How to Handle Payment Terms in Service Agreements

Do you have cash flow woes? ✨ Today’s Tuesday Tip: CLEAR PAYMENT TERMS IN CONTRACTS = MORE CASH FLOW. When payment terms are too vague, you leave room for misunderstandings, delayed payments, and unnecessary tension. For example, simply saying “payment due upon receipt” doesn’t set clear expectations. What does “upon receipt” mean—immediately, within 24 hours, or within a week? Instead, opt for clear, specific language: “Payment is due within 7 calendar days of the invoice date.” “A late fee of X% will be applied for payments received after 30 days.” Here’s why this matters: 1️⃣ Protects Your Business: Specific terms create a legally sound foundation, ensuring your rights are clear in case of disputes. 2️⃣ Builds Trust: Setting expectations upfront demonstrates professionalism and makes it easier for clients to plan accordingly. 3️⃣ Streamlines Operations: You can better manage your cash flow and forecast income when payment terms are clear. Clarity in payment terms can make or break your client relationships and your cash flow. If you’re unsure how to draft payment terms that are clear and enforceable, let’s chat! Helping businesses create strong agreements is one of my favorite parts of what I do! 💕 Together, we got this!

Today's contract tip is about how to handle disputed invoice language in your payment provision. Some agreements give buyers the right not to pay if the buyer disputes the fee. This may seem innocuous, but it can have dire consequences for sellers’ cash flow. The dispute language means the buyer is not in breach when it doesn't pay. The buyer has to act in good faith, but that's about it. Here are three techniques sellers can use to limit their risk when they have bargaining power (with no judgment on fairness). 1. No right to withhold and dire consequences for nonpayment. “Seller may immediately suspend its performance if Buyer fails to pay the Fee by the deadline. Failure to pay by the deadline is a material breach.” 2. Require Seller's approval for nonpayment. “Buyer may withhold payment of disputed portions of the Fee for up to 10 days during discussions with Seller but must pay the entire Fee by the end of that period unless Seller approves otherwise.” 3. Narrow the type of dispute for which Buyer can elect not to pay. “Buyer may withhold payment of the disputed portions of the Fee only if Buyer reasonably believes there is a clerical error; provided, however, Buyer must submit the correct accounting prior to the due date.” What other techniques do you use when drafting the disputed payment language? #HowToContract #procurement #contracts #lawyers

You’re not a bank. Stop floating the project for free. Your crew wraps up the work, invoices go out… and payments drag on for weeks or even months. Contract Clause: Vague or one-sided payment provisions. If the subcontract doesn’t clearly spell out when you’ll be paid or, worse, ties your payment to the owner’s payment, you’re left financing the project for everyone else. 💡 Solution: Negotiate clear, enforceable deadlines. Instead of “payment will be made promptly,” push for: ➡️ Specific timeframes (ex: “within 30 days of invoice”) ➡️ Defined triggers (ex: “upon substantial completion of Subcontractor’s work”) ➡️ Clarification on retention (how much, and when it must be released). ✅ Actionable Takeaway: For California trades, here’s some good news: Starting January 1, 2026, retention on private works will be capped at 5% (SB 61). That means you should already start preparing to negotiate with that standard in mind. 👉 Want to get better at spotting these profit-killers before you sign? Download my free OWN Your Contracts Quickstart Guide. It's your roadmap to reviewing, redlining, and negotiating like a lawyer. 📥 Get yours now at the link in comments ⤵️

My actual New Year’s resolution is to put out more informative content. Let’s start with payment terms in a contract: 1) What is Payment Based on? Why are you paying? “Because they are doing work for me.” Sick, great response. I mean specifically, why are you cutting a check at that very moment? What triggered the need to pay (major project item, a time frame passed, job done, etc)? 2) Payment Structure There are many different ways that payment can be structured. Usually it’s dependent on the type of work (maybe someone is building software for you) and relationship of the parties (person or company is working with you on an ongoing basis). 3) Per Milestone/Project A common structure is payment per stage of a project (or just completion). Think construction: x% up front, x% once you hit some critical path item, and then finally x% when the job’s done. If this is what you’re doing, a clearly defined scope and understanding amongst the partiesis key. If the vendor/contractor gets paid after “kitchen repaired” and you thought that included appliance electrical work (and it doesn’t), it’s a payment dispute. 4) Quarterly/Monthly/Weekly Pay You could be paying for ongoing work that may end on a certain date in the future (or not). Think IT support for your company. Generally, you’re going to get an invoice on a certain day and have to pay within x calendar days (called Net X days). Timing of payment is important here. Can you pay within 15 calendar days (Net 15) of the date of an invoice? Maybe your company does check runs twice a month so that’s fine. Maybe that’s too fast for your accounts payable folks (or you). 5) Bespoke Payment Sometimes payment terms are unique and based on the industry/type of service or product. Like paying a base subscription fee (monthly payment) and an amount in additional once a certain amount of data has been used (milestone). 6) General Considerations A) Make sure there is a mechanism in place to handle disputed payments (like the kitchen example) (if you can hold that payment and pay whatever isn’t in dispute). B) If you’re the vendor, collection language is important (interest + fees). C) What happens to payments made upfront? Is it a deposit? If so, what happens to it? (Applied at the beginning? The end? Returned if work isn’t performed?) D) Can you off-set what you owe by how much you paid to fix the work the vendor did? E) What if we terminate the agreement? Consider language that clearly defines exactly what is owed (and what isn’t) when one party terminates the contract. F) Is payment final or just an estimate? Clarify, clarify, clarify. G) Is there a mechanism in place for when the scope/time/contract price changes? Very important and needed by both parties. H) In the same vein as G), are you approving (in writing) changes to the contract? Just a quick, non-exhaustive list of considerations for payment terms. Consult with an attorney.