payment-terms-policy

name	payment-terms-policy
description	Creates payment terms and collections policies with net terms, late fee structures, and escalation procedures. Use when establishing how and when clients must pay.
allowed-tools	Read Write Glob
metadata	{"author":"matthewhitcham","version":"1.0"}

Payment Terms Policy

When to Use This Skill

Use this skill when you need to:

• Establish standard payment terms for your business
• Create a late payment and collections escalation policy
• Draft payment terms language for contracts and invoices
• Design early payment incentives or late fee structures

DO NOT use this skill for creating invoices, pricing strategies, or full client agreements. This is specifically for the payment terms and collections process.

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Core Principle

CLEAR PAYMENT TERMS PREVENT 90% OF COLLECTIONS ISSUES — STATE THE RULES UPFRONT, ENFORCE THEM CONSISTENTLY, AND ESCALATE PREDICTABLY.

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Phase 1: Business Context

Required Inputs

Input	What to Ask	Default
Business type	"What type of business? (freelance, agency, SaaS, product)"	Service-based
Average invoice amount	"What is your typical invoice size?"	$1,000-5,000
Current terms	"What payment terms do you currently use? (net 30, due on receipt)"	Net 30
Payment methods accepted	"How can clients pay? (credit card, ACH, wire, check)"	Credit card + ACH
Late payment issues	"Are you experiencing late payments now?"	Some
Client type	"B2B or B2C? Large companies or small businesses?"	B2B small businesses

GATE: Do not proceed without business type and typical invoice size.

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Phase 2: Payment Terms Design

Standard Terms Options

## Payment Terms Policy

### Recommended Terms: [Net XX]

| Term Type | When to Use | Risk Level |
|-----------|------------|-----------|
| Due on receipt | Small projects, new clients, under $1,000 | Lowest |
| Net 15 | Standard services, retainer invoices | Low |
| Net 30 | Established clients, B2B standard | Medium |
| Net 45-60 | Enterprise clients only (with justification) | Higher |
| 50% upfront / 50% on delivery | Projects, custom work | Lowest |
| Monthly retainer (due 1st of month) | Ongoing services | Low |

### Selected Terms Structure

**Standard terms:** [Net XX]
**New client terms:** [Due on receipt or 50/50 split]
**Retainer terms:** [Due on 1st, auto-charge preferred]
**Large project terms (>$[X]):** [Milestone payments — 33/33/34 or 50/25/25]

Early Payment Incentives

### Early Payment Discount (Optional)

- 2/10 Net 30: 2% discount if paid within 10 days
- 1/15 Net 30: 1% discount if paid within 15 days

Only offer if cash flow timing matters more than the discount cost.

Late Fee Structure

### Late Payment Fees

| Days Past Due | Action | Fee |
|--------------|--------|-----|
| 1-7 days | Courtesy reminder email | None |
| 8-15 days | Late notice + late fee applied | [1.5% per month or $X flat] |
| 16-30 days | Second notice, phone call | Additional interest accrues |
| 31-60 days | Final notice, work paused | Services suspended |
| 61-90 days | Collections warning letter | Formal demand |
| 90+ days | Collections agency or legal | External collections |

**Late fee rate:** [1.5% per month / 18% annually — check state usury laws]
**Grace period:** [7 days from due date]
**Compounding:** [Simple interest, not compounding]

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Phase 3: Collections Process

Escalation Templates

### Email Template: Courtesy Reminder (Day 1-7)

Subject: Friendly reminder — Invoice #[X] due [date]

Hi [Name],

Just a quick reminder that Invoice #[X] for $[amount] was due on [date].
If you have already sent payment, please disregard this message.

You can pay here: [payment link]

Thanks,
[Your name]

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### Email Template: Late Notice (Day 8-15)

Subject: Past due — Invoice #[X] ($[amount])

Hi [Name],

Invoice #[X] for $[amount] is now [X] days past due. A late fee of $[X]
has been applied per our payment terms.

Please remit payment by [new date] to avoid additional fees. Pay here: [link]

If there is an issue with this invoice, let me know and we can resolve it.

[Your name]

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### Email Template: Final Notice (Day 31-60)

Subject: Final notice — Invoice #[X] past due

Hi [Name],

Invoice #[X] for $[amount] is now [X] days past due. As stated in our
agreement, services have been paused until the balance is resolved.

Total due (including late fees): $[X]

Please remit payment within 7 days. If we do not receive payment or a
response, we will proceed with formal collections.

[Your name]

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Phase 4: Policy Document

Invoice Language

## Payment Terms (for invoice footer or contract)

Payment is due within [X] days of invoice date. A late fee of [1.5%]
per month will be applied to balances outstanding beyond the [7]-day
grace period. Client is responsible for all costs of collection,
including reasonable attorney fees. [Business Name] reserves the right
to suspend services on accounts more than [30] days past due.

Implementation Checklist

- [ ] Payment terms added to contract template
- [ ] Late fee language added to invoice template
- [ ] Payment link included on every invoice
- [ ] Auto-reminder set up in invoicing software (Day 1, 7, 14, 30)
- [ ] Collections escalation process documented
- [ ] Team trained on enforcement (no exceptions without approval)
- [ ] Late fee rate compliant with state usury laws

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Example: Freelance Consultant

Terms: Net 15 for ongoing clients, 50% upfront for new clients and projects over $5,000. Late fee: 1.5% per month after 7-day grace period. Auto-reminders at Day 1, 7, and 14. Services paused at Day 30.

Result: Average days-to-payment dropped from 38 to 14 after implementing clear terms and auto-reminders.

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Anti-Patterns

• No written terms — verbal agreements lead to "I thought it was net 60." Put terms in writing on every contract and invoice.
• Terms but no enforcement — if you never charge late fees, your terms are suggestions. Enforce consistently.
• Net 60+ for small businesses — only enterprise clients justify long terms. Small business clients should pay net 15-30.
• No upfront payment on projects — custom work without deposits is a risk. Always collect 30-50% before starting.
• Emotional collections — follow the escalation process mechanically. Angry emails damage relationships and rarely get you paid faster.

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Recovery

• Currently owed money with no terms in place: Implement terms going forward. For existing overdue invoices, send a professional reminder and offer a payment plan if needed.
• Client refuses late fees: Decide if the relationship is worth it. For valuable clients, waive the fee once but communicate that terms apply going forward.
• State restricts late fee rates: Research your state's usury laws. Most states allow 1-1.5% per month for commercial transactions.
• Client disputes the invoice: Pause collections. Resolve the dispute first, then restart the clock on payment terms.