Payment Terms That Won't Sink Your Offshore Agency
Net-60 might work for enterprise vendors, but it can devastate a 20-person agency. Here's how to negotiate payment terms that match your cash flow reality.
Key Takeaways
- 1Net-60 terms can force you to float 2+ months of salaries before seeing payment
- 2Push for Net-15 or Net-30 by framing it as regional standard practice
- 3Use milestone-based payments or monthly retainers to protect cash flow
- 4Always include late payment penalties (1.5% monthly is common) to create urgency
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You signed a $200K annual contract with a Fortune 500 client. Great news - until you read the fine print: Net-60 payment terms.
That means you're paying salaries for two full months before seeing a dollar. For an offshore agency with thin margins, this isn't just inconvenient - it's potentially fatal.
The Math That Kills Agencies
Let's break it down:
| Item | Monthly Cost |
|---|---|
| Developer salaries | $50,000 |
| Benefits & overhead | $15,000 |
| Office & tools | $5,000 |
| Total burn | $70,000 |
With Net-60 terms and a 30-day billing cycle, you're floating $140,000 before your first payment arrives.
Now imagine the client pays late. Or disputes an invoice. Suddenly you're scrambling for a credit line just to make payroll.
What You Should Negotiate
Option 1: Shorter Payment Windows
Push for Net-15 or Net-30. Frame it as standard for your region:
"Our standard terms are Net-15, which reflects typical payment cycles for our operating region. We can accommodate Net-30 for enterprise clients."
Option 2: Milestone-Based Payments
For project work, tie payments to deliverables - not calendar dates:
"Payment is due within 10 business days of milestone acceptance, not to exceed 30 days from delivery."
Option 3: Retainer + True-Up
For ongoing work, get a monthly retainer upfront:
"Client shall pay a monthly retainer of $X by the 1st of each month. Actual hours exceeding the retainer will be invoiced monthly at the agreed rate."
Red Flags to Watch For
Our contract scans consistently flag these dangerous patterns:
- "Payment upon launch" - Ties your cash flow to factors outside your control
- Net-60 or Net-90 - Enterprise terms that crush agency margins
- No late payment penalties - Removes any urgency to pay on time
- Approval chains - "Payment requires sign-off from VP of Engineering"
The Fix
When you upload a contract to Arendly, we identify risky payment terms and suggest specific alternative language. No legal degree required.
Try it free - your next contract could be the one that makes or breaks your quarter.
