Invoice payment terms: Set clear terms to get paid on time

Published 13 January 2026

Table of contents

• What are invoice payment terms?
• Standard payment terms on an invoice
• How to choose payment terms that fit your business
• How to write payment terms on an invoice
• Simplify your invoicing with Xero – and get paid faster
• FAQs on invoice payment terms

Key takeaways

• Set clear, fair payment terms on every invoice and in your contract to reduce late payments and protect your cash flow.
• Match the payment terms to your work: net 30 payment terms for B2B, deposits or milestones for projects, due upon receipt for smaller jobs.
• To speed up cash collection (and therefore improve your cash flow), offer online payments, automated reminders, and early payment discounts. You could also charge late fees (where allowed).

What are invoice payment terms?

Payment terms on invoices explain to the recipient – your customer – what, when, and how to pay. For example, customer invoices typically set out the amount the recipient owes, and the due date (by when your customer must pay you). An invoice can also include terms like:

• early payment discounts or late payment penalties
• prepayment, immediate payment, and various future payment due dates
• due dates and payment amounts for deposits or installment payments
• types of payment methods accepted

Standard payment terms on an invoice

The payment terms on most invoices are abbreviated, but once you know the basics, it's pretty easy to understand what they mean. Here are the most common payment terms examples:

Net X

Net X payment terms are some of the most common payment terms. You simply note "net" followed by the number of days until the payment is due. For instance, you may use:

• Net 7: Due in 7 calendar days
• Net 15: Due in 15 calendar days
• Net 30: Due in 30 calendar days
• Net 60: Due in 60 calendar days
• Net 90: Due in 90 calendar days

Generally, if there are two numbers before the word "net," that indicates a percentage discount for payments made within a certain number of days. For instance:

• “2 10 net 30 early pay discount” means that the full payment is due in 30 calendar days; you get a 2% early payment discount if you pay within 10 days
• “4 10 net 60” means the payment is due in full in 60 calendar days, and you’ll receive a 4% discount if you pay within 10 days

Due upon receipt

Due upon receipt typically means immediately for in-person payments – for instance, car repair invoices typically say "due upon receipt." But due upon receipt can also refer to the next business day – for instance, an online service provider sending an invoice to a customer.

EOM or MFI

EOM is short for end of the month, which means due at the end of this calendar month. MFI stands for month following invoice, and is usually paired with a number showing which date the invoice is due. For instance, 21 MFI means due on the 21st of the month following the invoice date.

CIA

Also referred to as payment in advance (PIA), cash in advance, or CIA payment terms, are typically used by service providers to mean that payment is due before the services start. Similar terms include CWO (cash with order) and CBS (cash before shipment) – terms commonly used by companies that ship goods to customers.

COD

COD, or cash on delivery, applies when invoices must be paid on delivery. This is a popular payment term for wholesalers who provide goods to retailers. A similar term is CND, which stands for cash next delivery and means the recipient must pay for the previous delivery before they can get a new one.

Deposits and prepayments

There are a couple different ways to request a deposit with an invoice:

• You can send a deposit invoice, which is an invoice for just the deposit, using any invoice payment terms you like, such as net 30 or EOM. You then send a final invoice when the work is done.
• You can also send an invoice for the full amount due that notes deposit terms – for instance, "30% advance, EOM" means a 30% down payment is due immediately and the remaining amount is due at the end of the month.

These invoice payment terms tend to be the most common for big projects, like construction, event planning, custom manufacturing, or creative projects from freelancers or agencies.

Milestones and installment payments

Milestone payment terms are when payment due dates are tied to project milestones – for example, a construction company may request payments when permits are acquired, foundations are poured, or other milestones are hit.

Generally, you outline the terms and requirements in a contract before starting the work, and you then include relevant details on the invoice as a reminder of the agreement.

Installment payments are regularly scheduled payments that split the full cost of the invoice over time. You can abbreviate them on an invoice – for instance, 40/30/30 means that the first installment covers 40% of the total, while the next two payments each account for 30% of the total.

Alternatively, the invoice can list installment due dates and payment terms, or you can send out a separate invoice for each installment payment.

How to choose payment terms that fit your business

There are no standard business payment terms for invoices – best practices vary based on your risk tolerance, your industry, and your personal preferences.

