Common invoice payment terms for your small business to know: Clear examples, tips and FAQs

Published Thursday 27 November 2025

Table of contents

• Invoicing tips from other small businesses
• What are invoice payment terms?
• Common types of invoice payment terms
• Why payment terms matter for your cash flow
• Tps 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

• Implement shorter payment terms of 7-14 days instead of the traditional 30 days to get paid weeks earlier, even when clients pay late.

• Send invoices immediately after completing work and include specific due dates, accepted payment methods, and late payment penalties to set clear expectations.

• Follow up consistently with overdue payments by sending reminder emails before the due date and calling clients who don't respond to emails.

• Negotiate faster payment terms in exchange for discounts when clients request price reductions, creating a win-win situation for both parties.

Invoicing tips from other small businesses

Almost 40% of invoices are paid late, but you can take steps to get paid sooner.

The good news: Some businesses get paid in days instead of weeks or months. They use specific invoice payment terms and proven strategies to speed up payments.

Insights from 1,500 business owners and millions of invoices have shaped this guide to help you get paid faster.

What are invoice payment terms?

Invoice payment terms are the specific conditions that spell out 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:

• stating the due date for payment
• listing accepted payment methods, such as credit cards, bank transfers or cheques
• specifying the currency, especially for cross-border work
• outlining late payment penalties for overdue invoices

Why the due date matters most: 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.

Now that you can send invoices electronically and most payments are made online, shorter payment terms are more practical than ever.

If you meet your clients' deadlines, you deserve to be paid within a week.

Common types of invoice payment terms

Most businesses use standard payment terms. Familiar terms help your customers know when and how to pay you. Here are some of the most common ones:

• Net 30, 60 or 90: This means the full payment is due within 30, 60 or 90 days after the invoice date. Net 30 is a common term, and Australia’s voluntary supplier payment code requires signatories to pay small businesses within 30 days.
• Payment in Advance (PIA): You require full payment from the client before you start the work or deliver the goods. Use this option for large projects or when you work with new clients.
• Due upon receipt: Payment is due as soon as the client receives the invoice. This encourages quick payment, but a specific date can sometimes be clearer.
• Cash on Delivery (COD): The customer pays for the goods at the time of delivery. This is less common for service businesses but is still used for physical products.
• Instalments: The total cost is broken down into a series of smaller payments over a set period. This can make expensive products or services more manageable for your customers.

Why payment terms matter for your cash flow

Setting clear payment terms helps you get paid and keeps your business healthy. Clear payment terms help you create a better experience for your customers and manage your finances.

Setting clear payment terms helps you:

• improve your cash flow by knowing when to expect payments
• set clear expectations to prevent misunderstandings and build trust
• reduce late payments by agreeing on terms from the start
• look professional with standard payment terms

Tips to get paid faster

Getting paid consistently requires more than just sending invoices. Here are effective ways to get paid faster, based on feedback from 1,500 businesses:

• Keep detailed records: Track time and inventory accurately
• Create clear invoices: Make them easy to understand and process
• Address the right person: Send invoices to whoever handles payments
• nvoice immediately: Don't delay after completing work
• Maintain communication: Stay in touch with clients about payments
• Include overdue fees: Add penalties for late payments

Short payment terms get you paid quicker

Short payment terms help you get paid faster, even if clients pay late.

Payment term vs actual payment time:

• one week terms are paid in about two weeks
• two week terms are paid in two to three weeks
• three to four week terms are paid in about a month

Even if short-term invoices are paid late, you still get paid weeks earlier than with longer terms.

Payment terms are getting shorter

Shorter payment terms are now common. For example, major corporations like Rio Tinto have moved to 20-day payment terms for thousands of suppliers. Close to 75% of invoices ask for payment within 2 weeks, so client expectations are already changing.

For larger bills, some customers may expect longer payment terms. You can negotiate these terms.

If a client asks for a discount, ask for faster payment in return. This approach can benefit both you and your client.

How to write clear payment terms on your invoices

Use clear, direct language in your payment terms to avoid late payments. Here's how to make sure your terms are easy to understand:

• Be specific: Instead of just writing 'Net 30', state 'Payment due 30 days from invoice date'. It leaves no room for interpretation.
• State the full due date: Always include the exact date payment is due, such as 'Due by 30 August 2024'.
• List your payment methods: Make it easy for customers to pay you. List the ways you accept payment (e.g., bank transfer, credit card) and include necessary details like your bank account number.
• Outline any consequences: If you charge late fees, mention them in your terms. Make sure you comply with laws on unfair contract terms for small businesses. For example, 'A 2% late fee may be applied to overdue invoices'.

Get clients on the clock quickly

The payment period starts when you send the invoice, not when you finish the work. Send invoices promptly to get paid sooner.

Send invoices as soon as you finish the work to get paid faster.

Speed up your invoicing process by:

• using templates to reduce creation time
• sending invoices electronically for faster delivery
• invoicing from your phone to bill immediately after completing work
• trying eInvoices for automated processing and faster payments

Don't be afraid to chase payment

Start your follow-up process as soon as a payment is overdue.

Payment chase timeline:

Follow this payment chase timeline:

• send a friendly reminder email before the due date
• follow up again immediately after the due date
• call the client if you do not get an email response

Consistent follow-up helps you collect payments on time and keep your business running smoothly.

If you do not have time for all the follow-up, you can:

• use invoicing software that automatically sends reminder emails
• ask your accountant to call overdue clients

Creating an invoicing system that works

Many businesses start by creating invoices in software like Microsoft Word or by searching online for tips.

As your business grows, your invoicing needs may change. Create a system that helps you invoice faster and improve your cash flow.

Billing software can help. Many accounting packages include billing features that update your books automatically as you issue and receive payments.

Streamline your payment process with the right tools

The right tools can 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. Set up automated reminders for overdue payments. Offer online payment options to make it easy for your customers to pay you.

Connect your invoicing and accounting to update your books automatically as payments arrive. With Xero, you can manage your finances in one place and focus on running your business.

Try Xero for free to see how quickly you can get paid.

FAQs on invoice payment terms

Find answers to common questions about invoice payment terms below.

What are reasonable payment terms in Australia?

It can vary by industry, but payment terms of 7 to 30 days are common for small businesses. Many businesses are moving towards shorter terms, like 7 or 14 days, to improve cash flow.

Is 'due upon receipt' a good idea?

It can encourage immediate payment, but it can also be ambiguous. Some clients may interpret it differently. Providing a specific due date is often clearer for both you and your client.

Can you charge interest on late payments?

Yes, you can, but this policy must be clearly stated in your initial contract or terms of service. It's also a good idea to check local regulations to ensure you're compliant.