A payment schedule contains one or more scheduled payments. Each scheduled payment has a due date and an amount.
Setting the correct due dates and amounts for your payment schedule can be tricky. This article covers all of the options and the best time to use each one.
Relative vs. fixed due dates
When setting a due date in a payment schedule, you'll have the option between a relative or fixed due date.
Relative due date
The payment schedule will calculate the exact due date after you apply it to an invoice within a project. The due date will be based on the timing and trigger you choose, such as "30 days before project start date."
You will almost always use a relative due date in a payment schedule template, so that the template can adapt to any invoice.
Fixed due date
You'll choose an exact calendar date such as 10/9/2020. Each time you use the payment schedule, no matter when the invoice was created, the due date will be the exact same date.
It's not common to use a fixed due date in a payment schedule template. The only reason to do so is if you're setting something up for a specific holiday offer or event.
Relative due date triggers
Relative due dates are set up with timing and a trigger that will be used together to calculate the exact due date. For the timing, you can enter a number of days, weeks, or months in relation to the trigger.
Before project start date / After project end date
These triggers calculate a due date based on the project date. If your project date is a single date, it will be treated as both the start and end date. If there's no project date set, the due date will be (TBD) until you set one.
For example, if the relative due date is "30 days before project start date," payment would be due 30 days before whatever date is set as the project date.
After payment schedule is applied to invoice
The due date will be calculated based on the date the payment schedule was applied to the invoice. Sometimes, this will line up with the same day you are creating the invoice, but not always.
For example, if the relative due date is "0 days after payment schedule is applied to invoice," payment would be due on the same day you apply the payment schedule to the invoice.
After contract is signed by client
This trigger will wait to calculate a due date until after the contract on the project has been signed. If you're sending a proposal-contract-invoice, this is a good trigger to use for the first payment.
For example, if the relative due date is "0 days after contract is signed by client," payment would be due on the same day the client signs the contract.
Fixed vs. percentage amounts
When setting the due amount in a scheduled payment, you'll have the option between a fixed dollar amount and a percentage.
A fixed amount is an exact dollar amount, such as $500.00, that will not change based on the invoice total.
Use a fixed amount if you always charge the same amount for a specific payment, such as a deposit.
A percentage amount automatically calculates based on the invoice total. This allows a payment schedule template to adapt to different invoice amounts.
The sum of the percentages for all the due dates in a payment schedule should add up to 100% and only whole numbers (no decimals) can be used. Here are some examples:
Payment in full: 100%
Two equal payments: 50%, 50%
Three equal payments: 34%, 33%, 33%
Three payments with a larger payment up front: 50%, 25%, 25%
Four equal payments: 25%, 25%, 25%, 25%
👋 Here's a tip... it can get tricky to divide 100% into even numbers when there are five or more payments. You might consider using fixed amounts or a recurring invoice instead.
Combining fixed and percentage amounts
You can use percentages and fixed amounts in the same payment schedule. The percentages will ignore the fixed amounts and cover any remaining balance on the invoice not covered by the fixed payments.
For example, if you collect a $500.00 deposit when the contract is signed and the remaining balance 30 days before the project date, your payment schedule would be:
$500 due "0 days after contract is signed by client"
100% due "30 days before project start date"
The $500 is fixed, but the second scheduled payment will be 100% of the remaining balance, no matter what the invoice total is.