# How to set payment terms that actually get you paid

> Stop chasing late payments. Learn how to structure payment terms that protect your cash flow and get clients to pay on time.

- URL: https://tillage.ai/blog/payment-terms-that-work
- Author: Tillage Team
- Published: 2025-12-02
- Updated: 2026-10-30
- Category: Payments

Let's talk about the most uncomfortable part of running an agency: getting paid.

You did great work. The client is happy. But the invoice is 45 days overdue, and you're too polite to be "that person" who keeps asking for money.

Meanwhile, you're covering payroll out of your savings account.

Here's the truth: **Payment problems aren't about bad clients—they're about bad payment terms.**

When you set clear, fair payment terms upfront, clients pay on time. When you don't, you're training them that late payment is acceptable.

Let's fix this.

## The Problem with "Net 30"

Most agencies default to "[Net 30](https://tillage.ai/blog/net-30-payment-terms)" (payment due 30 days after invoice) because it sounds professional. But here's what actually happens:

- **Day 0**: You send the invoice
- **Day 1-20**: Client hasn't looked at it yet
- **Day 25**: They finally open it, realize they need approval
- **Day 30**: They submit it to accounting
- **Day 45**: You finally get paid (if you're lucky)

Net 30 becomes Net 45. Or Net 60. Or "I'll have to check with my accountant."

**The real problem**: You're financing your client's project for 1-2 months. That's not sustainable.

## Better Payment Structures

Here are payment models that actually work:

### 1. **50% Deposit, 50% on Completion**

**Best for**: Projects under $10,000 or new clients

**How it works**:
- 50% due before work starts
- 50% due upon delivery (or within 7 days)

**Why it works**:
- You're not fully funding the project
- Client has skin in the game from day one
- Final payment comes when value is highest (they just got the deliverable)

**Example terms**:
> "50% deposit ($2,500) due upon contract signing to begin work. Remaining 50% ($2,500) due upon project delivery. Work begins upon receipt of deposit."

### 2. **Milestone-Based Payments**

**Best for**: Projects over $10,000 or multi-phase work

**How it works**:
- Break project into 3-4 milestones
- Payment due at completion of each milestone
- Typical split: 30% / 30% / 30% / 10%

**Why it works**:
- Steady cash flow throughout project
- Client sees progress before each payment
- Reduces risk for both parties

**Example terms**:
> "Payment schedule:  
> - 30% ($6,000) upon contract signing  
> - 30% ($6,000) upon design approval  
> - 30% ($6,000) upon development completion  
> - 10% ($2,000) upon final delivery  
> 
> Each milestone payment due within 7 days of completion notification."

### 3. **Retainer with Monthly Billing**

**Best for**: Ongoing services or long-term clients. Price one with the [retainer calculator](https://tillage.ai/tools/retainer-calculator).

**How it works**:
- Fixed monthly fee for defined scope
- Billed on the 1st, due by the 15th
- Auto-pay via credit card or ACH

**Why it works**:
- Predictable revenue for you
- Predictable costs for client
- Automatic payment = no chasing

**Example terms**:
> "Monthly retainer of $5,000 for 40 hours of service. Invoiced on the 1st of each month, due by the 15th. Payment via automatic credit card charge or ACH transfer."

### 4. **The "2/10 Net 30" Discount**

**Best for**: Clients who need Net 30 for internal processes

**How it works**:
- 2% discount if paid within 10 days
- Full amount due in 30 days

**Why it works**:
- Incentivizes fast payment
- Clients love feeling like they got a deal
- You get paid faster (worth the 2% discount)

**Example terms**:
> "Payment due within 30 days. 2% discount available if paid within 10 days of invoice date."

## The Deposit is Non-Negotiable

Here's a rule that will save you thousands: **Never start work without a deposit.** Tillage's [billing schedules](https://tillage.ai/features/billing-schedules) issue the deposit invoice when the client signs.

Not for "good clients." Not for referrals. Not for "they're definitely going to pay."

Why? Because the deposit:

1. **Qualifies the client**: If they can't afford a deposit, they can't afford the project
2. **Proves commitment**: Serious clients don't hesitate to put money down
3. **Protects you**: If the project goes sideways, you're not out 100% of your time
4. **Funds the work**: You're not financing their project with your cash

**What to say when they push back**:
> "We require a deposit to reserve your spot in our schedule and cover initial project setup. This is standard practice for professional services and protects both of us."

If they still won't pay a deposit, that's a red flag. Walk away.

## Late Payment Policies That Work

Even with good terms, some clients will pay late. Here's how to handle it:

### Set Clear Late Fees

Work out the amount with the [late fee calculator](https://tillage.ai/tools/late-fee-calculator), then include this in your contract:
> "Late payment fee of 1.5% per month (18% annually) applies to overdue balances. Invoices unpaid after 30 days may result in work stoppage and/or collection proceedings."

