Getting paid late shouldn’t be the norm, but for many small businesses, chasing payments is a frustrating and all-too-frequent reality.
Yet often, this is because of a lack of clear, enforceable, and professional payment terms on the invoice.
In this guide, we’ll help you solve this common problem by showing you how to set up invoice payment terms that actually work. We’ll provide examples, tips, and tools to help you protect your cash flow, stay professional — and get paid faster. So let’s begin.
What are invoice payment terms — and why are they important?
Your invoice payment terms are the section of your customer invoices that clearly lay out the ground rules of paying. When you send out an invoice, these terms tell your client:
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When you expect payment (e.g., in 30 days)
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How they can pay (e.g., bank transfer, debit, digital wallets etc.)
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What happens if they pay late (e.g., a 1.5% late fee for each day)
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Whether they can save money by paying early (e.g., 5% off if paid within 10 days)
Without clarity in these terms, you’re leaving it up to interpretation — and that often leads to delays, disputes, and financial stress. Clear terms and conditions set expectations, and build trust between you and your clients.
Common invoice payment terms and what they mean
Invoice payment terms are usually written in a specific way which can be confusing at first. Here’s what they look like, and what they mean:
Common invoice payment terms
|
Term |
Meaning |
|
Net 7/15/30/60/90 |
This means that payment is due on (or within) X days, from the exact date that the invoice has been issued. For example, Net 15 would mean payment is due within 15 days. |
|
2/10 Net 30 |
This refers to discounts for early payment. In this example, the client is entitled to a 2% discount if they pay within 10 days (2/10); otherwise, full payment is due in 30 days (Net 30). |
|
Due on receipt |
This means that payment is due immediately. |
|
EOM (end of month) |
This means payment is due by the end of the invoice month. |
|
CIA (cash in advance) |
This means payment is required before the product or service is delivered. |
|
COD (cash on delivery) |
This means payment is due when the product or service is delivered. |
|
PIA (payment in advance) |
This is simply another term for prepayment, and is often used for services rather than goods. |
It’s generally advisable to keep your terms simple. If they are confusing or unclear, the payment is likely to be delayed, or the terms disputed. As a result, you may want to use clear language (such as “payment within 30 days” rather than “Net 30”).
How to choose the right payment terms
As with most things in business, there’s no one-size-fits-all approach to follow; your payment terms should generally reflect the circumstances and needs of your own business.
Here’s how to decide what’s right for you:
1. Know your cash flow needs
If you rely on fast payments to keep things moving, it’s advisable to choose one of the following terms:
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Net 7 or Net 14
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Due on Receipt
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Advance payment
If you have cash reserves, Net 30 may be fine, but don’t stretch your company’s finances or put yourself in a potentially difficult situation unless absolutely necessary.
2. Think about your client base
Rightly or wrongly ,your relationship with your clients is a key factor. For instance, when dealing with new, unknown clients, many businesses opt to enforce stricter terms, such as ‘Due on receipt’. or ‘PIA’. This helps protect your company in the case that your new client is unreliable.
Conversely, trusted and long-term clients may allow you to be more flexible, and offer Net 30 and early payment discounts.
The size of your clients can also be a factor. For instance, larger companies often manage invoices in bulk and, while reliable, you can probably expect a slower payment cycle. This is fine, as long as you plan accordingly.
Consider local and cultural norms, too, if you are working with international clients. For example, Net 60 may be the standardized norm in your client’s part of the world.
3. Offer early payment incentives
Early payment incentives and discounts are usually a win-win as you get paid faster, and your clients save a little money. Be wary of cutting into your profit margins too much, though.
4. Include late payment penalties
No one likes paying fees, but they can be a highly effective deterrent — especially if you are dealing with a client that has paid late previously. You can opt to charge a flat fee, or a percentage, either as a one-off or ongoing (e.g., per day, per 7 days, or per month).
You can also apply interest on late payments, but always ensure that your terms are legally compliant in your jurisdiction.
5. Make payment easy
The easier you make it for your clients to pay, the far more likely you are to get paid on time. Accept multiple payment methods such as bank transfer, credit/debit card, ACH, PayPal, Wise, or even cash.
Invoice payment terms examples
Here’s what a typical set of invoice payment terms might look like:
For trusted clients
3/10 Net 30
Under these terms, you are telling the client that they must pay within 30 days, with no late fee. You are also stating that if they pay early (within 10 days), they are entitled to a 3% discount.
For new clients
Net 7 + Late fee
Under these terms, you are telling the client that they must pay the full amount within seven days, with a late fee if they exceed this deadline. Note that you would need to lay out the terms of the late fee clearly, as this could be potentially disputed — especially if it involves interest accruals.
For large projects or orders
PIA
Whether the client is known to you or not, it’s advisable to take payment up front for any jobs that will require a lot of your time and/or resources (such as a very large order of goods, or a large-scale project). Under these terms, you are telling the client that payment must be made in advance.
Note that in cases like this, it’s very common to split the payment and/or issue a deposit. For example, you might request 50% of the payment in advance (PIA), and the other 50% of the payment upon completion (Due on receipt). Just make sure that this is clearly outlined.
Adding clauses for extra protection
Beyond these basic terms, you may also want to consider adding additional clauses. For instance, you might insert a dispute resolution clause (which defines how any potential payment disputes will be handled), or a jurisdiction clause (which defines which laws apply when dealing with international clients).
Best practices for managing invoice payments
To make invoice payment terms work for you — not against you — there are a few additional steps you should follow. As a rule, it’s a good idea to:
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Always use written agreements. Don’t just rely on verbal agreements, phone conversations, or even emails. If the worst comes to the worst, the agreement needs to be seen as legally binding. Therefore, put the payment terms in the official work agreement and on the invoice.
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Automate your invoicing. If possible, aim to manage your invoices through a platform that lets you set recurring invoices, receive automated reminders (before, during, and after the invoice deadline), and generate penalty triggers.
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Send your invoices promptly. It can be easy to get lost administratively, but don’t delay when sending your invoice. Every day you wait is another day where you won’t be paid.
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Follow up professionally. If the deadline passes and you still haven’t received payment, remain professional. Send a follow-up communication with a clear subject line, a polite (but firm) tone, and a copy of the original invoice and agreement. If non-payment continues or you hear nothing back, then you can proceed to escalating within the rights of your jurisdiction.
How can Remote help?
When you use Remote’s Freelancer Hub, you spend less time chasing invoices — and more time earning money. We enable you to create recurring invoices, track them in real time, and follow up automatically — so the cash keeps flowing, even when you're offline.
And that’s not all. Remote also gives you:
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The option to get paid in your preferred currency, with no hidden fees or frustrating delays.
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The ability to log hours, track project milestones, and share professional reports, resulting in fewer misunderstandings and stronger client relationships.
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Legally sound, localized contracts that protect both you and your clients, which is crucial if you’re working with international clients.
To learn more about Freelancer Hub and how it can make invoice management quicker, simpler, and more efficient, check it out for free now.