Invoice Payment Terms Explained: Net 30, Due on Receipt & More

Understanding Invoice Payment Terms

Payment terms on invoices tell your clients when and how they should pay. Choosing the right terms can significantly impact your cash flow and client relationships.

Common Payment Terms Explained

Due on Receipt

Payment is expected immediately upon receiving the invoice. Best for:

• Small one-time projects
• Clients you haven't worked with before
• Situations where you need immediate payment

Net 15

Payment is due within 15 days of the invoice date. This balance offers:

• Faster payment than Net 30
• Reasonable time for client processing
• Good for ongoing relationships

Net 30

The most common B2B term, payment due within 30 days. Suitable for:

• Established business relationships
• Corporate clients with payment cycles
• Larger invoices

Net 60 / Net 90

Extended payment windows for:

• Enterprise clients
• Government contracts
• Situations where longer terms are industry standard

Early Payment Discounts

Offering discounts for early payment can improve cash flow:

• 2/10 Net 30 - 2% discount if paid within 10 days, otherwise full amount due in 30 days
• 1/10 Net 30 - 1% discount for payment within 10 days

Late Payment Fees

To discourage late payments, clearly state:

• When late fees apply (e.g., "1.5% monthly interest on overdue amounts")
• Grace period if any
• Maximum fees (check local regulations)

How to Choose the Right Terms

Consider these factors:

1. Industry standards - What's normal in your field?
2. Client type - Corporations often need longer terms
3. Project size - Larger projects may warrant deposits
4. Cash flow needs - Shorter terms if you need faster payment
5. Relationship - You might offer better terms to loyal clients

Communicating Payment Terms

Always include terms:

• On your initial quote or proposal
• In your contract or agreement
• On the invoice itself
• In follow-up communications

Sample Payment Terms Language

"Payment is due within 30 days of the invoice date. A late fee of 1.5% per month will be applied to overdue balances. Please make payment via bank transfer or credit card."

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