Invoice Payment Terms Explained

Payment terms define when and how your customers should pay. Clear terms reduce confusion, improve cash flow, and set professional expectations.

Common Payment Terms

Due on Receipt

Payment expected immediately

Best for: Small transactions, one-time customers

Pros: Fastest payment

Cons: May seem pushy

Net 7 / Net 14

Due within 7 or 14 days

Best for: Services, smaller businesses

Pros: Quick cash flow

Cons: May be tight for some customers

Net 30

Due within 30 days

Industry standard for B2B

Best for: Regular business transactions

Most widely accepted

Net 60 / Net 90

Due within 60 or 90 days

Best for: Large orders, established relationships

Pros: Attractive to customers

Cons: Long wait for payment

End of Month (EOM)

Due at month's end

EOM + 30 = End of following month

Best for: Regular monthly clients

Cash on Delivery (COD)

Payment when goods arrive

Best for: New customers, high-risk orders

Reduces credit risk

Early Payment Discounts

Format: X/Y Net Z

X = Discount percentage

Y = Days to qualify

Z = Standard payment period

Examples:

2/10 Net 30

2% discount if paid within 10 days

Full amount due in 30 days

1/7 Net 14

1% discount if paid within 7 days

Full amount due in 14 days

Why Offer Discounts?

A 2% discount for paying 20 days early equals ~36% annual return for the customer. It's a strong incentive!

Your Benefit

Faster cash flow

Reduced collection efforts

Better customer relationships

Setting Your Payment Terms

Consider:

Your cash flow needs

- Need cash fast? Use shorter terms - Stable cash flow? Can be flexible

Industry norms

- Research what competitors offer - Match or improve upon standard

Customer relationships

- New customers: Stricter terms - Loyal customers: More flexibility

Invoice size

- Small invoices: Shorter terms - Large invoices: May need longer

Recommended Terms by Business Type

Business Type	Suggested Terms
Retail	Due on Receipt
Freelance	Net 14
Professional Services	Net 30
B2B Products	Net 30
Wholesale	Net 30-60
Construction	Progress billing

How to Display Terms

On every invoice, clearly state:

Payment due date (specific date)

Early payment discount (if any)

Late payment penalty

Accepted payment methods

Example:

Payment Terms: 2/10 Net 30

>

Pay by [date] for 2% discount.

Otherwise, full payment due by [date].

Late payments subject to 2% monthly interest.

LEDGA Payment Terms

LEDGA makes payment terms easy:

Preset templates - Common terms ready to use

Auto-calculate due dates - From invoice date

Discount tracking - Know who qualifies

Reminder automation - Based on terms

Reporting - See payment trends