Understanding Invoice Payment Terms
Common Payment Terms
Due on Receipt
Payment is due immediately upon receipt of invoice
Net 7
Payment due within 7 days of invoice date
Net 15
Payment due within 15 days of invoice date
Net 30
Payment due within 30 days of invoice date
Net 60
Payment due within 60 days of invoice date
Net 90
Payment due within 90 days of invoice date
Early Payment Discounts
Many businesses offer discounts for early payment. Common discount terms include:
- 2/10 Net 30: 2% discount if paid within 10 days, otherwise net 30
- 1/15 Net 45: 1% discount if paid within 15 days, otherwise net 45
- 5/7 Net 60: 5% discount if paid within 7 days, otherwise net 60
Calculating Due Dates
When calculating due dates:
- Count starts from the invoice date (day 0)
- Weekends and holidays are typically included unless specified otherwise
- Some industries use "end of month" (EOM) terms (e.g., Net 30 EOM)
- International transactions may have different conventions
Best Practices
- Clearly state payment terms on all invoices
- Consider offering early payment discounts to improve cash flow
- Be consistent with your payment terms across clients
- Follow up promptly on overdue invoices
- Consider late payment penalties for chronic late payers