To decide the payment terms that meet your needs, think about these things first:

• Cash flow: When choosing invoice terms, think about how quickly you need to get paid to stay on top of operational expenses.
• Industry norms: To be competitive, you need to know what's standard for your industry, in terms of invoice format, how products/services are listed, how prices are broken down, and so on.
• Customer risk: Different customers often need different terms. If a customer has missed payments in the past, you may need to ask for advance payments or payment on delivery.
• Invoice size: To reduce your risk, consider requiring down payments for large invoices, or do the reverse and let customers break up large invoices into installments. The right option depends on your industry and the creditworthiness of your customers.
• Discounts: Early discounts can help to reduce payment delays, but may also cut into cash flow – so think carefully about the discounts you offer.
• Late fees: Late fees discourage late payments but may be unfavorable to some customers. Weigh your cash flow needs against industry norms and your customers’ expectations – and, therefore, your relationships with them.

The nation's largest group of volunteer business mentors, SCORE, has tips on how to create invoicing terms that speed up payments.

How to write payment terms on an invoice

To encourage prompt payments and minimize the risk of disputes, your invoice needs clear terms. Here are some tips for clear, professional invoices:

• Note invoice payment terms using accepted and widely recognized invoicing language and abbreviations, such as due upon receipt or net 30.
• If you’ve made any written or verbal agreements with a customer, make sure the terms reflect what you’ve agreed.
• Clearly spell out early payment discounts, late fees, and deadlines.
• Outline deposit requirements, installment payment due dates, or payment milestones on the invoice – and nail down these details in a contract before starting work or invoicing your customer.
• Confirm that your invoice matches the contract wording to prevent conflicts later.
• On your invoice, list payment methods you’ll accept and the details – for example, automated clearing house (ACH), card, bank transfer, or check.
• Include a clear pay now link or simple instructions so customers can pay in a few clicks.

Finally, save the terms as a template so you keep them consistent across invoices. You may need to save a few different templates – especially if you do different types of projects or use different terms for different customers. Here’s a free template from Xero.

And once you’ve invoiced your customer, keep copies for your records for more tips, check out this IRS resource on recordkeeping.

Simplify your invoicing with Xero – and get paid faster

Invoicing is your bread and butter – you need the right invoicing processes if you want to get paid, and Xero can help. Use Xero to generate professional invoices with custom terms. Easily calculate sales tax across multiple jurisdictions, send invoices to customers electronically, and track outstanding payments.

You can also let customers pay with a credit card or ACH transfer when you integrate apps such as Stripe or GoCardless.

Get one month free

FAQs on invoice payment terms

Here are answers to frequently asked questions about invoice payment terms:

Is “net 30” calendar days or business days?

Net 30 payment terms refer to 30 calendar days. It basically means the invoice is due in a month. Similarly, the payment terms net 15, net 45, and net 60 mean the invoice is due in 15, 45, and 60 days, respectively.

What does due upon receipt mean?

Due upon receipt means the receipt is due immediately. This type of payment term is often used for one-off projects or service invoices, such as for car repairs, carpet cleaning, or HVAC services. It's also a common term for freelancers who invoice on the same day their customer processes invoices.

What are 40/30/30 payment terms?

The payment terms 40/30/30 refer to three installment payments, one for 40% of the total and two for 30% of the total. Payments may be due at certain project milestones or as set out in the invoice terms and conditions. You can also pair these numbers with net 30 terms and abbreviate them as 3X433, which means there's a payment due every 30 days at a 40-30-30 split.

What are standard payment terms on an invoice?

Standard invoice payment terms include cash in advance (CIA) payment terms, due upon receipt, net 30, and net 60. Business payment terms vary widely between different types of industries and even from project to project, or customer to customer.

How do I write terms of payment on an invoice?

Businesses should typically write invoice payment terms in abbreviations like CIA, net 30, or EOM. Note the payment terms by the total due or in another prominent spot, such as on the top-right of the invoice or along the bottom. Consider using an invoice template to help you.

Here’s a free invoice template from Xero

Should I charge late fees?

It depends on your relationships with your customers and what's usually done in your industry. Late fees help reduce payment delays, and if a customer pays late, the extra fee helps to make up for the delayed cash flow. But there’s a risk you'll affect your relationship with long-standing or loyal customers, so think carefully before taking this step.