Payment terms tell your client when and how to pay. They’re one of the few things on an invoice that directly control your cash flow, yet many people copy “Net 30” without thinking about it. This guide decodes the common terms, helps you choose the right ones, and shows how to write them so there’s no room for misunderstanding.
Common payment terms decoded
| Term | Meaning | Example (invoice dated 1 Nov) |
|---|---|---|
| Due on receipt | Pay immediately when the invoice arrives | Due 1 Nov (in practice: within a few days) |
| Net 7 / Net 10 / Net 15 | Full amount due 7 / 10 / 15 days after the invoice date | Net 15 → due 16 Nov |
| Net 30 | Full amount due 30 days after the invoice date | Due 1 Dec |
| Net 45 / Net 60 / Net 90 | Full amount due 45 / 60 / 90 days after the invoice date | Net 60 → due 31 Dec |
| EOM (end of month) | Due at the end of the month the invoice is issued | Due 30 Nov |
| Net 30 EOM | Due 30 days after the end of the invoice month | Due 30 Dec |
| 2/10 Net 30 | 2% discount if paid within 10 days; otherwise full amount in 30 days | Pay by 11 Nov for 2% off, else by 1 Dec |
| CIA / CWO | Cash in advance / cash with order | Pay before work starts |
| COD | Cash (or payment) on delivery | Pay when goods are delivered |
| 50% upfront | Half on acceptance, half on completion | Common for creative projects |
| Stage / milestone payments | Payments tied to project milestones | e.g. 30% / 40% / 30% |
| PIA | Payment in advance | Same as CIA |
“Net” simply means the full (net) amount with no discount. The day count normally starts on the invoice date unless your terms say otherwise (e.g. “30 days from receipt of goods”).
How to choose your payment terms
There’s no single right answer, but these factors usually decide it:
- Your cash flow. If you’re a freelancer paying rent monthly, Net 60 can hurt. Shorter terms (7–14 days) are common for freelancers and small service providers.
- Industry norms. Large corporates and public bodies often have standard terms (30–60 days) and payment runs on fixed days. You may be able to negotiate, but know the norm before you start.
- Client relationship and risk. New clients, one-off projects and international clients without a track record justify deposits or shorter terms.
- Project size and length. Long projects should be broken into milestones so you’re never financing months of work.
A practical starting point
| Situation | Suggested terms |
|---|---|
| Small freelance job, new client | 50% upfront, balance Net 7 |
| Ongoing work with a trusted client | Net 14 or Net 30 |
| Large project (> 4 weeks) | Deposit + milestones, each Net 14 |
| Retainer | Invoice at the start of each month, due in 7 days (see retainers) |
| Product sales to businesses | Net 30, or prepayment for new accounts |
| Consumer services | Due on completion / on receipt |
Should you offer an early-payment discount?
Terms like 2/10 Net 30 reward fast payment. They can work, but understand the cost: giving up 2% to be paid 20 days earlier is equivalent to a very high annual interest rate — roughly 37% a year (2/98 × 365/20). That’s generous. Consider it only if early cash is genuinely valuable to you, and remember that some clients take the discount and pay late anyway. Many small businesses get better results from simply shortening terms and making payment easy.
How to write payment terms on an invoice
Be explicit. Always show an actual due date, not just a code:
Payment terms: Net 14. Due date: 15 November 2026. Please pay by bank transfer using reference INV-2026-0047.
For staged payments:
Payment schedule: 40% deposit ($4,800) due on acceptance; 30% ($3,600) on design approval; 30% ($3,600) on launch. Each payment is due within 14 days of the invoice date.
For early-payment discounts:
Terms: 2/10 Net 30. Pay $980.00 by 11 November 2026 (2% discount) or $1,000.00 by 1 December 2026.
Put the agreed terms in your contract or quote too — the invoice should confirm terms, not introduce them for the first time.
Late payment: what the law says
Your terms are strongest when they’re backed by law and your contract. A few examples (check the current rules where you and your client are based):
- European Union: The Late Payment Directive (2011/7/EU) generally limits B2B payment terms to 60 days unless expressly agreed and not grossly unfair to the creditor, and public authorities to 30 days (60 in limited cases). Creditors are entitled to statutory interest of at least 8 percentage points above the reference rate, plus at least €40 fixed compensation for recovery costs. Member states implement it in national law, sometimes with stricter limits. The EU has proposed replacing the directive with a stricter regulation; check the current status.
- United Kingdom: Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can claim statutory interest at 8% above the Bank of England base rate on late B2B payments, plus fixed compensation of £40, £70 or £100 depending on the size of the debt, unless the contract provides a substantial alternative remedy.
- United States: There’s no general federal late-payment rule for private B2B invoices; late fees and interest depend on your contract and state law (including usury limits). Federal government contracts are covered by the Prompt Payment Act.
- Elsewhere: Many countries have their own rules — for example, Japan has long-standing subcontracting rules that set payment deadlines to protect smaller suppliers.
If you plan to charge late fees, state them in your contract and on the invoice, e.g. “Late payments may incur interest at the statutory rate.” Then actually follow up: see our late payment reminder templates.
Mistakes to avoid
- Only writing “Net 30”. Some clients count from the date they receive or approve the invoice. Write the due date.
- Vague terms like “prompt payment” or “ASAP”. They mean nothing enforceable.
- Terms that don’t match your contract. If the contract says 30 days and the invoice says 14, expect the contract to win.
- Accepting long terms without pricing them in. If a client insists on Net 60 or Net 90, that’s financing — factor it into your rates or ask for a deposit.
- Sending invoices late. Terms only start when you invoice. Send the invoice the day the work or milestone is done.
Quick reference: due-date maths
- Net N: invoice date + N days
- EOM: last day of the invoice month
- Net N EOM: last day of the invoice month + N days
- If the due date lands on a weekend or holiday, many businesses pay on the next working day — or the one before. Say which you expect if it matters.
BillKit’s invoice generator lets you set the invoice and due dates and add terms in the notes, so every invoice states exactly when it’s due.
This article is general information about common commercial practice and late-payment rules. It is not legal advice; the rules that apply depend on your contract and jurisdiction.