Invoice payment terms: examples and tips to get paid

Published Thursday 2 April 2026

Table of contents

• Invoicing tips from other small businesses
• What are invoice payment terms?
• Why invoice payment terms matter
• Common types of invoice payment terms
• How to choose the right payment terms for your business
• How to write payment terms on your invoice
• Short payment terms get you paid quicker
• Payment terms are getting shorter
• Best practices to get paid faster
• Set up your invoicing system with Xero
• FAQs on invoice payment terms

Key takeaways

• Set shorter payment terms like Net 7 or Net 14 instead of the traditional Net 30, as research shows shorter terms lead to faster payments even when invoices go overdue.
• Discuss payment expectations before starting work and include specific due dates, accepted payment methods, and late payment consequences prominently on your invoices to avoid confusion and disputes.
• Send invoices immediately after completing work while the value is fresh in your client's mind, and follow up consistently on overdue payments with reminders and phone calls.
• Use invoicing software to automate payment reminders, track outstanding invoices, and streamline your billing process, as businesses can spend up to 10% of their time on manual invoice management.

Invoicing tips from other small businesses

Late payments are a major issue, with research showing half of all B2B invoices are currently overdue. Yet some businesses get paid in days, not weeks.

A survey of 1,500 business owners and analysis of millions of invoices reveals what works. This guide covers invoice payment terms, common types, and practical tips to help you get paid faster.

What are invoice payment terms?

Invoice payment terms are the conditions you set for how and when you expect to be paid. They tell your client exactly what's due and by when.

Common payment terms include:

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

The due date is the most important term. Businesses used to give 30 days as standard, but that's changing.

With electronic invoicing and online payments, 30-day terms are often unnecessary. If you deliver work quickly, you can reasonably expect payment within a week.

Why invoice payment terms matter

Clear payment terms protect your cash flow and set professional expectations with clients. They tell your customers exactly when and how to pay, reducing confusion and disputes.

Here's why payment terms matter:

• Cash flow control: predictable payment timing helps you plan expenses and avoid shortfalls. This is crucial, as a study found that 60% of small businesses with longer payment terms reported cash flow problems, compared to just 40% of those with immediate terms.
• Professional credibility: clear terms show you run a serious business
• Legal clarity: documented terms provide protection if disputes arise
• Fewer payment delays: clients know what's expected, so they're more likely to pay on time. This is critical for financial stability, as over half of small businesses report being owed money from unpaid invoices, averaging $17.5K per business.
• Stronger client relationships: upfront agreements reduce awkward payment conversations later

Setting payment terms is about running your business with confidence.

Common types of invoice payment terms

Different payment terms suit different situations. Here are the most common types you'll see on invoices.

• Net 30, Net 60, Net 90: Payment is due within 30, 60, or 90 days of the invoice date. Net 30 is the most common, but shorter terms like Net 14 or Net 7 are becoming standard for small businesses.
• Due on receipt: Payment is expected immediately when the client receives the invoice. This works well for smaller jobs or new clients.
• PIA (Payment in Advance): The client pays before work begins. This is common for large projects or when working with new clients.
• COD (Cash on Delivery): Payment is due when goods or services are delivered. This reduces your risk on new orders.
• 2/10 Net 30: The client gets a 2% discount if they pay within 10 days. Otherwise, the full amount is due in 30 days. This encourages early payment.
• EOM (End of Month): Payment is due at the end of the month in which the invoice was issued.
• MFI (Month Following Invoice): Payment is due in the month after the invoice date. For example, an invoice dated 15 March would be due sometime in April.
• 21 MFI: Payment is due on the 21st of the month following the invoice date. This gives clients a specific deadline.

Choose terms that match your cash flow needs and the size of the job. Shorter terms generally mean faster payment.

How to choose the right payment terms for your business

The right payment terms depend on your business, your clients, and your cash flow needs. Consider these factors when setting your terms.

