The net 10, 30 net, or 60 net (listed on the invoice) simply indicate that the contractor's payment is due 10, 30, or 60 days after the invoice date, respectively. Independent contractors are usually paid by the hour or by the job. When it comes to project-based work, freelancers can request a deposit in advance, followed by milestone payments. It is recommended to have a signed contract or statement of work (SOW) documenting payment terms, deadlines, and project results.
In addition, the funds are not guaranteed. This often makes contractors wary of accepting checks from a new company that they are not familiar with. A returned check may result in fees from your bank and delay payment. One of the most overlooked drawbacks of checks is security.
While the recipient doesn't have to share their bank information, the issuing party's bank account information is printed directly on the check. After all, checks are still a cheap and reliable form of payment, but given their lack of security and slow processing time, it's best to reserve them for one-off situations where there's no need to make recurring payments. ACH transfers are the most common form of payment between employers and employees (that is, if the contractors are not employees), they can be set up with one-time or recurring ACH transfers, just like contractors are paid with direct deposits. This is especially practical if you're using software that can automate recurring payments.
Credit card payments are another quick and easy way to pay contractors. The appeal of credit cards comes mainly from their security. Credit cards offer a layer of protection by keeping your bank account information private and separate from your daily transactions. Bank transfers are one of the best options when speed is paramount.
If you need to make a payment quickly, a bank transfer is one of the fastest ways to make funds available. The most important thing to consider before starting a bank transfer is how well you know the recipient and trust them. Once the funds have been transferred to the recipient's account, it's much more difficult to reverse them. This is particularly true in the case of international bank transfers.
In short, bank transfers should be reserved for urgent payments. For small or routine payments, the relatively high cost and risk associated with transfers make them less attractive than the other options we've discussed so far. Online payment systems are another great option for business owners. PayPal, the world's leading online payment system, is definitely leading the pack.
It's available in more than 200 countries and has more than 300 million active users. The net payment terms of your business transactions depend on the industry you're in and the nature of your business. Some companies pay independent contractors through accounts payable as a business expense, but it may be more efficient to use a payroll service that clearly differentiates between employees and independent contractors.