Invoice Generator

Invoice payment terms explained

Payment terms are the least-negotiated part of most invoices and one of the few levers that changes when money actually arrives. Two invoices for the same amount, sent the same day, can be paid five weeks apart purely because one said Net 30 and the other said 30 days end of month.

The terms you will actually encounter

Terms fall into three families: a fixed number of days, a month-anchored date, and payment before or on delivery. The number-of-days family is the most common and the most misread, because the clock does not always start where people assume.

TermWhat it meansWhen it suits you
Due on receipt Payment expected immediately on delivery of the invoice. Small jobs and new clients. Widely ignored by larger companies, whose systems cannot pay same-day regardless of intent.
Net 7 / Net 14 Full amount due 7 or 14 days from the invoice date. Freelance and small-agency work. Short enough to protect cash flow, long enough to be processed.
Net 30 Full amount due 30 days from the invoice date. The default for business-to-business work in most of the world. Rarely questioned.
Net 60 / Net 90 Due 60 or 90 days from the invoice date. Common with large corporates and public bodies. You are effectively lending them the money — price accordingly.
EOM End of month: due at the end of the month the invoice was issued in. Clients running a single monthly payment run. An invoice sent on the 2nd waits four weeks; one sent on the 29th is due almost at once.
Net 30 EOM 30 days from the end of the month of issue. Very common and much slower than it sounds. An invoice dated 3 March is not due until 30 April — 58 days.
MFI (e.g. 15 MFI) Month following invoice: due on a fixed day of the next month. Predictable for both sides. Useful when the client's payment run is on a known date.
2/10 Net 30 2% discount if paid within 10 days; otherwise the full amount at 30 days. When you would rather have cash now than the last 2%. See the real cost below before offering it.
CIA / PIA Cash in advance / payment in advance — the whole amount before work starts. New clients, high-risk jurisdictions, or work with unrecoverable up-front costs.
50/50 Half up front, half on completion. The workhorse term for project work. Caps your exposure without asking the client to fund everything.
COD Cash on delivery — payment as the work or goods are handed over. Physical goods and one-off jobs where handover is a distinct moment.
Common invoice payment terms. Always write the due date explicitly as well as the term — abbreviations are read inconsistently.

Write the date, not just the term. "Net 30" is ambiguous enough that two reasonable people will produce different due dates from the same invoice. Put the actual calendar date on it — an unambiguous due date is the single cheapest improvement you can make to an invoice.

What an early payment discount really costs

2/10 Net 30 looks like a small concession. It is not. You are giving up 2% of the invoice to be paid 20 days sooner, and the annualised cost of that trade is much larger than most people assume.

The arithmetic: you forgo 2 to receive 98, so the cost of the money is 2 ÷ 98 ≈ 2.04% for 20 days. There are roughly 18.25 such periods in a year (365 ÷ 20), which puts the annualised cost at about 37%. That is credit-card territory. It can still be the right call — if the alternative is an overdraft at 40%, or if it reliably converts a 45-day payer into a 10-day payer — but it should be a deliberate financing decision, not a politeness.

Discount termDays savedApprox. annualised cost
1/10 Net 3020~18%
2/10 Net 3020~37%
2/10 Net 6050~15%
3/10 Net 3020~56%
 Rounded, using discount ÷ (100 − discount) × (365 ÷ days saved).

Choosing terms that actually get paid

The best term is the shortest one the client's systems can genuinely accommodate. Pushing Net 7 onto a corporate that runs payments fortnightly does not get you paid in seven days; it gets you an invoice that is permanently "overdue", which devalues every reminder you send afterwards.

Set your terms once and reuse them on every invoice.

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Statutory limits on how long terms can be

Payment terms are not entirely a private matter. Several jurisdictions cap how long a business can take, particularly when the payer is a public body.

The practical use of this is not litigation. It is that "60 days is the outer limit of what the law considers reasonable here" is a calm, factual thing to say when a client proposes 120.

Common questions

Does Net 30 mean 30 calendar days or business days?

Calendar days, by near-universal convention. If you mean business days you have to write that explicitly, and you should expect to be asked why.

When does the clock start — invoice date or delivery date?

Usually the invoice date, which is why invoicing promptly matters so much. Some contracts start the clock on receipt or on acceptance of the work instead; if yours does, the difference can be weeks, so check before assuming.

Can I change terms partway through a relationship?

For future work, yes, with notice. Changing terms on work already delivered is a unilateral variation of an agreed contract and will usually just be ignored. Raise it when quoting the next job.

Should I offer a discount for early payment?

Only if you have worked out the annualised cost and would accept borrowing at that rate. For most freelancers, a deposit achieves the same cash-flow goal without permanently discounting the work.

What terms should I use if I genuinely don't know?

Net 14 for individuals and small businesses, Net 30 for larger companies, and a deposit for anything where you will be significantly out of pocket before completion. These are unremarkable enough to pass without discussion.

General information, not legal or financial advice. Statutory limits and their exceptions vary by country and change over time. Confirm the current rules in your own jurisdiction before relying on a specific figure.

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