How to Adjust Invoice Payment Terms in QuickBooks Online

There are many questions to ask yourself as a business owner, but some we don’t give as much attention to. Like, how soon do you want to get paid after sending an invoice? How long do you want to give customers to pay their outstanding invoices? If you aren’t sure, keep reading so we can help you out!

Invoice payment terms are an agreement between you and your customers regarding when invoice payments are due. “Net” refers to the number of days before the expected payment. Even simple things, like net payment terms, set expectations for all parties involved.

Here are some things to keep in mind when deciding:

• the pace of your business or industry 
• your relationship with your customers
• payment methods you offer

When taking types of payments into account, a good place to start is to ask your customers what they prefer. There was a time when cash and checks were the most popular ways to pay. Now debit/credit cards tend to be the top choice.

If you find they prefer the convenience of credit cards, the upfront service fees your business absorbs can be justified in the name of quicker payments and satisfied customers. At the same time, you may want to only accept checks or ACH payments to avoid fees entirely. Communicate with your customers so they understand these limitations. 

The most important part is to be transparent and have good communication about your policy. 

Now, let’s get to the good stuff!

We recommend setting default payment terms in your Settings and making adjustments for special situations. You can use your default as the “benchmark” and make due date adjustments for particular customers to learn which works best. To set your default:

1. Click the Gear Icon and select Accounts and Settings.
2. Click the Sales tab on the left and then click the pencil icon.

Review the default settings and if you don’t want to change anything, click Save and you are done. In this example, Net 30 means that your customers have 30 days to pay from the creation of that invoice. Your preferred invoice terms will now be automatically applied to all invoices moving forward (not retroactively). 

Because there are so many ways to win with QuickBooks Online, you can also set this up directly in your invoices. Simply go to Invoicing on the left menu, then to the Invoicing tab. Click on Create Invoice and you’ll get this screen:

As you can see, it defaults to net 30 just like we set up earlier in this article. In this situation, we want to change this, maybe for a long-term customer that we can be more flexible with. 

Click on the dropdown and either pick from the choice provided or choose Add New.

If you need to customize, we got you! After you click on Add New you’ll see a screen to make your terms right there on the spot. Your choices are:

• Due in fixed number of days
• Due by certain day of the month
• Due the next month if issued within _ days of due date

Before I go, let me leave you with some tips to help you be successful!

• Payment terms are about more than getting paid – they set a tone for your business. Establish them based on what is reasonable for both you and your customers.
  
• We recommend adjusting your payment terms concurrently with the growth of your business. If customers aren’t paying outstanding invoices fast enough, you shorten the payment period. At the same time, don't assume they’ve neglected their responsibilities – if your payment terms offer flexibility, customers will act accordingly. Set expectations early, communicate clearly and give ample notice if you plan to make changes.

• Make your payment terms clear and easy to find on every invoice. If you commit to "Net 60” payment terms, customers have 60 days to pay you. Even if customers pay at 11:59 pm on day 59, it’s still on time. You can’t apply new payment terms retroactively, you can only set new expectations going forward.
  
• Provide ample notice if you ever plan to change your payment terms, especially if you decide invoices are “Due on Receipt.” 

As always, I hope this was an informative article that will help you with your business. Take a look here at other ways to customize your invoices: Customizing Invoices in QuickBooks Online.