Payment terms define when and how clients must pay your invoices. Clear payment terms reduce confusion, prevent disputes, and help you get paid faster.
Common Payment Terms Explained
Understanding standard payment terms:
- Due on Receipt / Immediate Payment: Payment expected immediately upon receiving invoice
- Net 7: Payment due within 7 days of invoice date
- Net 10: Payment due within 10 days
- Net 15: Payment due within 15 days
- Net 30: Payment due within 30 days (most common)
- Net 60: Payment due within 60 days
- Net 90: Payment due within 90 days
- EOM (End of Month): Payment due at the end of the month
- 2/10 Net 30: 2% discount if paid within 10 days, otherwise net 30
Which Payment Terms Should You Use?
Choose terms based on your industry and cash flow needs:
- Service businesses: Net 15 or Net 30
- Contractors: 50% deposit, balance due on completion
- Recurring services: Due on receipt or auto-charge
- Large projects: Progress payments (30/30/40)
- Freelancers: 50% upfront, 50% on delivery
How to Write Payment Terms
Make your terms crystal clear on every invoice:
- State the due date explicitly ("Payment due: March 15, 2025")
- Include payment methods accepted
- Specify late fee policy ("1.5% monthly late fee")
- Note early payment discounts if offered
- Add payment instructions (bank info, payment link)
Late Payment Fees
Protect yourself with late fees:
- Typical late fee: 1.5% per month (18% annual)
- Alternative: Flat fee ($25-50) for overdue invoices
- Specify when late fees begin (day after due date)
- Ensure late fees are legal in your state/country
- Include late fee policy on every invoice
Early Payment Discounts
Incentivize fast payment:
- 2/10 Net 30: 2% discount if paid in 10 days
- 1/7 Net 30: 1% discount if paid in 7 days
- Calculate if the discount is worth the faster cash flow
Clear payment terms are essential for getting paid on time. Choose terms that work for your business, communicate them clearly, and enforce them consistently.