If you run a business, you’re probably familiar with sending invoices and waiting (sometimes impatiently) to get paid. As a business owner, getting paid quickly and reliably is crucial for maintaining positive cash flow. One invoicing term you may come across is “due upon receipt”, which requires your customer to pay as soon as they receive the invoice. But what exactly does this payment term mean and when should you use it?
What Is Bill Pay Upon Receipt?
Bill pay upon receipt, also known as due upon receipt, is a payment term that requires the customer to pay the invoice immediately when they receive it. Essentially, it means payment is expected right away, usually by the next business day.
This invoicing terminology communicates to the customer that you expect to be paid for your products or services as soon as they are delivered. It’s a way to get paid faster and avoid waiting weeks or even months for customers to pay invoices.
When To Use Bill Pay Upon Receipt
Bill pay upon receipt can be useful in certain situations, but it’s not necessarily the right approach for every customer. Here are some examples of when due upon receipt billing may make the most sense:
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One-time customers or clients For a single project or one-off service requiring immediate payment helps you get compensated quickly and close out the transaction.
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New customers When starting work with a new customer, due upon receipt billing sets payment expectations upfront. Once trust and rapport are established over time, you may relax the terms
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Large invoices For high-value invoices you may want payment as soon as possible to improve cash flow especially if the customer typically takes a long time to pay.
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Customers with late payment history: If a customer habitually pays invoices late, billing due upon receipt can help prevent further late payments.
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Consulting or freelancing work: Consultants and freelancers relying on project income may want to require due upon receipt to get compensated faster for their work.
Pros of Bill Pay Upon Receipt
Requiring payment upon receipt offers some benefits:
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Speeds up payment: You get paid almost immediately instead of waiting weeks or months. This gives you access to cash faster.
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Enhances cash flow forecasting: With quick payments, you can more accurately predict cash inflows and outflows.
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Reduces invoicing paperwork: You spend less time on follow-ups and tracking down late payments.
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Improves tracking: Immediate payment means invoices don’t slip through cracks or get forgotten.
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Conveys urgency: Due upon receipt billing sends the message that you expect prompt payment for goods/services.
Cons of Bill Pay Upon Receipt
However, there are also some potential drawbacks:
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Inconvenient for customers: Some clients can’t pay immediately and find it inconvenient. This could damage customer relationships.
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Prevents customer evaluation: Customers may want to inspect products or evaluate services before paying. Requiring immediate payment doesn’t allow for this.
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Inflexible terms: Due upon receipt leaves no room for special circumstances or payment plan options.
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Causes tension: Customers may feel the terms are overly demanding and react negatively.
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Discourages recurring work: Customers may look elsewhere for vendors with more flexible payment options.
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Reduces customer cash flow: Forcing fast payment can disrupt customer cash flow management if they need time to collect their own payments.
How To Request Bill Pay Upon Receipt Politely
If you do decide to require payment upon receipt for some or all of your customers, it’s important to communicate this tactfully. Here are some tips:
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Thank the customer for their business first to set a polite, appreciative tone.
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Clearly state that payment is expected immediately or by next business day upon receiving the invoice.
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Provide options for convenient payment such as online payment portals, bank transfer, credit card, etc.
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Note that these payment terms were agreed upon in your original contract or estimate.
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Avoid threatening language, just directly but nicely state your bill pay upon receipt policy.
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Be open to occasionally making exceptions if special circumstances arise.
Other Bill Payment Term Options
While due upon receipt is one approach, there are other payment term possibilities as well:
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Net 7/Net 14/Net 30 terms: Payment is due 7, 14, or 30 days after invoice receipt.
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End of month terms: Payment must be made by the end of the month.
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Milestone payments: Larger projects can be divided into payment milestones based on project stages.
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Deposits and partial payments: Requiring an upfront percentage deposit or partial installment payments improves cash flow.
The ideal payment terms depend on your specific business model, industry, customer profile, invoicing preferences, and cash flow needs. Evaluate all these factors before landing on the best billing and payment policies.
Tips For Managing Bill Pay Upon Receipt
If you implement bill pay upon receipt in your business, here are some tips for making it work smoothly:
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Discuss payment terms upfront before starting new projects. Don’t surprise customers.
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Be extremely clear about payment expectations on every invoice.
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Use email and electronic invoices for fastest delivery.
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Make paying easy by accepting diverse payment methods.
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Follow up consistently if payment is late per your terms.
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Consider small late payment fees to deter delays.
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Automate payment reminders for unpaid invoices.
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Build payment rules exceptions into contracts for special cases.
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Be open-minded and adaptive – due upon receipt won’t work for everyone.
The Bottom Line
A better way to manage your finances
With Hiveage you can send elegant invoices to your customers, accept online payments, and manage your team â all in one place.
Ultimately, the best way to avoid such a situation is to set up terms of payment, as well as conditions before you agree to work for someone. Those who want to get paid quickly should put a label on their invoice, which uses the phrase âdue upon receiptââa reference to the invoice payment terms.
Should You Use Due Upon Receipt in Invoice Payment Terms?
Due upon receipt invoices can be a good thing, but some people may still wonder if itâs right for them. There may be a secret to knowing when to use it on your invoice. If youâve got a one-time job coming up, this term can help you. Freelancers like to have their money immediately or by a specific date. The due on receipt label ensures that small businesses can manage their accounts. The one-time client can make payment for the work you do, and everything is complete.
As a small business owner, you have the right to get paid for the work you do. The invoice is your proof that the work was completed, and payment should be rendered. However, it is up to you to ensure that the invoice is complete and sent promptly.
Invoices vs Receipts – What is the Difference?
FAQ
What does it mean when a bill is on receipt?
What does it mean when a payment is on receipt?
What is the meaning of “upon receipt”?
What does it mean when a medical bill is due upon receipt?
What is payment due upon receipt?
A payment due upon receipt is a payment that customers must make immediately upon receiving an invoice for a transaction. Typically, businesses use payment due upon receipt to signify that a payment is due by the following business day.
What is pay bill upon receipt?
Pay bill upon receipt represents a reversed concept of the above due upon receipt. In this case, you are the customer who has to pay for either an itemized list of products or services that were sold to you – and the total amount of money that you have to pay is reflected in the bill you receive.
When should payments be made ‘due upon receipt’?
When should payments be ‘due upon receipt’? The payment terms ‘due upon receipt’ mean that you expect your client to pay as soon as they receive the invoice.
Why is payment due upon receipt important?
Here are several reasons why it’s important for businesses to understand payments due upon receipt: Minimize the risk of missed payment: If customers receive a notice of payment due upon receipt, it may lower the chance of them forgetting or missing a payment since they must pay immediately upon receiving the invoice.
What does ‘due on receipt’ mean?
The term ‘due on receipt’ is straightforward: it refers to when payment is due for an invoice. Therefore, when you include it on your invoice payment terms, it means the client must pay you for your work as soon as he or she receives the invoice.
Is payment due upon receipt a good or bad thing?
Payment due upon receipt can be a good or bad thing, depending on the situation. Clearly, you can see the biggest advantage of using this term on your invoice. Payment is needed as soon as possible, which is often the next business day. Clients can use these payment terms along with the method they choose to pay the bill when they get the invoice.