages clients to pay early, this ensures freelancers receive steady cash flow and clients save on costs.
- Early payments create a consistent income stream, helping freelancers plan and manage their finances effectively.
- Predictable cash flow allows for better budgeting and reduces the impact of late payments.
- Timely payments and quality work build trust and reliability, ensuring long-term collaborations and potential referrals.
Advantages for Clients
- Clients enjoy a 2% discount for early payments, providing a cost-saving incentive and benefiting both parties.
- Clients benefit from reliable partnerships, ensuring smooth collaborations and potentially leading to future projects.
- Knowing payment timelines allows clients to budget efficiently, contributing to a well-managed financial plan.
You should carefully weigh the decision to propose or agree to “2/10 net 30” terms. Consider factors such as cash flow needs, project timelines, and the overall financial health of your freelance business. Assess whether the potential benefits of early payment discounts align with your business objectives and if the arrangement fits comfortably within your financial strategy.
How to Communicate “2/10 net 30” to Clients?
- When introducing “2/10 net 30” to clients, clarity is key. Explain the terms straightforwardly, including the 2% early payment discount, the 30-day standard payment period, and the 10-day window for the discount to apply.
- Avoid any confusion by incorporating “2/10 net 30” directly into your contracts and invoices. This not only acts as a reference for both parties but also formalizes the agreement, reducing the chances of misunderstandings.
- Anticipate and address any questions or concerns your clients might have about the payment terms. Explain the reasons behind “2/10 net 30,” highlight the advantages of early payments, and be open to discussing and adjusting terms when necessary.
How to include “2/10 net 30” in your invoices?
Here’s a step-by-step process to include “2/10 net 30” in your invoices when invoicing via CheckYa.
- Log in to Checkya and go to the dashboard where you manage your invoices. If you don’t have an account signup on CheckYa using this link –
- Select invoice from the left menu and and click create new invoice to invoice your client.
- Fill in the client details
- Outline the services and associated costs.
- Find the ‘Terms’ or ‘Payment Terms’ section in the invoice and input your payment terms. Clearly state “2/10 net 30” in this section. For example:
Payment Terms: 2/10 net 30 - – 2% discount if paid within 10 days
- – Full payment due in 30 days
- Preview and send. Review the invoice for accuracy before sending it to your client.
Alternatives to “2/10 net 30” payment term:
Apart from 2/10 net 30 there are also various payment term options to encourage early payments and maintain a steady cash flow. Here are some alternatives to “2/10 net 30” that you can consider:
- 1/15 net 30: Offers a 1% discount if the client pays within 15 days. Full payment is due within 30 days.
- Net 15: Requires the client to pay the full amount within 15 days with no early payment discount.
- Due on Receipt: Implies that payment is due immediately upon receipt of the invoice.
- 1/30 net 60: Provides a 1% discount if the client pays within 30 days. Full payment is due within 60 days.
- Net 7: Requires the client to pay the full amount within 7 days.
- Discount for Early Project Completion: Offer a discount if the client approves the project or provides feedback within a specified timeframe.
- Subscription-Based Payments: Break down the total project cost into monthly or weekly subscription-like payments, encouraging regular and timely payments.
Conclusion:
In conclusion, adopting “2/10 net 30” is a win-win for freelancers and clients. Clearly communicating this term, especially through tools like Checkya, streamlines invoicing for freelancers and builds trust with clients. Additionally, clients enjoy a discount for early payments. This not only makes invoicing more efficient but also encourages a mutually beneficial relationship between freelancers and clients.
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.
