Invoice payment terms: common types, examples and tips

Published Wednesday 17 June 2026

Table of contents

• What are invoice payment terms?
• Why payment terms matter for your cash flow
• Common types of invoice payment terms
• Invoicing tips from other small businesses
• Tips to get paid faster
• Short payment terms get you paid quicker
• Payment terms are getting shorter
• How to write clear payment terms on your invoices
• Get clients on the clock quickly
• Don't be afraid to chase payment
• Creating an invoicing system that works
• Streamline your payment process with the right tools
• FAQs on invoice payment terms

Key takeaways

• Set short payment terms of seven to 14 days, as clients who pay late on a short-term invoice will still pay you weeks earlier than they would on a 30-day or longer term.
• Send your invoice the moment you finish the work, because the payment clock starts when the client receives the invoice, not when you complete the job.
• Write payment terms in plain, specific language on every invoice, stating the exact due date, accepted payment methods, and any late fees, so clients have no room to delay or misunderstand.
• Follow up on overdue invoices straight away by sending a reminder before the due date, following up on the day payment is due, and calling the client directly if you get no response.

What are invoice payment terms?

Invoice payment terms are the conditions on your invoice that specify how and when you expect to be paid. They set clear expectations between you and your clients about the payment process.

Key components of payment terms include:

• Due date: the specific date you must receive payment
• Payment methods: accepted options such as credit cards, bank transfers or cheques
• Currency: the currency for payment, especially for cross-border work
• Late payment penalties: fees or interest you apply to overdue invoices

The due date matters most because it directly impacts your cash flow.

Many businesses used to offer 30 days to pay, but shorter terms are now standard. Some countries, such as New Zealand, are considering a maximum payment term of 20 days.

Electronic invoicing and online payments make shorter terms more practical than ever, with Australian Government agencies already paying eInvoices in five days. If you meet your clients' deadlines, you deserve to be paid within a week.

Why payment terms matter for your cash flow

Clear payment terms help you get paid on time and keep your business financially healthy.

Setting clear payment terms helps you:

• Improve cash flow: know exactly when to expect payments
• Build trust: set clear expectations that prevent misunderstandings
• Reduce late payments: agree on terms before work begins
• Look professional: use standard terms that clients recognise

Common types of invoice payment terms

Most businesses use standard payment terms. Familiar terms help your customers know when and how to pay you.

The most common payment terms are:

• Net 30, 60 or 90: Full payment is due within 30, 60 or 90 days after the invoice date. Net 30 is the most common. Australia's voluntary supplier payment code requires signatories to pay small businesses within 30 days. The Payment Times Reporting Scheme requires large businesses to publish their small business payment times.
• Payment in Advance (PIA): You require full payment before work begins or you deliver goods. Use this for large projects or new clients.
• Due upon receipt: The client must pay as soon as they receive the invoice. This encourages quick payment, though a specific date can be clearer.
• Cash on Delivery (COD): You collect payment when you deliver goods. This is common for physical products but less so for services.
• Instalments: You split the total cost into smaller payments over a set period. This makes expensive products or services more manageable for customers.

Invoicing tips from other small businesses

Clients pay almost 40% of invoices late, and suppliers often wait on average 34 days to receive payment for standard 30-day terms, but you can take steps to get paid sooner. Some businesses receive payment in days instead of weeks or months by using specific payment terms and proven strategies.

You can use insights from 1,500 business owners and millions of invoices to get paid faster. These businesses use specific invoice payment terms and proven strategies to speed up payments.

Tips to get paid faster

Getting paid consistently requires more than just sending invoices. The most effective strategies focus on clarity, timing and follow-through.

Proven ways to get paid faster, based on feedback from 1,500 businesses:

• Keep detailed records: track time and inventory accurately to avoid disputes
• Create clear invoices: make them easy to understand and process quickly
• Address the right person: send invoices directly to whoever handles payments
• Invoice immediately: send invoices as soon as you complete the work
• Maintain communication: stay in touch with clients about upcoming and overdue payments
• Include overdue fees: add penalties for late payments to encourage promptness

Short payment terms get you paid quicker

Short payment terms help you get paid faster, even when clients pay late. The maths is simple: a late payment on a short term still arrives sooner than a late payment on a long term.