• Your industry norms: Check what's standard in your sector. Construction often uses longer terms, while consulting may use shorter ones.
• Your cash flow requirements: If you need money quickly to cover expenses, shorter terms help.
• Client size and payment capacity: Larger companies may expect Net 30 or longer. Smaller clients can often pay faster.
• Project scope and value: Bigger projects may warrant longer terms or milestone payments.
• Your relationship with the client: New clients may need stricter terms until trust is established.
• Competitive positioning: Offering flexible terms can win business, but don't sacrifice cash flow.

Start with terms that work for your cash flow. You can always adjust for specific clients or situations.

How to write payment terms on your invoice

Writing clear payment terms helps ensure clients understand exactly what's expected. Follow these steps to add payment terms to your invoices.

1. Place terms prominently on the invoice. Include them near the total amount or in a dedicated section so they're easy to find.
2. State the due date explicitly. Write the actual date, not just "Net 30." For example: "Payment due: 15 March 2025."
3. Specify accepted payment methods. List bank transfer details, card payment options, or online payment links.
4. Include late payment consequences. If you charge interest or fees on overdue invoices, state the rate and when it applies.
5. Use clear, simple language. Avoid jargon. "Payment due within 14 days" is clearer than "Net 14."
6. Keep terms consistent. Use the same wording on every invoice so clients know what to expect.

Invoicing software like Xero lets you set default payment terms that appear automatically on every invoice.

Short payment terms get you paid quicker

Shorter payment terms lead to faster payments, even if invoices occasionally go past due. Research shows you still get your money sooner than if you offer longer terms like three or four weeks.

Here's what the research found:

• 1-week terms: settled in about two weeks
• 2-week terms: settled in two to three weeks
• Three to four-week terms: settled in about a month

The shorter your terms, the sooner you get paid.

Payment terms are getting shorter

Analysis of millions of invoices shows that close to 75% of invoices now ask for payment within two weeks. Shorter terms are becoming the norm, so you don't need to feel awkward about requesting them.

Some clients may expect longer terms for larger invoices. If they ask for a discount, consider requesting faster payment in return.

Best practices to get paid faster

Getting paid on time takes more than just sending an invoice. Here are seven practical tips from a survey of 1,500 business owners.

Set up your invoicing system with Xero

Invoicing software saves time and keeps your books up to date. As your business grows, manual invoicing becomes harder to manage; in fact, businesses can spend up to 10% of their work time creating, sending, and chasing invoices.

Modern billing software helps you:

• Create and send professional invoices quickly
• Set up automatic payment reminders
• Track what's been paid and what's outstanding
• Update your accounts automatically when invoices are paid

Most invoicing tools come as part of accounting software like Xero, so everything stays connected.

Clear payment terms and a streamlined invoicing process help you get paid faster. When you set expectations upfront and follow up consistently, you spend less time chasing payments and more time running your business.

Ready to simplify your invoicing? Xero helps you set payment terms, send professional invoices, and track what you're owed in one place. Get one month free and see how easy it is to get paid on time.

FAQs on invoice payment terms

Here are answers to common questions about invoice payment terms.

How do I write payment terms on an invoice?

Place your payment terms near the invoice total. Include the specific due date, accepted payment methods, and any late payment fees. Use clear language like "Payment due: 15 March 2025" rather than just "Net 30."

Do I need to put payment terms on an invoice?

Including payment terms is optional in most places, but strongly recommended. With clear terms, clients know exactly when payment is expected, helping you avoid delays and disputes.

What are reasonable payment terms for small businesses?

Net 14–Net 30 is common for small businesses. Shorter terms like Net 7 or due on receipt work well for smaller jobs or new clients. Choose terms that balance client expectations with your cash flow needs.

Can I change payment terms for existing clients?

Yes, but communicate changes clearly. Give clients notice before applying new terms, and consider phasing in changes gradually. Put updated terms in writing and include them on your next invoice.

What happens if a client doesn't follow my payment terms?

Start with a friendly reminder before the due date. If the invoice goes overdue, follow up with emails and phone calls. You can charge late payment fees if stated in your terms. For persistent non-payment, consider involving a collections agency or seeking legal advice.