A client sent you a contract, and somewhere in it is the part about money — often under a heading like "Compensation," "Fees," "Payment," or "Invoicing and Payment." This page explains what those terms do. It doesn't tell you whether to sign them; it describes what the words mean, so you can read your own agreement with your eyes open.
What it does
The payment terms cover two things: the price, and the mechanics of collecting it. The first is the amount and how it's calculated. The second is the plumbing — when invoices go out, when they must be paid, and what happens if a payment is late or disputed.
In a typical freelance agreement the amount is stated as a specific figure or rate — a flat fee for the whole job, an hourly rate, a recurring retainer, or a total split into installments tied to milestones. The billing terms then say how often invoices are sent and when each one comes due, usually as a set number of days from the invoice date — commonly written as net-15 or net-30. Around that core, a payment section often adds a handful of related provisions: a deposit before work begins, which side covers out-of-pocket expenses, how sales or transaction taxes are handled, a late charge on overdue invoices, and a short window in which the client has to flag any amount it disputes, with everything undisputed still due on schedule.
The variations you'll see
- How the fee is calculated. A flat fee names one number for the job. An hourly rate bills time as it's spent. A retainer is a recurring amount — weekly, twice-monthly, or monthly — often payable in advance. A milestone structure splits a total into installments that come due as defined stages are completed.
- When invoices come due. The window can be short or long: some contracts make each invoice payable within a set number of days of its date; retainers are often billed in advance for the coming period; milestone work is billed as each stage finishes.
- A deposit or advance. Some agreements require a payment before work starts. A common version makes it non-refundable and credits it against the final amount due, as either a fixed dollar figure or a percentage of the fee.
- Late fees or interest. Many payment clauses add a charge on invoices that go past their due date — a percentage per month or a flat amount. How much such a charge can be, and whether a stated rate holds up at all, is set by law and varies from state to state, which is why a common version caps the charge at "the maximum permitted by applicable law." What that maximum is where you are is a question for counsel.
- Who covers expenses. One version has the client reimburse reasonable out-of-pocket costs, sometimes only with advance written approval above a threshold. Another has the contractor absorb its own costs, with no reimbursement.
- What happens if work stops partway. A deposit and a payment schedule connect to the end of the deal, too — a deposit may be credited against what's owed on the way out, and a separate term can govern a cancellation. That's a different clause; see Kill fee.
How it reads from each side
- If you're the one doing the work, the payment terms are where the timing of the money lives. The due-date window sets how long you carry the work before cash arrives; a deposit sets what's in hand before you start; a late charge sets what it costs the client to pay you last; and some contracts add a right to pause work or hold deliverables while an invoice sits unpaid. The dispute window sets how, and how quickly, the client has to raise an objection rather than simply paying late.
- If you're the one hiring, this is where the cost and the cash-flow timing sit: the fee, the schedule on which it becomes due, and any deposit, expense reimbursement, or tax responsibility the terms put on you. It's also the clause that defines what counts as "late" and what follows from it.
A one-way set of payment terms — deposit, late charge, and a right to suspend all running toward the person doing the work — is ordinary in a form one party hands the other. It isn't, by itself, a sign of anything unusual.
Where it is on the checklist
Getting paid is the first section of our free Before You Sign checklist, and it flags several payment details as worth finding and reading closely in a contract you've been sent: whether the exact amount is written down in numbers, whether there's a specific payment deadline, whether a deposit is due before work starts, and whether overdue invoices carry a late fee or interest. You read your own document and score it yourself — we never see it, and the checklist doesn't assume what yours says.
Reading the rest of it
The clauses near the money are worth the same read: Kill fee · Ownership of the work · Limitation of liability.
The most comfortable place to be with terms like these is on the side that wrote the first draft. If you're the one sending the agreement, you can build one free — written from your side, with a plain-English note on what each clause does.
Whether a given set of payment terms is right for your situation is a question for a lawyer licensed in your state. This page explains the clause; it doesn't advise you on your deal.