How to Set Payment Terms That Actually Get You Paid
Most freelancers set payment terms once, stick them at the bottom of an invoice, and hope for the best. Then they spend half their time chasing money instead of doing paid work. Here is how to set terms that protect your cash flow from day one — including the exact wording that works.
Why Payment Terms Matter More Than You Think
Your payment terms are not an afterthought — they are the foundation of your cash flow. Get them wrong and you will spend your career in a cycle of:
- Do the work
- Send the invoice
- Wait
- Chase
- Wait more
- Get paid (eventually)
- Repeat
Strong payment terms do three things:
- Filter out bad clients early. Clients who refuse reasonable terms are telling you something. Listen.
- Reduce the need to chase. Clear expectations mean fewer "forgotten" invoices.
- Give you legal teeth. When terms are agreed in writing and included in your contract, you have real recourse if payment is late.
Choosing Your Payment Terms
Here is what the options actually mean in practice:
| Terms | What it means | Best for |
|---|---|---|
| Payment on receipt | Due immediately when the invoice is sent | Small, one-off jobs. Clients you have not worked with before. |
| 7 days | Due within 7 days of invoice date | Small businesses, direct clients, retainers |
| 14 days | Due within 14 days of invoice date | Most freelance work. The sweet spot. |
| 30 days | Due within 30 days of invoice date | Corporates, agencies. Often non-negotiable with larger companies. |
| 60 days | Due within 60 days of invoice date | Avoid if possible. Only accept from large corporates who pay reliably. |
My recommendation: 14 days as your default. It is reasonable, professional, and gives clients enough time to process payment without leaving you waiting a month. Move to 7 days or payment on receipt for new clients until they have proven reliable.
If a corporate insists on 30 days, accept it — but charge a higher rate to account for the cash flow delay. If they want 60 days, seriously consider whether the work is worth it.
Deposit Structures That Work
Deposits are the single most effective tool for protecting your cash flow. They reduce your risk, demonstrate client commitment, and mean you are never starting a project having earned nothing.
When to require a deposit
- New clients: Always. No exceptions. Until someone has paid you at least once, they are an unknown risk.
- Projects over £500: Always. The larger the project, the more you stand to lose.
- Long projects (4+ weeks): Always. You cannot afford to work for a month before seeing any money.
- Existing clients with good history: Optional. If they always pay on time, you can waive the deposit as a goodwill gesture — but there is no shame in keeping it.
How much to charge
- 25% deposit — minimum. Covers your setup and early work costs.
- 50% deposit — standard for projects. Half upfront, half on completion. Simple and fair.
- 100% upfront — for small projects under £500, or any situation where the scope is clear and unlikely to change.
Example deposit email
Subject: Deposit invoice — [project name]
Hi [Name],
Great to have the project confirmed. As per our agreement, please find attached a deposit invoice for 50% of the project fee (£[amount]).
I will begin work once the deposit has cleared. The remaining 50% will be invoiced on completion.
Payment is due within 7 days. Bank details are on the invoice.
Looking forward to getting started.
Best,
[Your name]
Need more deposit and payment email scripts? Our deposit email scripts guide has word-for-word templates for every scenario.
Milestone Payments for Larger Projects
For projects over £2,000 or lasting more than 4 weeks, milestone payments keep cash flowing throughout:
| Milestone | Payment | Trigger |
|---|---|---|
| Project kickoff | 25% | Contract signed |
| First deliverable | 25% | Delivery of [specific item] |
| Second deliverable | 25% | Delivery of [specific item] |
| Completion | 25% | Final delivery + sign-off |
The key: milestones must be specific and measurable. "Phase 2 complete" is vague. "Delivery of wireframes for all 8 pages" is clear. Ambiguous milestones lead to disputes about when payment is triggered.
Your Late Payment Clause (Exact Wording)
Include this in every contract and on every invoice:
Payment is due within [X] days of invoice date. Late payments will incur interest at the statutory rate of 8% plus the Bank of England base rate per annum, calculated daily from the due date until payment is received, in accordance with the Late Payment of Commercial Debts (Interest) Act 1998. A fixed compensation charge of £40–£100 (depending on debt value) will also apply to overdue invoices.
This is not aggressive — it is a statement of your legal rights. Most clients will never see this clause triggered because the existence of it encourages on-time payment.
Use our late payment interest calculator to calculate exactly what a client owes when they pay late.
When and How to Communicate Terms
Payment terms should appear in three places:
- Your proposal or quote. Before they say yes, they should know how and when you expect to be paid.
- Your contract. Formal, signed agreement with full payment schedule, deposit requirements, and late payment clause.
- Your invoices. Every invoice should state payment terms, due date, and bank details clearly.
The conversation about money should happen at the start — not when you send the first invoice. If a client is going to push back on your terms, you want to know before you start work, not after you have invested 40 hours.
When Clients Push Back on Your Terms
Some clients will negotiate. Here is how to handle common pushback:
- "We only pay on 30-day terms." — Accept it if they are a large, reliable company. Increase your rate by 5–10% to cover the cash flow delay. Get it in writing.
- "We do not pay deposits." — For new clients, this is a red flag. Say: "I understand. For first engagements, a deposit is standard practice to protect both parties. I am happy to waive it for future projects once we have an established working relationship."
- "Can we pay after 60 days?" — Only accept this from corporates with strong payment reputations. Price it in. If a small business asks for 60 days, walk away.
- "We will pay when the project is fully complete." — Never agree to 100% on completion for projects over £500 with new clients. Too much risk. Counter with a milestone structure.
Invoice Best Practice
Your invoice is your payment instruction. Make it impossible to misunderstand:
- Clear due date. Not "Net 14" — write "Due by 27 March 2026". Remove ambiguity.
- Bank details on every invoice. Do not make them search for how to pay you.
- Reference number. Makes it easy for their accounts team to process.
- Line items. Break down what the invoice covers. Vague invoices get queried, and queries delay payment.
- Payment terms stated. Include your standard terms and late payment clause on every invoice.
- Send immediately. The moment work is complete (or a milestone is hit), send the invoice. Every day you delay sending is a day added to when you get paid.
Need a solid invoice template? Our free invoice generator creates professional UK invoices in seconds.
FAQ
What payment terms should a freelancer use?
For most freelancers, 14-day payment terms strike the best balance between being reasonable and protecting cash flow. Avoid 30-day or 60-day terms unless you are working with large corporates who will not budge. Always request a deposit (25–50%) before starting work on new client relationships.
Can I charge interest on late freelance invoices?
Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge 8% plus the Bank of England base rate on overdue invoices from other businesses. You can also claim a fixed compensation amount: £40 for debts up to £999.99, £70 for debts of £1,000–£9,999.99, and £100 for debts of £10,000+.
Should I ask for a deposit before starting freelance work?
Yes, especially for new clients or projects over £500. A 25–50% deposit is standard practice and demonstrates client commitment. It also reduces your financial risk if the project is cancelled or the client disappears.
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