Invoice Payment Terms Explained (Net 15, Net 30, Net 60)

Payment terms are the rules that define when your invoice is due and what happens if it is late. In accounting references, payment terms are often expressed as “Net D,” which indicates the number of days before payment is due.¹ Clear terms protect your cash flow and set expectations with clients. They also give your client’s accounts payable team a concrete due date to follow.

When payment terms are vague or missing, delays increase. Xero data shows that US small businesses are paid late by an average of 8.2 days beyond the agreed deadline, and the total time to get paid is about 27.6 days on average.² Those delays compound when you set long terms or do not enforce them.

This guide explains common payment terms, how they affect cash flow, and how to choose the right terms for your business.

What Are Invoice Payment Terms?

Payment terms are the credit agreement written on the invoice. They specify how long the buyer has to pay and, in some cases, whether early payment discounts or late fees apply. The term “Net 30,” for example, means the full invoice balance is due 30 calendar days after the invoice date.³

In B2B transactions, this is effectively a short-term, interest-free loan from the seller to the buyer. Net terms give clients time to process invoices and schedule payments, but they also extend the time you wait to get paid.³

Common Payment Terms Defined

Below are the most common terms you will see on invoices, with plain-language explanations and real-world examples.

Due on Receipt

Meaning: Payment is due immediately when the invoice is received.
When to use: First-time clients, small projects, or when you need cash flow quickly.
Example: “Due on receipt. Please pay within 24 hours.”

Net 7 / Net 10 / Net 15 / Net 30 / Net 60 / Net 90

Meaning: Payment is due a set number of days after the invoice date.
Example: An invoice dated March 5 with Net 30 terms is due April 4.³
Common use: Net 15 or Net 30 is common for freelancers and service businesses. Longer terms like Net 60 or Net 90 are more common in large B2B supply chains.

EOM (End of Month)

Meaning: Payment is due at the end of the month in which the invoice is issued.
Example: An invoice issued on March 10 with EOM terms is due March 31.

2/10 Net 30

Meaning: The buyer gets a 2% discount if they pay within 10 days; otherwise the full amount is due in 30 days.³
Example: A $1,000 invoice becomes $980 if paid within 10 days.³
Why it matters: Early discounts can speed up payments, but they reduce revenue.

PIA (Payment in Advance)

Meaning: Payment is required before work starts or goods are delivered.
When to use: High-risk clients, custom work, or large expenses.

COD (Cash on Delivery)

Meaning: Payment is due when goods are delivered, often used for physical products.

Monthly Deferred (1MD, 2MD)

Meaning: Payment is deferred to the next month or later. This is common in some enterprise contracts.

Choosing the Right Payment Terms for Your Business

The right terms depend on your cash flow needs, your industry, and your client relationship. Consider these factors:

Cash flow pressure: Shorter terms reduce the time your money is tied up.
Industry norms: B2B service providers often use Net 15 or Net 30. Large enterprise clients may expect Net 45 or Net 60.
Client reliability: New or high-risk clients may require deposits or shorter terms.
Project size: For large projects, consider milestone billing or partial upfront payments.
Operating costs: If you have high monthly expenses, longer terms can create cash gaps.

A good rule: set terms that you can realistically manage without taking on debt. If you must accept longer terms, build late fees and follow-up processes into your workflow.

How Payment Terms Affect Cash Flow

Payment terms directly change how fast cash comes into your business. The longer the term, the longer your cash sits in accounts receivable.

Xero data shows that even when terms are defined, US small businesses are paid late by over a week on average.² That means Net 30 often turns into Net 38 in practice. If you set Net 60, you might be waiting 70 days or more.

Late payments are not just an inconvenience. Clockify’s review of late invoice statistics notes that late payments can be a major cause of financial strain, contributing to 1 in 4 bankruptcies.⁴ That is why clear terms and active follow-up matter.

Quick cash flow example

Net 15: $5,000 paid in 23 days (15 days + 8 days average lateness)
Net 60: $5,000 paid in 68 days (60 days + 8 days average lateness)

The difference is 45 days of cash tied up. Multiply that by multiple clients and the cash flow impact becomes significant.

Early Payment Discounts: Are They Worth It?

Early payment discounts can be a smart tool when you need faster cash flow. The most common structure is 2/10 Net 30. That means you give up 2% of revenue for payment 20 days earlier than Net 30.³

The tradeoff is simple:

Pros: Faster cash, lower follow-up time, fewer overdue invoices.
Cons: Reduced revenue, clients may expect discounts every time.

If your cash flow is tight or you want to reward reliable clients, early payment discounts can be worth it. If margins are thin, it may not be.

Legal Considerations and Late Fees

Late fees are legal in many places, but the rules vary by jurisdiction. In the UK, statutory interest on late business-to-business payments is set at 8% plus the Bank of England base rate, unless your contract specifies a different rate.⁵ The rule applies when a payment is late and gives businesses a clear legal basis to charge interest on overdue invoices.⁵

In the US, late fees are usually governed by contract terms and state law. Even when legal, you should disclose late fees clearly on the invoice and in your contract to avoid disputes.

Best practice: state your late fee policy in plain language and include it in your invoice notes.

Payment Terms FAQ

Does Net 30 start on the invoice date or delivery date? Most Net terms start on the invoice date. This is why you should issue the invoice promptly and make sure the date is correct.³

Should I offer Net 30 to every client? Not necessarily. For new or high-risk clients, shorter terms, deposits, or payment in advance can reduce risk. For established clients, Net 30 may be a reasonable standard if your cash flow can handle it.

Do early payment discounts always help? Early payment discounts can speed up cash flow, but you lose a portion of revenue. If you offer 2/10 Net 30, the buyer pays 2% less for paying within 10 days.³ Use discounts when faster cash is more valuable than the margin.

What if a client ignores the terms? Follow your reminder schedule and document all communication. The more consistent you are, the more likely clients will treat your terms as real obligations.

Best Practices for Setting Payment Terms

Be explicit: Always list the due date and the payment term.
Confirm in writing: Include terms in contracts and proposals, not just invoices.
Match payment methods: Offer ACH, card, or PayPal to reduce friction.
Use reminders: Automated reminders reduce late payments and admin time.
Reassess annually: As your client mix changes, adjust your standard terms.

Payment Terms Templates You Can Reuse

Use these examples on your invoices:

Net 15: “Payment is due within 15 days of invoice date.”
Net 30: “Payment is due within 30 days of invoice date.”
Due on receipt: “Payment is due upon receipt of this invoice.”
2/10 Net 30: “2% discount if paid within 10 days; full balance due in 30 days.”

When you use consistent wording, clients know exactly what to expect and can schedule payment faster.

Set Clear Terms on Every Invoice

Payment terms are not just a formality. They protect your cash flow and reduce follow-up work. If you want to add clear terms to invoices in seconds, use our free invoice creator.

Set payment terms on your invoice ->

Invoice Payment Terms Explained: Net 15, 30, 60