Guide

Invoice Payment Terms Explained

Published June 5, 2026 · 7 min read

You've seen "Net 30" on invoices. Maybe "2/10 Net 30." Maybe "Due on Receipt." But what do these actually mean, and which one should you use?

Payment terms are the rules about when and how your client pays you. Pick the wrong ones and you're waiting 90 days for money you earned last month. This guide breaks down the common terms, when to use each, and what to watch out for.

The common payment terms

Due on Receipt

What it means: Pay me when you get this invoice.

When to use it: Small jobs, one-off projects, or clients you don't have a recurring relationship with. Also makes sense when the work is already delivered — you handed over the files, the project is done, and there's no reason to wait.

The catch: "Due on Receipt" doesn't mean "instant payment." Most companies still run a payment cycle. Even with this term, expect to wait 3–7 business days. Large companies with accounts payable departments won't drop everything to cut a check.

Net 15

What it means: Payment is due within 15 days of the invoice date.

When to use it: Short projects, repeat clients, or when you want a middle ground between "pay now" and "take your time." Net 15 is common with small businesses and startups that move fast.

The catch: Some clients assume all invoices are Net 30 regardless of what you wrote. If you're setting Net 15, mention it in your contract before the work starts — not as a surprise on the invoice.

Net 30

What it means: Payment is due within 30 days of the invoice date. If you send the invoice on June 1, payment is due by June 30.

When to use it: This is the default for most business-to-business invoicing. If you're not sure what to use, start here. It's what most companies expect.

The catch: 30 days is a long time when rent is due on the 1st. If you're billing for a full month's work and the client takes the full 30 days, you're always a month behind on income. Plan your cash flow accordingly.

Net 60 / Net 90

What it means: Payment is due in 60 or 90 days.

When to use it: Big companies often demand these terms — they're not asking you, they're telling you. Government contracts and enterprise clients frequently use Net 60 or Net 90.

The catch: If you're a freelancer or small business, 60–90 day terms can wreck your cash flow. If a client insists, consider asking for partial payment upfront (e.g. 50% at project start, 50% at Net 60).

2/10 Net 30 (early payment discount)

What it means: If the client pays within 10 days, they get a 2% discount. Otherwise, full payment is due in 30 days.

When to use it: When you want to encourage faster payment and don't mind giving up a small cut. On a $5,000 invoice, the client saves $100 by paying early — and you get your money 20 days sooner.

The catch: Not every client will take the discount. And on large invoices, 2% adds up. Run the numbers before offering it.

50% Upfront / 50% on Completion

What it means: You collect half the money before starting and the rest when the work is done.

When to use it: Large projects (anything over $2,000–$3,000). New clients you haven't worked with before. Any project where you're buying materials or dedicating significant time upfront.

The catch: Some clients push back on upfront payments. Have a clear reason ready — "I split payments on projects over $X to cover the upfront time commitment" works better than "I don't trust you."

Payment terms at a glance

What about late fees?

You can charge them, but you have to say so before the invoice goes out — ideally in your contract. A common setup is 1.5% per month on the outstanding balance. That's not meant to be punitive; it covers the cost of not having that money available to you.

If you want to add a late fee clause, keep it simple:

Invoices not paid within the stated terms are subject to a late fee of 1.5% per month on the outstanding balance.

Check your local regulations — some places cap how much you can charge, and some require specific language.

A few practical tips

• Agree on terms before the work starts. Don't wait until you send the invoice to tell a client it's Net 15 if they assumed Net 30.
• Put the due date on the invoice. Don't just write "Net 30" — write "Due: July 1, 2026." Specific dates work better than abbreviations.
• Send the invoice right away. The clock starts when you send it, not when the project ends. If you wait two weeks to write the invoice, you've already given away half your payment window.
• Follow up politely. A quick email on day 31 saying "Just checking in on invoice #2026-003, due June 30" is fine. Most late payments are just oversight, not bad intentions.

Frequently asked questions

What does Net 30 mean on an invoice?

Net 30 means the client has 30 days from the invoice date to send payment. If you send the invoice on June 1, payment is due by June 30.

Is Due on Receipt the same as immediate payment?

In theory, yes. Due on Receipt means payment is expected when the client receives the invoice. In practice, most companies still take a few days to process it.

What payment terms should freelancers use?

Net 15 or Net 30 is standard for freelancers. Use Due on Receipt for small one-off jobs. Always agree on terms before starting the work, not when you send the invoice.

Can I charge late fees on overdue invoices?

Yes, if you stated the late fee policy on the invoice or in your contract before the work started. A common rate is 1–2% per month on the outstanding balance. Check local regulations — some regions cap how much you can charge.

Set your terms and send the invoice

Pick your payment terms, open the invoice generator, and fill in the form. Set your due date, add your payment details, and download the PDF. Done in under 5 minutes.

Written by Allen Wong. If this guide helped you, consider supporting InvoiceCraft on Ko-fi.