Payment terms compare to actual payment times as follows:

• One-week terms: clients typically pay in about two weeks
• Two-week terms: clients typically pay in two to three weeks
• Three- to four-week terms: clients typically pay in about a month

Even if clients pay short-term invoices late, you still receive payment weeks earlier than with longer terms.

Payment terms are getting shorter

Shorter payment terms are now the norm. Close to 75% of invoices ask for payment within two weeks, and major corporations like Rio Tinto have moved to 20-day terms for thousands of suppliers.

For larger bills, some customers may expect longer payment terms. You can negotiate these terms to find a balance that works for both parties.

Negotiation tip: If a client asks for a discount, ask for faster payment in return. Trading a small discount for quicker cash flow can benefit both sides.

How to write clear payment terms on your invoices

Clear, direct language in your payment terms helps avoid late payments. Ambiguous wording gives clients room to delay, so be precise about what you expect.

To write payment terms that get results:

1. Be specific: write "Payment due 30 days from invoice date" instead of just "Net 30" to remove any ambiguity
2. State the exact due date: include the specific date, such as "Due by 30 August 2024", so there's no confusion
3. List your payment methods: include all accepted options (bank transfer, credit card) with necessary details like your bank account number
4. Outline consequences: state any late fees clearly, such as "You may apply a 2% late fee to overdue invoices", and ensure compliance with unfair contract term laws if your agreement qualifies as a small business contract

Get clients on the clock quickly

The payment clock starts when you send the invoice, not when you finish the work. The sooner you invoice, the sooner you get paid.

Speed up your invoicing process by following these steps:

1. Use templates: reduce invoice creation time with pre-built formats
2. Send electronically: deliver invoices instantly instead of waiting for post
3. Invoice from your phone: bill clients immediately after completing work on-site
4. Try eInvoices: automate processing for faster payments and fewer errors, which can reduce processing costs to less than $10 an invoice

Don't be afraid to chase payment

Start your follow-up process as soon as a payment is overdue. Consistent follow-up helps you collect payments on time and keeps your business running smoothly.

Follow this payment chase timeline:

1. Before the due date: send a friendly reminder email
2. On the due date: follow up immediately if payment hasn't arrived
3. After no response: call the client directly

If you don't have time for manual follow-up, try these alternatives:

• Use invoicing software: set up automatic reminder emails
• Involve your accountant: ask them to call overdue clients on your behalf

Creating an invoicing system that works

A good invoicing system helps you invoice faster and improve your cash flow. Many businesses start with Microsoft Word or online templates, but these methods don't scale.

As your business grows, billing software can help. Many accounting packages include invoicing features that update your books automatically as you issue and receive payments.

Streamline your payment process with the right tools

The right tools automate invoicing and payment reminders, so you get paid faster and spend less time on bookkeeping.

Accounting software helps you:

• Create and send invoices quickly: use templates and saved client details
• Automate payment reminders: set up emails that send automatically when invoices are due or overdue
• Offer online payment options: make it easy for customers to pay instantly
• Connect invoicing to accounting: update your books automatically as payments arrive

With Xero, you can manage your finances in one place and focus on running your business. Get one month free.

FAQs on invoice payment terms

Common questions about invoice payment terms and getting paid faster.

What are the most common invoice payment terms?

The most common payment terms are Net 30 (payment due within 30 days), Payment in Advance (PIA), Due upon receipt, Cash on Delivery (COD), and instalments. Net 30 is the most widely used, though shorter terms are becoming more popular.

How can I get clients to pay invoices faster?

To get paid faster, use short payment terms, invoice immediately after completing work, send invoices to the right person, follow up consistently, and make payment easy by offering multiple payment methods including online options.

What payment terms should small businesses use?

Small businesses should use payment terms between seven and 14 days. Shorter terms help improve cash flow, and even if clients pay late, you'll still receive payment faster than with 30-day or longer terms.

Can I charge late fees for overdue invoices?

Yes, you can charge late fees for overdue invoices if you clearly state the fees in your payment terms before starting work. Make sure your late fee policy complies with local unfair contract term laws, especially for small business contracts.

Should I offer payment plans or instalments?

Offering instalments can make expensive products or services more accessible to customers while still protecting your cash flow. Split the total cost into manageable payments over an agreed period, and clearly document the payment schedule.