Understanding Invoice Payment Terms: Net 30, Net 60, and More

What Are Payment Terms?

Payment terms dictate when a client is expected to pay an invoice. Setting clear payment terms upfront helps manage cash flow and sets expectations for both parties.

Common Payment Terms Explained

• Due Upon Receipt: Payment is expected immediately when the client receives the invoice.
• Net 15, Net 30, Net 60: Payment is due within 15, 30, or 60 days of the invoice date, respectively. "Net 30" is the most common standard in B2B transactions.
• EOM (End of Month): Payment is due at the end of the month in which the invoice was issued.

Choosing the Right Terms

For freelancers and small businesses, shorter terms like "Due Upon Receipt" or "Net 15" are often preferable to maintain healthy cash flow. However, larger corporate clients may have strict policies requiring "Net 30" or even "Net 60". It's crucial to negotiate these terms before starting work.

Late Fees

Consider including a clause about late fees in your contract and on your invoice to encourage timely payment. Ensure any late fees comply with local usury laws.