Invoice Payment Terms Explained (Net 15, Net 30, Due on Receipt)

Payment terms are the part of the invoice that says when the money is due, and they’re a negotiation, not a formality. Terms that are too loose starve your cash flow. Terms that ignore how your client’s accounts payable actually runs guarantee “late” payments that were never going to arrive any sooner. Here’s what the standard terms mean and how to choose yours.

The Common Terms, Decoded

• Due on receipt: payable immediately, which in practice means within a few days
• Net 7 / net 14 / net 15: the full amount is due 7, 14, or 15 calendar days after the invoice date
• Net 30 / net 60: due 30 or 60 days after the invoice date. Net 30 is the default expectation for business-to-business work.
• EOM: due at the end of the month the invoice was issued in
• 2/10 net 30: the client may take a 2% discount for paying within 10 days; otherwise the full amount is due in 30

How to Choose Terms

• Consumers and one-off residential jobs: due on receipt or net 7. The relationship is short and the work is fresh in their mind.
• Freelance client work: net 14 is a sensible default, professional without handing out a month of free credit
• Established business clients: net 30 is standard. Ask their AP team when payment runs happen, and date your invoices to catch the next one.
• Large or slow-paying organizations: negotiate before the work starts. A deposit up front beats fighting net 60 later.

Time Your Invoice to the Client’s Payment Run

Large clients don’t pay invoices one at a time. Accounts payable batches them into payment runs, weekly or twice a month, and an invoice that misses a run waits for the next one no matter what your terms say. That’s how a net 30 invoice quietly becomes a 44-day wait with nobody acting in bad faith. The fix costs you one question: “When are your payment runs, and when do you need an invoice by to make the next one?” Then date and send your invoices to catch the cycle. Suppliers who work with a client’s AP process get treated like professionals, and more to the point, they get paid on schedule.

The Discount Math on 2/10 Net 30

Offering an early payment discount sounds generous until you run the numbers, so run them. On a $1,850 invoice, 2/10 net 30 means the client keeps $37 for paying 20 days early. Annualized, that’s roughly a 36% interest rate you’re paying for faster cash, which is expensive money if your cash flow is already healthy. It can still be worth it: when you’re squeezed and waiting on slow corporate payers, $37 to pull $1,813 forward by three weeks beats most alternatives. Treat it as a deliberate pricing decision, not a line you copied from someone else’s invoice. And if a client takes the discount but pays on day 25 anyway, bill the difference. Discounts have conditions.

Late Fees, Done Properly

A late fee only works if the client agreed to it before the invoice existed. State it in your estimate or contract, then restate it on every invoice. Typical practice is 1-1.5% per month on the overdue balance (roughly 12-18% per year) or a modest flat fee. Interest caps vary by state and country, so check your local rules before setting a rate. And keep the fee’s real job in mind. It isn’t revenue. It exists to make “pay this one first” the path of least resistance when your client sorts their bills.