Invoice payment terms: types, examples and when to use

Published Monday 30 March 2026

Table of contents

• What are invoice payment terms?
• Common invoice payment term types
• How to write payment terms on your invoice
• Why short payment terms get you paid faster
• Seven ways to get paid faster with the right payment terms
• Create an invoicing system that supports your payment terms
• Streamline your invoice payment terms with Xero
• FAQs on invoice payment terms

Key takeaways

• Set payment terms of 7-14 days instead of the traditional 30 days to get paid faster, as research shows shorter deadlines lead to quicker settlements even when invoices go slightly overdue.
• Include clear payment terms on every invoice with the exact due date, accepted payment methods, and any late fees prominently displayed near the total amount to avoid confusion and encourage prompt payment.
• Discuss and agree on payment terms before starting work to set clear expectations upfront, then send invoices immediately after completing work since your payment terms don't start until the client receives the invoice.
• Use invoicing software to automate payment reminders, apply consistent terms across all invoices, and track what's been paid to reduce manual follow-up time and improve cash flow management.

What are invoice payment terms?

Invoice payment terms are the conditions you set for how and when clients pay you. They form an agreement between you and your customer that clarifies expectations and protects your cash flow. This is critical when studies show that problems with late payments are widespread. Research shows 46% of invoices are paid late in the UK and 42.5% in the USA.

Payment terms typically include:

• Due date: when payment is expected (for example, seven days, 14 days, or 30 days)
• Accepted payment methods: bank transfer, credit card, or other options
• Currency: especially important for cross-border work
• Late payment fees: penalties for overdue invoices

The due date is the most important term. While 30-day terms were once standard, most businesses now request payment within two weeks. Electronic invoicing and online payments mean there's no reason to wait a month for your money.

Common invoice payment term types

Before setting your payment terms, understand the options available. The most common types used by small businesses:

• Net 30, Net 60, Net 90: payment is due within 30, 60, or 90 days of the invoice date
• Due on Receipt: payment is expected immediately when the invoice is received
• End of Month (EOM): payment is due by the last day of the month
• Cash on Delivery (COD): payment is collected when goods are delivered
• Payment in Advance (PIA): payment is required before work begins or goods are shipped
• 2/10 Net 30: A 2% discount applies if paid within 10 days; otherwise, full payment is due in 30 days

Choose terms that balance your cash flow needs with what's reasonable for your clients. Shorter terms like Net seven or Net 14 are increasingly common for small businesses.

How to write payment terms on your invoice

Adding clear payment terms to your invoice helps avoid confusion and encourages faster payment. Follow these steps to set them up correctly.

Example wording:

"Payment terms: Net 14. Payment due by 15 February 2025. Accepted methods: bank transfer or credit card. A 1.5% monthly fee applies to overdue invoices."

Why short payment terms get you paid faster

Shorter payment terms help you get paid faster, even if invoices occasionally go past due. Xero's research of millions of invoices shows that tighter deadlines lead to quicker settlements:

• Seven-day terms: Typically paid within two weeks
• 14-day terms: Typically paid within two to three weeks
• 30-day terms: Typically paid within a month

Setting shorter terms moves your payday forward, even when clients pay a few days late.

According to research, nearly 75% of invoices now request payment within 2 weeks, so shorter terms are becoming the norm. If a client asks for extended terms or a discount, consider negotiating faster payment in return.

Seven ways to get paid faster with the right payment terms

Clear payment terms help protect your cash flow, but they work best when paired with smart invoicing practices. Seven ways to get paid on time:

Create an invoicing system that supports your payment terms

Invoicing software helps you set consistent payment terms, send invoices faster, and track what's been paid. As your business grows, a proper system saves time and improves cash flow.

Invoicing software supports better payment terms by:

• Automatic reminders: send payment reminders before and after the due date without manual effort. For instance, one company used automated reminders to reduce its days sales outstanding (DSO) by 18%.
• Consistent terms: apply the same payment terms across all invoices
• Real-time tracking: see which invoices are paid, pending, or overdue
• Integrated accounting: update your books automatically when invoices are issued and paid

Billing software often comes bundled with accounting tools, so you can manage invoicing and bookkeeping in one place.

Streamline your invoice payment terms with Xero

Clear payment terms and a reliable invoicing system help you get paid faster and spend less time chasing payments. Xero makes it easy to set terms, send professional invoices, and track what's owed, all in one place. Get one month free and see how Xero can simplify your invoicing.

FAQs on invoice payment terms

Answers to common questions about setting and using invoice payment terms.

Do I need to include payment terms on every invoice?

Yes. Including payment terms on every invoice sets clear expectations and gives you a reference point if payment is delayed.

What happens if I don't include payment terms?

Without stated terms, clients may assume they can pay whenever they choose, making it harder to enforce deadlines. Clear payment terms help protect your business. Research shows that 50,000 small businesses in the UK close each year due to untimely payments.

Can I change payment terms for existing clients?

Yes, but give clients notice before applying new terms. Explain the change and apply it to future invoices rather than outstanding ones.

Should I offer early payment discounts?

Early payment discounts can speed up cash flow, but they reduce your revenue. Consider offering them for large invoices or clients who regularly pay late.

What are the most common payment terms for small businesses?

Net 14 and Net 30 are the most common. However, many small businesses now request payment within seven to 14 days to improve cash flow.