Due Upon Receipt Definition
Due Upon Receipt means that payment is required immediately after the invoice is received. Unlike standard payment terms like net 30 or net 60, this term ensures that the buyer initiates payment instantly, without any delay. It helps businesses maintain a steady cash flow and reduce late payments. However, it may strain customer relationships if they are unprepared for immediate payment.
Picture this: you prepare a nice-looking invoice for your customers, and it gets paid within a few minutes. Amazing, isn’t it? Now, this could be a real-life scenario if you consider ‘due upon receipt’ as an invoice payment term in an invoice.
Businesses often deal with late payments, especially when issuing multiple invoices. Due upon receipt can come as a handy invoicing solution, allowing businesses to collect payment faster instead of chasing unpaid invoices.
Specifying ‘due upon receipt’ as a receipt payment term means you get the payment right after you hand over an invoice to the client. So, if you are fed up with dealing with untimely payments, introducing due upon receipt can be worthwhile.
Let’s shed more light on this topic and understand what “due upon receipt” means and the pros and cons of payment upon receipt.
What Do You Mean By Due Upon Receipt?
Due upon Receipt refers to the process of collecting the payment as soon as the invoice is shared. Unlike long payment terms, due upon receipt informs customers to pay instantly instead of paying the money anytime between 15-30 days (as per standard terms). This receipt invoicing approach ensures that businesses receive payments without unnecessary delays.
If the payment upon receipt is clearly mentioned in an invoice, the recipient doesn’t get the flexibility like net 30 or net 60. The buyer is responsible for initiating the payment process the moment they receive an invoice, making it a reliable receipt method for immediate transactions.
While you may be familiar with the meaning of due upon receipt and its benefits, it’s important not to overlook its downsides. Let’s examine its pros and cons in detail.
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Advantages of Due Upon Receipt Payment
Here are the positives of using due upon receipt in an invoice that will simplify your payment collection process.
1. Improved Cash Flow
Implementing the due upon receipt term ensures you get paid on time, resulting in better incoming cash flow. When due upon receipt is stated in an invoice, you would have fewer or no unpaid invoices. It sets clear payment expectations for customers, requiring them to fulfill their dues immediately or else they may face consequences. Thus, the cash will keep flowing, and your core operations will run smoothly.
2. No Follow-ups Required
An invoice comprising due upon receipt as a payment term doesn’t need frequent follow-ups.
It lets customers know how quickly they need to pay the pending amount, as there is no payment flexibility. Hence, there is a strong chance of you getting paid on time, eliminating the need to send payment reminders.
3. Covers Expenses Quickly
Another benefit of due upon receipt is that it allows you to cover business expenses in a timely manner. As long as customers pay their dues immediately, referring to due upon receipt, the received payment can be directly transferred to your bank account, making financial management seamless and stress-free.
Disadvantages of Due Upon Receipt Payment
A couple of disadvantages of using due upon receipt in an invoice are explained below.
1. Can’t Be Used by All Businesses
One drawback of due upon receipt is that not everyone can use it. Small businesses may demand payment upon receipt when they complete the project. Similarly, freelancers can’t demand instant payment as clients usually review their work before processing the payments. Clients may demand modifications in project work that may extend the completion time, eventually increasing payment wait times.
2. No Flexibility for Clients
It goes without saying that client relationships are crucial for businesses. Implementing payment terms that are due upon receipt can develop cracks in your relationships with clients. If so, clients may churn out, and your business may suffer losses. Therefore, you need to keep your customers first before mulling over shorter payment terms. Otherwise, it will be inconvenient for clients, and they might switch to other businesses.
How to Ask for Immediate Payment?
The payment request can only be made once the work is finished or the product delivery is made. Generating an online invoice is a professional and polite way of asking clients to complete the payment. An online invoice made using a pre-built template can improve the chances of early payments and ensure client satisfaction.
Consider the below-mentioned invoicing practices when asking for urgent payment.
- Specify payment terms that grab the client’s attention in a fraction of a second.
- Prioritize politely-written invoices to help customers pay quickly, even if it is one-time work.
- Offer customer-preferred payment methods to aid clients in completing the payment.
- Write payment terms in one-liners so that they are easy for customers to understand.
When to Issue an Invoice With Due Upon Receipt?
Since you are already aware of the pros and cons of due upon receipt invoicing, issuing invoices with this term depends on your business type and the projects you handle. Suppose you are working on large-scale projects; then, you can’t demand payment upon receipt.
You may need different payment terms that align with your invoicing process. However, for small business owners handling short-term projects, adding due upon receipt as a payment term can ensure quicker payments, often within a day.
Moreover, the decision to use due upon receipt also depends on your client’s payment history. Some clients consistently delay payments, regardless of how promptly you send invoices. In such cases, enforcing immediate payment terms is beneficial.
To make transactions smoother, you can integrate an online payment gateway, allowing clients to pay conveniently using options like credit card payment. This ensures seamless and faster transactions while reducing the risk of late payments.
Additional Invoicing Terms and Conditions to Consider
In case you don’t want to specify due upon receipt, you can consider its alternatives, such as short payment terms.
Net 15
Utilize a net 15 payment term that allows your customers to pay the outstanding amount within 15 days. It doesn’t ask for immediate payment, so customers can buy some more time to clear pending dues. It will help you minimize unpaid invoices as people who can’t pay immediately get extra time for payment.
Net 30
If implementing Net 15 is too short a payment term, then offering Net 30 makes sense. Net 30 payment terms help customers complete a payment within a month. The recipient has 30 days starting from the day the invoice was issued. Hence, customers don’t have to pay the money hurriedly.
Tips for Payment Upon Receipt
Are you preparing an invoice with payment upon receipt for the first time? Here are some actionable tips to facilitate timely payments while keeping your customers’ experience hassle-free.
1. Get Invoice templates
Invoices made using online templates grab clients’ attention instantly and encourage them to process the payment. It not only makes the payment collection process easy but also aids you in creating invoices faster.
2. Issue invoices timely
Send an invoice to clients as soon as you are done generating it. Email or WhatsApp an invoice using software and let clients know how soon you are expecting the payment. You no longer need to arrange meetings when sending invoices online.
3. Multiple Payment Methods
Some clients may refuse to pay if you don’t allow them to use their preferred payment method. Therefore, online payments should be introduced to help clients transfer the money as soon as they receive an invoice.
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Conclusion
Due upon receipt is a payment term that helps businesses get paid immediately once the work is completed. If receiving payments is a daily struggle for you, incorporating ‘due upon receipt’ in your invoices can amplify the payment collection process. However, on the negative side, you must be aware of certain disadvantages of due upon receipt.
Failing to do so may cause your client relationships to hang by a thread and impact your bottom line. Alternatively, you can choose Moon Invoice to generate professional invoices that facilitate faster payments, even compared to regular payment terms. Plus, it ensures customer satisfaction as well. Start using Moon Invoice for free.
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Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