### Automate Reminders

Don't rely on memory. Set up automatic reminders:
- **Day 0**: Invoice sent
- **Day 7**: Friendly reminder ("Just making sure you received this")
- **Day 14**: Second reminder ("Payment due in X days")
- **Day 21**: Urgent reminder ("Payment overdue")
- **Day 30**: Final notice before late fees

### Stop Work on Unpaid Invoices

This is hard, but necessary. If a client is 30+ days late on an invoice, pause all work until they're current.

**What to say**:
> "I noticed your invoice from [date] is still outstanding. To keep the project moving forward, we'll need to get that settled before we can proceed with the next phase. Can you help me understand what's causing the delay?"

## Payment Methods That Speed Things Up

Make it easy for clients to pay you:

### 1. **Credit Card Payments**

**Pros**:
- Instant payment
- Can set up auto-pay
- Clients earn rewards points (they like this)

**Cons**:
- Processing fees (2-3%)

**Worth it?**: Yes. Getting paid 30 days faster is worth 3%.

### 2. **ACH/Bank Transfer**

**Pros**:
- Lower fees (0.5-1%)
- Good for large invoices

**Cons**:
- Takes 3-5 days to clear
- Requires bank account info

**Worth it?**: Yes, especially for retainers and recurring payments.

### 3. **Wire Transfer**

**Pros**:
- Same-day payment
- Good for international clients

**Cons**:
- High fees ($25-50)
- Complicated for clients

**Worth it?**: Only for very large invoices ($50,000+).

### 4. **Check**

**Pros**:
- No processing fees

**Cons**:
- Slow (mail time + clearing time)
- Can bounce
- Requires manual deposit

**Worth it?**: No. It's 2025. Stop accepting checks.

## The Power of Automatic Payments

Here's a game-changer: **Set up automatic payments for retainers.**

When a client's credit card is charged automatically on the 1st of every month, you never have to:
- Send an invoice
- Wait for payment
- Send reminders
- Wonder if you'll get paid

More of your invoices get paid on time.

**How to set it up**:
1. Get client authorization in your contract
2. Securely store payment method
3. Set up recurring charges in your payment processor
4. Send receipt automatically after each charge

**What to say to clients**:
> "To make things easier for both of us, we'll set up automatic monthly billing. You'll receive a receipt after each charge, and you can cancel anytime with 30 days notice."

Most clients prefer this. It's one less thing for them to remember.

## What to Put in Your Contract

Your contract should include:

```
PAYMENT TERMS

1. Project Fee: $[amount]

2. Payment Schedule:
   - [X]% ($[amount]) due upon contract signing
   - [X]% ($[amount]) due upon [milestone]
   - [X]% ($[amount]) due upon project completion

3. Payment Methods: Credit card, ACH, or wire transfer

4. Late Payments: Invoices not paid within 30 days will incur a late 
   fee of 1.5% per month (18% annually). Work may be paused on accounts 
   with overdue balances.

5. Work Stoppage: If payment is not received within 45 days of invoice 
   date, all work will stop until account is current.

6. Collections: Client agrees to pay all costs of collection, including 
   reasonable attorney fees, for overdue balances.
```

## Common Objections (And How to Handle Them)

### "Can we do Net 60?"

**Response**: 
> "Our standard terms are [your terms]. Net 60 would require us to finance your project for two months, which isn't sustainable for our business. However, we can offer milestone payments to spread out the cost."

### "We don't pay deposits."

**Response**:
> "I understand. The deposit reserves your spot in our schedule and covers initial project setup. It's standard practice in our industry. If your company has a policy against deposits, we can structure it as 'Phase 1 payment' instead—same amount, different label."

### "Can you invoice us after the work is done?"

**Response**:
> "We've found that milestone-based payments work better for both parties. You get to see progress before each payment, and we maintain healthy cash flow to deliver great work. Would a 30/30/40 split work for your budget?"

## The Bottom Line

Good payment terms aren't about being greedy or difficult. They're about:

- **Protecting your cash flow** so you can pay your team
- **Setting clear expectations** so everyone knows what to expect
- **Qualifying serious clients** who respect your work
- **Reducing stress** so you can focus on delivering great work

When you set strong payment terms and stick to them, you'll find that:
- Clients respect you more
- You get paid faster
- You stress less about money
- Your business is more sustainable

And the clients who push back on reasonable payment terms? They're usually the ones who would have paid late anyway.

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**Want to automate your payment collection?** [Try Tillage free](https://app.tillage.ai/signup) and set up automatic invoicing, payment reminders, and online payments in minutes. No credit card required.

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