Payment terms are the single biggest lever you have over how quickly you get paid. The terms you set on your invoices directly influence client payment behavior, your cash flow, and your average days to collection.
Common Payment Terms Compared
Due on Receipt
Payment is expected immediately upon invoice delivery. Best for small invoices, new clients, and businesses where service is delivered at the time of billing. Average actual payment time: 5-7 days.
Net 15
Payment due within 15 days of the invoice date. A good balance between urgency and professional courtesy. Increasingly the standard for service businesses. Average actual payment time: 14-18 days.
Net 30
The traditional default — payment due within 30 calendar days. Widely expected in B2B transactions, especially with larger companies. Average actual payment time: 28-35 days.
Net 60 / Net 90
Extended terms used primarily with enterprise clients and government contracts. Significantly impacts cash flow and should be reserved for high-value, low-risk clients.
How Terms Affect Cash Flow
The difference between Net 15 and Net 30 seems small — just 15 days. But for a business sending $50,000 in monthly invoices, that 15-day difference means $25,000 more cash in hand at any given time. Over a year, the compounding effect on working capital is substantial.
Choosing the Right Terms
- New clients: Start with Due on Receipt or Net 15. Extend terms after they demonstrate reliable payment behavior.
- Small businesses and freelancers: Net 15 or Due on Receipt. Small operations need cash quickly.
- Mid-market companies: Net 15 to Net 30. Match industry norms while protecting your cash flow.
- Enterprise clients: Net 30 is often non-negotiable. Consider offering early payment discounts to accelerate collection.
Negotiating Payment Terms
Clients sometimes request longer payment terms. Before accepting:
- Understand why they need the extension — is it standard corporate policy or a cash flow issue?
- Consider the client value — high-value, reliable clients may warrant more flexibility.
- Negotiate a middle ground — if they want Net 60, counter with Net 30 plus an early payment discount.
- Build the cost of extended terms into your pricing — longer terms cost you money and should be reflected in your rates.
Displaying Terms on Invoices
- State terms clearly: "Payment Terms: Net 15" and show the specific due date.
- Include any late fee policy: "A 1.5% monthly late fee applies to invoices overdue by more than 14 days."
- Show accepted payment methods and any relevant instructions.
- Make the due date the most prominent date on the invoice — bold, colored, or highlighted.
When to Change Terms
Review your payment terms annually. Shift to shorter terms when your cash flow needs tightening, when a client demonstrates a pattern of late payment, when your industry standard shifts, or when you have enough leverage (demand exceeds supply) to require faster payment.