Payment terms are one of the most overlooked parts of an invoice — and one of the most consequential. Set them poorly and you're either strangling your cash flow or losing clients. Here's a practical guide to the most common terms and how to use them effectively.
What are payment terms?
Payment terms specify when and how a client must pay an invoice. They define the due date, accepted payment methods, and the consequences of late payment. Without explicit payment terms on your invoice, the due date is legally ambiguous — and clients will exploit that ambiguity.
The most common payment terms
Net 30
Pay within 30 days of the invoice date. This is the standard for most B2B transactions globally. A client receiving an invoice dated 1 May must pay by 31 May.
Best for: established business relationships, recurring work, B2B services.
Net 60
Pay within 60 days of the invoice date. Common in certain industries (manufacturing, publishing, large retail) where approval and payment processes take longer. From a supplier's perspective, it stretches cash flow significantly.
Best for: large corporate clients with rigid payment cycles — but push back if you can.
Net 90
Pay within 90 days. Rare outside of major supply chains. Generally unfavourable for freelancers and small suppliers: three months of credit extended to a client is essentially a free loan.
Due on receipt
Pay as soon as you receive the invoice. Typically used for small one-off jobs, retail transactions, or clients with a history of late payment. In practice, "due on receipt" often means within 3–5 business days.
50% upfront / 50% on delivery
A common structure for freelance projects: half paid before work begins, half on completion. Protects your cash flow and ensures the client is financially committed. The first payment is invoiced as a deposit invoice; the second as a final invoice deducting the deposit already paid.
2/10 Net 30
A 2% early payment discount if paid within 10 days, otherwise full payment due within 30 days. Known as an early payment discount or prompt payment discount. Incentivises fast payment without making it mandatory.
Example: Invoice for $5,000 — if paid within 10 days, client pays $4,900. Otherwise, $5,000 due by day 30.
EOM (End of Month)
Payment due at the end of the month in which the invoice is issued. Less common, sometimes used in combination: "Net 30 EOM" means payment is due 30 days after the end of the invoice month.
How late payment fees work
Most countries give suppliers a legal right to charge interest on overdue invoices — regardless of whether you mention it explicitly. That said, you should always state your late payment policy on the invoice to make enforcement easier and to signal that you take it seriously.
Europe
In the EU, the Late Payment Directive (2011/7/EU) entitles B2B suppliers to:
- Statutory interest at ECB reference rate + 8 percentage points
- A fixed compensation of €40 per late invoice
- Recovery of reasonable debt collection costs
These rights apply automatically without any prior warning — but you must state your policy on the invoice.
United Kingdom
The Late Payment of Commercial Debts Act 1998 applies to B2B contracts. It entitles you to:
- Statutory interest at 8% above the Bank of England base rate
- A fixed compensation fee (£40 for invoices under £1,000; £70 for £1,000–£9,999; £100 for £10,000+)
United States
No federal late payment law for B2B contracts exists. Terms are governed by the contract or invoice. Most US-based freelancers apply a 1.5% monthly finance charge (equivalent to 18% annual) on overdue balances.
Australia
The Prompt Payment Protocol is voluntary. Individual states have different rules. Typical practice is to specify a monthly interest rate in the invoice terms.
Which payment terms should you choose?
| Situation | Recommended terms | |---|---| | First project with a new client | 50% upfront + 50% on delivery | | Recurring monthly retainer | Net 15 or Net 30, invoiced monthly | | Large project, trusted client | Net 30 with deposit at project start | | Rush or one-day job | Due on receipt | | Corporate client, large PO | Net 30 (resist Net 60+) |
How to state payment terms on your invoice
Your invoice should include:
- Due date (as a specific date, not just "Net 30" — it removes ambiguity)
- Accepted payment methods: bank transfer (IBAN/BIC), card, PayPal, etc.
- Late payment clause: interest rate + fixed fee per your jurisdiction
- Bank details if payment is by transfer
Example clause:
"Payment due by [specific date]. Invoices not settled by the due date will incur late payment interest at [rate]% per annum, plus a fixed collection fee of [€40 / £40 / equivalent]."
The fastest way to get paid
Research consistently shows that a few simple practices reduce average payment times significantly:
- Name a specific due date (not "Net 30") — clients act on concrete deadlines
- Send the invoice the same day the work is delivered — don't wait weeks
- Follow up 3 days before the due date with a friendly reminder
- Offer multiple payment methods — bank transfer, card, PayPal
- Request a deposit upfront for projects over a few days of work
Invoice Creator lets you set your payment terms once and apply them to every invoice automatically — including the late payment clause and your banking details. For freelancers managing multiple clients, this means no forgotten clauses and no manual copying between documents.