Invoice payment terms explained

What payment terms are

Payment terms are a short line on your estimate and invoice, such as “Net 30”, that sets the deadline for paying. They matter because a customer with no deadline has no reason to pay today.

Agree the terms before you start. A term the customer saw on the estimate is far easier to hold to than one that first appears on the bill.

The terms you will see most

• Due on receipt: payment is expected as soon as the invoice arrives. Good for small jobs and homeowners.
• Net 7 or Net 14: due 7 or 14 days after the invoice date. Common for repairs and one-off work.
• Net 15 and Net 30: due 15 or 30 days after the invoice date. Net 30 is the usual ask from businesses with an accounts team.
• Net 60: two months. Some large customers insist on it. Think hard before accepting it as a small business.
• 2/10 Net 30: a 2% discount if paid within 10 days, otherwise the full amount in 30. It rewards fast payment, but costs you the discount.
• Deposit up front, balance on completion: for example 50% now and 50% when the job is done.
• Milestones: part of the price at set stages, such as start, rough-in and finish.

“Net 30” counts from the invoice date, so an invoice you send late is paid late. Write the actual due date as well.

Choosing the right one

• Homeowner, job under a few hundred dollars: due on receipt, and let them pay at the door.
• Larger home jobs: a deposit, then the balance due on completion.
• Ongoing work for a business: Net 15 or Net 30, with a monthly invoice date you can keep to.
• Materials you must buy first: ask for a deposit that covers them.

Shorter terms get paid sooner. If you offer Net 30, expect some invoices to arrive on day 30, and some after it.

What each term costs you

Terms are a trade-off. The longer you give a customer to pay, the longer you carry the cost of materials, wages and fuel. Net 30 means you are lending the customer a month of your money, interest free.

If cash is tight, shorten the terms, ask for a deposit, or invoice in stages. If you want the work, you may accept longer terms, but add them to your price or your plan. Do the sums before you say yes to Net 60.

Deposits

A deposit covers your upfront costs and shows the customer is committed. State the amount and what it is for on the estimate, and take it off the final invoice so the total due is clear.

Late fees

A late fee is a charge for paying after the due date. It only helps if the customer agreed to it before the work, so put it on the estimate and again on the invoice, for example “1.5% per month on balances over 30 days.”

Rules on late fees and interest differ by state, and some cap them or limit them for consumers. This guide is general information, not legal advice. Check your state’s rules or ask a lawyer or accountant before you rely on a fee.

Many owners keep the fee on paper and rarely charge it. Its main job is to give a polite reason to ask for payment now.

How to write terms on an invoice

Keep it short and put it above the payment details. When you’re ready, build one in the free invoice generator. Once the terms are set, a polite follow-up routine does the rest.