Invoice payment terms: what to include and common terms

Published Saturday 21 March 2026

Table of contents

• What are invoice payment terms?
• What to include in invoice payment terms
• Common invoice payment terms
• How to write payment terms on your invoice
• Short payment terms get you paid quicker
• Payment terms are getting shorter
• Top tips to get paid faster
• Creating an invoicing system that works
• Get started with Xero invoicing
• FAQs on invoice payment terms

Key takeaways

• Set shorter payment terms of 7-14 days instead of the traditional 30 days to get paid faster, as research shows invoices with 7-day terms are paid in approximately 2 weeks while 30-day terms take about a month.
• Include specific details in your payment terms such as the exact due date, accepted payment methods, currency requirements, and any early payment discounts or late fees to prevent confusion and encourage prompt payment.
• Send invoices immediately after completing work and address them directly to the person who handles payments rather than the project contact to eliminate delays in the payment process.
• Discuss payment terms upfront before starting any work to set clear expectations with clients and prevent disputes or confusion when it comes time to collect payment.

What are invoice payment terms?

Invoice payment terms are the conditions you set for how and when clients should pay. They typically include your payment due date, accepted payment methods, currency requirements, and any penalties for late payment.

The due date is the most critical term. While 30-day terms were once standard, expectations have shifted toward faster payment.

Sending invoices digitally and paying online have made long payment terms unnecessary. When invoices arrive instantly and payments can be made in minutes, there's no practical reason to wait 30 days, especially since a recent survey found that two-thirds of small businesses now accept payments online.

Many businesses now request payment within 7–14 days and get it.

What to include in invoice payment terms

Your payment terms should clearly communicate how and when you expect to be paid. Include these key details:

Payment amount and description

State the total amount due and itemize the work or products provided. Clear descriptions prevent disputes and speed up approval. According to the Canada Revenue Agency, businesses are required to provide sufficient information on invoices so customers can confirm their tax liability has been satisfied.

Payment due date

Specify when payment is expected, such as "Due within 14 days" or "Net 30." Including the actual calendar date removes ambiguity. This is important because Canadian tax law states that payment is deemed to become due on the date the invoice is issued.

Accepted payment methods

List how clients can pay, whether by bank transfer, credit card, cheque, or online payment. Offering multiple options makes it easier for clients to pay promptly.

Currency (for international payments)

If you work with clients in other countries, specify the currency you invoice in. This prevents confusion and potential exchange rate disputes.

Early payment discounts

Offering a small discount for fast payment can improve cash flow. For example, "2/10 Net 30" means clients get a 2% discount if they pay within 10 days.

Late payment penalties

State any fees or interest charged on overdue invoices. This encourages timely payment and compensates you for the cost of delayed cash flow.

Common invoice payment terms

Understanding standard payment terminology helps you choose the right terms for your business. Here are the most common terms you'll see:

• Net 30: Payment due 30 days from the invoice date
• Net 14: Payment due 14 days from the invoice date
• Net 7: Payment due 7 days from the invoice date
• Due on Receipt: Payment expected immediately upon receiving the invoice
• 2/10 Net 30: 2% discount if paid within 10 days; otherwise, full amount due in 30 days
• End of Month (EOM): Payment due by the last day of the month
• 21 MFI: Payment due 21 days after the month of the invoice
• Cash on Delivery (COD): Payment collected when goods are delivered
• Payment in Advance (PIA): Full or partial payment required before work begins

How to write payment terms on your invoice

The way you word your payment terms can make a big difference. Your language should be direct, professional, and easy to understand. Here's how to state them effectively:

Be specific about the due date. Instead of "payment due soon," write "Payment due within 14 days of invoice date" or include the exact calendar date.

State your preferred payment method. For example: "Please pay by bank transfer to [account details] or by credit card at [payment link]."

Include early payment incentives. If you offer discounts, make them clear: "Pay within 10 days and receive a 2% discount."

Add late payment terms. Be direct but professional: "Invoices unpaid after 30 days will incur a 1.5% monthly interest charge."

Example payment terms block:

• Payment terms: Net 14
• Due date: [Date]
• Payment methods: Bank transfer, credit card, or PayPal
• Early payment discount: 2% if paid within 7 days
• Late payment fee: 1.5% interest per month on overdue balances

Short payment terms get you paid quicker

Shorter payment terms result in faster payment, even when invoices go slightly past due. Our research on millions of invoices found:

• 7-day terms: Paid in approximately 2 weeks
• 14-day terms: Paid in 2–3 weeks
• 21–30-day terms: Paid in about a month

Payment terms are getting shorter

Nearly 75% of invoices now request payment within two weeks. Shorter terms have become the norm, not the exception.

For larger invoices, clients may request extended terms. Consider negotiating: offer a small discount in exchange for faster payment to maintain your cash flow.

Top tips to get paid faster

Getting paid on time takes more than sending an invoice. Here are seven tips from 1,500 business owners:

1. Discuss payment terms before you start. Setting expectations upfront prevents confusion and ensures clients understand when payment is due.
2. Send invoices immediately after completing work. The payment clock starts when your client receives the invoice, not when you finish the job. Use templates, send electronically, and invoice from your phone to eliminate delays.
3. Keep detailed records of time and costs. Track expenses as you go so invoicing is fast and accurate. This also lets you flag budget overruns before they become billing surprises.
4. Make invoices clear and easy to understand. List job details in plain language so clients can review and approve quickly. Confusion causes payment delays.
5. Address the invoice to the person who pays. Send invoices directly to accounts payable, not the person who ordered the work. If you're unsure who handles payments, ask.
6. Follow up on overdue invoices promptly. Send a reminder email before the due date, follow up immediately if payment is late, and call if emails go unanswered. To save time, use invoicing software that sends automatic reminders or ask your accountant to handle collection calls.
7. Consider late payment fees. If payment terms are clearly stated and ignored, you can charge interest on overdue amounts. Use this strategically, as some clients may push back. You can always waive the fee once payment is received.

Creating an invoicing system that works

As your business grows, a reliable invoicing system becomes essential. The right system speeds up billing, reduces manual work, and improves cash flow.

Invoicing software helps by automating reminders and tracking payments, aligning with a broader trend where many firms report investing in digital tools. When it's part of your accounting package, your books update automatically as you issue and receive payment on invoices. Find out more in our guide on how to make an invoice.

Get started with Xero invoicing

A streamlined invoicing process reduces the time you spend chasing payments and keeps cash flowing into your business.

Xero's invoicing software helps you create professional invoices, track payments automatically, and get paid faster. With Tap to Pay on the Xero Accounting App, you can accept contactless payments directly from your phone, and the app marks invoices as paid instantly.

Get one month free and see how Xero helps you manage payment terms and cash flow.

FAQs on invoice payment terms

Here are answers to common questions about setting and managing payment terms.

What are the most common payment terms for invoices?

The most common terms are Net 30 (payment due in 30 days), Net 14, and Due on Receipt. Nearly 75% of invoices now request payment within two weeks.

What does Net 30 mean?

Net 30 means payment is due 30 days from the invoice date. The "net" refers to the total amount owed after any discounts.

Should I charge late payment fees?

Late fees can encourage timely payment, but use them strategically. State the fee clearly on your invoice. Consider waiving it for first-time late payers to maintain good client relationships.

Can I change payment terms for existing clients?

Yes, but communicate changes clearly and in advance. Give clients reasonable notice before applying new terms to future invoices.

What payment terms work best for small businesses?

Shorter terms (7–14 days) typically result in faster payment. Match your terms to your cash flow needs and industry norms. Consider offering early payment discounts for larger invoices.