Picture this: you prepared 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 a 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’ means you get the payment right after you hand over an invoice to the client. So, if you are fed up dealing with untimely payments, introducing due upon receipt can be worthwhile.
Let’s throw more light into this topic and understand what due upon receipt means and what 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).
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.
While you may be familiar with due upon receipt meaning and its benefits, it’s important not to overlook its downsides. Moving on, let’s find out its pros and cons in detail.
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, you are likely to get paid on time, resulting in better incoming cash flow. You would have fewer or no unpaid invoices when due upon receipt is shown in an invoice. It states the customers 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
Covering business expenses timely is another benefit you get when considering due upon receipt. As long as customers are paying their dues immediately referring to due upon receipt, receiving payment is no longer a hassle for you, meaning you can cover business expenses in a timely manner.
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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 of the drawbacks of due upon receipt is not everyone can use it. Small businesses may demand payment upon receipt when they complete the project. Whereas, freelancers can’t demand instant payment as their work is usually reviewed by clients before processing the payments. The clients may demand some modifications in project work that may extend the completion time, eventually increasing your payment wait times.
2. No Flexibility for Clients
It goes without saying that client relationships are crucial for businesses. Implementing due upon receipt payment terms can develop cracks in your relationships with clients. If so, clients may churn out and your business may suffer loss. 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 in such a way that it grabs the client’s attention in a fraction 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 to understand by customers.
When to Issue an Invoice With Due Upon Receipt?
Since you are now already aware of the positives and negatives of due upon receipt, issuing invoices with due upon receipt 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. In case you have acquired short-term projects, then you can make an invoice containing due upon receipt as payment terms and get paid the next day or before that. Moreover, utilizing due upon receipt also depends on the history of your client.
Some clients often pay late no matter how quickly you share an invoice. Similarly, if there are new clients, you might not know how good they are at making payments and therefore, you can demand payment right after the work. For such individuals, you can put terms like due upon receipts in an invoice to collect the payment upon completion of your work.
Additional Invoicing Terms and Conditions to Consider
In case you don’t want to specify due upon receipt, you can consider its alternatives, 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 you think implementing net 15 is too short a payment term, then offering net 30 makes sense. Net 30 payment terms help customers to 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
Preparing an invoice with payment upon receipt for the first time? Here are some actionable tips to facilitate timely payments while keeping it hassle-free for your customers.
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 pay using their preferred payment method. So, introduce online payments 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 helping 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. But, on the negative side, you must be aware of certain disadvantages of due upon receipt.
Failing to do so means your client relationships may hang by a thread and it may 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.
