Invoice payment terms
Payment terms state when you expect to be paid. They are the shortest part of an invoice and one of the most consequential, because they set the default against which lateness is measured.
This guide covers what the standard terms mean, which suit which situation, and the gap between the terms you set and when money actually arrives.
The standard terms and what they mean
| Term | Meaning | Typical use |
|---|---|---|
| Due on receipt | Payable immediately | Small jobs, new customers |
| Net 7 / Net 14 | Within 7 or 14 days of the invoice date | Freelancers, small suppliers |
| Net 30 | Within 30 days | The commercial default |
| Net 60 / Net 90 | Within 60 or 90 days | Large corporates, government |
| EOM | End of the month of invoice | Regular monthly suppliers |
| CIA | Cash in advance | Custom orders, first-time customers |
| 50/50 | Half up front, half on completion | Project work |
| 2/10 Net 30 | 2% discount if paid within 10 days, otherwise 30 | Encouraging early payment |
Which terms to actually use
Terms are a negotiation, not a formality. Reasonable defaults:
- New customer, no history — deposit up front, or payment on delivery. This is normal and rarely objected to.
- Established customer — Net 14 or Net 30.
- Project work over a month — staged payments tied to milestones rather than one invoice at the end.
- Large corporate or government — expect Net 60 or longer regardless of what you put on the invoice, and price for the delay.
Deposits are the most underused term
A deposit does two things at once: it funds the work, and it tests commitment. A customer who will not pay a deposit is a customer who may not pay at all, and finding that out before you have delivered is worth far more than the cash.
For custom or made-to-order work, 30% to 50% up front is standard and defensible. Framing matters — “we take a 40% deposit to schedule the work” is a process statement, not a request for a favour.
The gap between terms and reality
Terms set an expectation. Payment behaviour is driven by the customer's process, and the two often differ.
Many large organisations run payment runs on fixed days. An invoice arriving the day after a run waits for the next one regardless of your terms — which is why invoicing promptly matters more than shortening terms from 30 days to 14.
Worth asking any large customer two questions at the start: when are payment runs, and what must appear on the invoice to be processed. Both answers are usually given freely and both save weeks.
Early payment discounts — do they work?
2/10 Net 30 offers 2% off for paying within 10 days. Whether that is worth it depends on arithmetic that catches people out.
Giving up 2% to be paid 20 days sooner is an annualised cost of roughly 36%. That is expensive money. It makes sense if you are short of cash and the alternative is more costly borrowing; it does not make sense as a routine discount to customers who would have paid on time anyway.
Late payment — what actually works
- Before due — a short reminder a few days ahead. Framed as helpful, and it works.
- Day after due — a factual note that it is now outstanding.
- Day 7 overdue — phone, do not email. Most delays are administrative and a call surfaces the reason.
- Day 30 overdue — a formal notice referencing your terms.
- Beyond that — stop further work before escalating. Continuing to deliver while unpaid removes your only real leverage.
Late payment interest exists in law in many countries and is rarely claimed, because most suppliers value the relationship more. Stating it on the invoice still has an effect; enforcing it is a separate decision.
Frequently asked questions
What does Net 30 mean on an invoice?
Payment is due within 30 days of the invoice date. It is the most common commercial default, though many large organisations operate on longer cycles in practice.
What does 2/10 Net 30 mean?
A 2% discount if paid within 10 days, otherwise the full amount within 30. Giving 2% to be paid 20 days early is an annualised cost of roughly 36%, so it is expensive unless you genuinely need the cash sooner.
Should I ask for a deposit?
For custom work or a new customer, yes — 30% to 50% is standard. It funds the work and tests commitment, and a customer unwilling to pay a deposit is a useful signal before you deliver.
What payment terms should I give a new customer?
A deposit up front or payment on delivery until they have a payment history with you. This is normal commercial practice and rarely objected to.
Can I charge interest on late payments?
In many countries yes, and stating it on the invoice has a deterrent effect. Whether to actually enforce it is a commercial decision most suppliers weigh against the relationship.
Why do customers pay late even with clear terms?
Usually process rather than intent — fixed payment runs, a missing PO number, or the invoice reaching the wrong person. Asking a large customer when payment runs happen and what the invoice must show saves weeks.