Payment terms are written vaguely, It means you are voluntarily assuming the risk of collection. when to pay How much to pay How to pay What will happen if you don’t pay? Here’s how “real security” is written in practice. Be sure to write down the payment time clearly (don’t just write payment term 30 days) Unsafe way to write: Payment due within 30 days. When does 30 days count? Safe way to write: Payment is due within 30 calendar days from the date of invoice. Or more clearly: Payment is due within 15 calendar days from receipt of invoice. Avoid ambiguous spaces. Be sure to write down the payment method Avoid reasons for procrastination in the future. It is recommended to write: Payment shall be made via ACH transfer, wire transfer, or company check. If you only accept a certain method, make it clear. Be sure to write down the overdue interest clause (very important) Without this, the cost to the other party of dragging you is almost zero. Suggested writing method:
Any payment not received by the due date shall accrue interest at the quotation of 1.5% per month (or the maximum quotation permitted by law), until paid in full. This creates stress. Be sure to write the Stop Work Clause This is one of the most important protections for a 1099 contractor. Writing method: Contractor reserves the right to suspend services if payment is not received within 7 days after written notice of late payment. Otherwise you will continue to work while being delayed. Installment payments must include an Acceleration Clause If in installments, you must write: If the customer fails to make any installment payment, the remaining balance shall become immediately due and payable. Without this, the other party can delay every issue. IP protection terms (required for creative works) If you do film and television/design/creation: Be sure to write: Ownership of work product shall be transferred only upon full payment. If not paid in full, the rights will not be transferred. Attorney's fee clause (necessary for recovery) In the event of collection or legal action, clients agree to pay reasonable attorney’s fees and collection costs. Without this, you will bear all the costs of collecting money. Deposit terms (reduce risk) Advice for High-Risk Customers: 50% deposit required before work begins. or: No work shall commence until deposit is received.
Don’t “start with trust.” Milestone payments (large projects) Large project suggestions: 30% advance payment 40% mid-project 30% before delivery Don’t wait until you’re 100% done to get paid. Complete security template (can be used directly) Payment Terms: Client agrees to pay Contractor a total fee of $_. 50% deposit is due prior to commencement of services. The remaining balance is due within 15 calendar days of invoice date. Any late payment shall accrue interest at 1.5% per month (or maximum permitted by law). Contractor reserves the right to suspend services for non-payment after written notice. Ownership of deliverables transfers only upon full payment. Client agrees to pay reasonable attorney’s fees and collection costs if collection becomes necessary. Special reminder from California In California: Overdue interest rates cannot exceed the legal limit If the interest rate is not written, you may only be able to claim the statutory interest rate. Written terms are stronger than oral agreements Most common mistakes No payment date written No interest written
No suspension rights written No attorney fees included No payment received before deliverables These are the main reasons for failed payment collection. core principles Payment terms are not polite words. It is: Your risk control mechanisms. Write clearly, In the future, we will not rely on the conscience of the other party.