Invoice Payment Terms Explained
Payment terms set the deadline and the consequences. They are the shortest section of an invoice and the one that most directly determines your cash flow.
Standard terms and what they mean
| Term | Meaning | Typical use |
|---|---|---|
| Due on receipt | Payment expected immediately | Small jobs, new clients, one-off consumer work |
| Net 7 / Net 15 | Due 7 or 15 days from invoice date | Freelancers and small suppliers |
| Net 30 | Due 30 days from invoice date | Default for business-to-business work |
| Net 45 / Net 60 | Due 45 or 60 days | Large corporates and public sector |
| EOM | Due at end of the month of issue | Recurring monthly services |
| 15 MFI | Due on the 15th of the month following invoice | Clients with fixed payment runs |
| 2/10 Net 30 | 2% discount if paid within 10 days, otherwise due in 30 | Encouraging early payment |
| CIA / PIA | Cash or payment in advance | New clients, custom orders, high material cost |
| 50/50 | Half upfront, half on delivery | Project work with materials or long lead time |
Choosing terms that fit your cash cycle
Work backwards from your own outgoings. If you pay suppliers or subcontractors on 15 days and your client pays on 45, you are financing a 30-day gap out of your own reserves on every job.
Shorter terms are not automatically better if they push a client into paying late anyway. A client with a fixed monthly payment run will pay on that run regardless; matching your due date to their cycle gets you paid sooner than an aggressive Net 7 that they simply miss.
Early payment discounts and late fees
An early payment discount such as 2/10 Net 30 is expensive in annualised terms, so use it only when cash timing genuinely matters more than margin. Late fees work best as a deterrent stated in the contract, not as a revenue line.
Whatever you choose, the invoice, the contract and your reminder emails must all state the same thing. Inconsistency is what makes terms unenforceable in practice.
Write terms so there is nothing to interpret
- Give the calendar due date as well as the term name.
- Say which date the term counts from: invoice date, delivery date or receipt.
- Name the currency and who bears bank charges.
- List accepted payment methods and the exact account details.
- State the late fee rate and when it starts, only if previously agreed.
Frequently asked questions
Does Net 30 mean 30 business days?
No. Net 30 means 30 calendar days from the invoice date unless the contract says otherwise. Write the calendar date on the invoice to remove all doubt.
Can I change terms for an existing client?
Yes, but in writing and in advance of the next engagement, not by quietly changing the footer of an invoice.
What is a reasonable late fee?
Commonly 1 to 2 percent per month on the overdue balance, subject to local law. Check the maximum permitted where you operate before stating a rate.
Sources and further reading
Rules differ by country. Confirm the details for your own situation with the official guidance below before relying on this article.
More reading: how to create an invoice, invoice numbering, payment terms, invoices vs quotations, common mistakes and small business invoicing. Practical questions are answered on the FAQ page.
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