Payment Terms Explained: Net 30, Due on Receipt, and More
Payment terms tell clients when you expect to be paid and what happens if payment is late. Clear terms reduce disputes and help your cash flow.
Common terms (and what they mean)
Due on receipt
Payment is expected immediately. This is common for small projects, one-off services, or when you’re working with new clients.
Net 7 / Net 15 / Net 30
“Net” means the invoice total is due a certain number of days after the invoice date. For example, Net 30 means payment is due 30 days after the invoice date.
2/10 Net 30
A discount for early payment: 2% off if paid within 10 days, otherwise the full amount is due in 30 days. Example: on a $1,000 invoice, early payment would be $980.
Milestone payments
Instead of one big invoice, you bill at specific milestones (e.g., 50% upfront, 25% after first delivery, 25% on completion). This reduces risk for both sides.
How to choose the right terms
- Client type: larger companies often require Net 30–60.
- Your cash needs: shorter terms reduce gaps between projects.
- Project size: use deposits or milestones for higher-risk work.
- Relationship: you can offer flexibility to repeat clients.
Late fees and reminders
If you charge late fees, include the policy in your contract and on the invoice. Keep it clear and reasonable. A common approach is a flat fee or a monthly percentage after a grace period.
Pro tip
Shorten payment time by removing friction: include payment instructions, confirm the due date, and send a polite reminder before the deadline.
Write terms in plain language
Avoid ambiguity. Examples:
- “Payment due within 15 days of invoice date (Net 15).”
- “Payment due on receipt. Thank you!”
- “2% discount if paid within 10 days; otherwise due in 30 days.”
Create an invoice with clear terms
Pick your terms, add your items, and export a PDF invoice.