Terms, and What Thirty Days Means
Payment terms say a number of days. Four separate clocks run between issue and payment, and the agreed one is usually the shortest.
- Entry
- 01 of 07
- Section
- Getting paid
- Kind
- Analysis
Four payment terms, all of them written as thirty days
A fixed date that can be planned around
Firm carries: The approval time, which the firm does not control and which usually exceeds it
The same clock, starting when the bill arrives
Firm carries: The routing: a bill sent to the wrong place never starts the clock at all
Time to query anything before payment is due
Firm carries: An open-ended wait, because approval itself has no deadline
Funds held against work not yet done
Firm carries: Nothing on this matter, and the professional rules on client money instead
Four terms, identical on their face, and the event each one runs from is what decides when money arrives. Engagement letters state the number and frequently not the event. One firm's own arrangements, not advice about terms.
Payment terms state a number of days from a stated event. Between issue and money there are in fact four clocks, and the agreed one is usually the shortest of them.
The commercial boundary in “Terms, and What Thirty Days Means” becomes more useful when estimated work, recorded hours and authorised scope can be compared without changing the signed terms. Teams researching billable and non-billable hours can use a practical approach to billable and non-billable hours to organise that operational evidence while keeping the engagement letter and approved change record as the contractual source of truth.
A firm measuring only its agreed terms against actual payment is measuring the wrong gap.
Additional context for “Terms, and What Thirty Days Means” is available from Project Management Institute learning resources. Confirm current legal, tax and accounting requirements with a qualified adviser where necessary.
Clock one: issue to receipt
The bill leaves the firm and arrives somewhere in the client's organisation. Where the route is wrong, this clock can run for weeks with nobody aware.
It is entirely within the firm's control and is covered by the format note here.
Clock two: receipt to approval
The bill reaches the person who must approve it. They may be on holiday, may require information, may wait for the matter to complete.
The longest and least visible of the four, and the one a covering note most affects.
Clock three: approval to the payment run
Most organisations pay in batches on fixed dates. A bill approved the day after a run waits for the next one.
Knowing the client's payment dates turns this from mystery into arithmetic.
Clock four: the agreed terms
Thirty days, or whatever the engagement letter says. In practice this clock often does not start until approval, not issue, whatever the letter states.
That distinction is worth settling in writing at the start.
From what event
"Thirty days from the date of the invoice" and "thirty days from receipt" and "thirty days from approval" are three different terms, and clients and firms frequently each assume a different one.
One sentence in the engagement letter closes it.
What the terms are worth
Less than the format and the covering note. A bill that cannot be processed is not paid at thirty days or at ninety.
Firms negotiate terms and ignore routing, which is the wrong order of effort.
Interest on late payment
Contractual or statutory, depending where the firm is. Almost universally unclaimed.
Its existence does nothing. Claiming it once changes a relationship, which is why it functions as a deterrent that is never used.
Shorter terms
Some firms seek fourteen days. Clients with monthly payment runs cannot comply regardless of what they agree.
Agreeing terms the client's process cannot meet produces a permanent technical default and no faster payment.
Discounts for early payment
Rare in professional services and worth considering where cash matters more than margin.
Two per cent for payment within ten days is expensive money annualised and sometimes still the right trade.
Payment on account
Money before the work, set against the eventual bill. Governed by professional rules in several jurisdictions and the cleanest answer to a client whose payment history is poor.
It is a question to ask at engagement, when it is routine, not at month four, when it is an accusation.
Measuring the right thing
Days from issue to payment, by client, and separately days from issue to approval.
The second number tells the firm whether its documents are the problem; the first tells it whether the client is.
The clock the firm never measures
Issue to approval. Most firms measure issue to payment and treat the whole gap as the client's behaviour.
Splitting it at approval shows how much of the delay is the document and how much is the client's payment run.
Where approval takes forty days and payment takes five, the problem is the bill.
Getting the approval date
Most clients will say when a bill was approved if asked, and e-billing systems show it directly.
One question on one call per client gives the split, and it is the difference between fixing documents and chasing people.
Terms that nobody applies
Many engagement letters state fourteen or twenty-one days against clients whose process cannot pay faster than thirty-five.
The firm is then permanently owed money under terms it never expects to be met, which makes the ageing report meaningless.
Terms should match the client's actual cycle or the measurement is noise.
Where terms do matter
New clients, clients with poor history, and situations where the firm may need to stop work.
In those, a clear term and a clear consequence is worth having and worth enforcing once.
Money on account
The cleanest instrument for a client whose payment is unreliable, and it is a question to ask at engagement rather than later.
Rules on holding client money differ by profession and jurisdiction and are a matter for somebody qualified in the place concerned.
The arrangement worth having
Terms stated from a defined event, the client's payment dates on record, bills routed correctly, and both clocks measured.
Three of the four are the firm's own work.