Invoice payment terms: definitions, examples and tips

Published Monday 20 April 2026

Table of contents

• What are invoice payment terms?
• Why payment terms matter for small businesses
• Most common payment terms for small businesses
• 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
• Get clients on the clock quickly
• Payment terms are getting shorter
• Follow up on payments proactively
• Top 7 tips to get paid faster
• Streamline your payment process with the right tools
• Download the free invoice template
• FAQs on invoice payment terms

Key takeaways

• Set shorter payment terms like Net 7 or Net 14 from the start, as research shows shorter terms consistently result in faster payments, and it's much harder to shorten terms later once a customer relationship is established.
• State your payment terms clearly on every invoice, including a specific due date, accepted payment methods, your bank details or payment link, and any late payment fees, so customers have everything they need to pay you straight away.
• Send invoices immediately after completing work, since payment terms only start counting once the customer receives the invoice, and any delay in sending it directly delays when you get paid.
• Follow up on payments proactively by sending a reminder before the due date, an email on the due date if unpaid, and a direct call after the due date, as consistent follow-up is one of the most effective ways to reduce overdue invoices.

What are invoice payment terms?

Invoice payment terms are the conditions you set for when and how customers pay your invoices. They specify the due date, accepted payment methods, and any penalties for late payment.

Payment terms appear on your invoice and should also be included in your service agreement or contract. Common examples include Net 30 (payment due in 30 days), Due on Receipt (payment due immediately), and Payment in Advance.

Clear terms protect your cash flow by setting expectations upfront, which is especially important now that large entities will no longer be required to disclose their payment practices under the Business Payment Practices Act Repeal Act 2024. With clear terms, customers know exactly when to pay, so you can focus on running your business.

Why payment terms matter for small businesses

Payment terms protect your cash flow by setting clear expectations for when and how customers pay you. When everyone knows what to expect, you can focus more time on running your business.

Clear terms also build trust with clients and show you're professional. This helps you plan for the future with confidence.

Most common payment terms for small businesses

The most common payment terms are Net 30, Net 7, Payment in Advance, Cash on Delivery, and Due on Receipt. Here's what each one means:

• Payment in Advance (PIA): Payment is collected before work begins or goods are delivered; best for large projects where you need cash flow certainty
• Net 7, 14, 30, or 60: Payment is due within the specified number of days from the invoice date; best for ongoing client relationships where you can extend short-term credit
• Cash on Delivery (COD): Payment is collected at the time of delivery; best for shipped goods or new customers
• Due on Receipt: Payment is due immediately when the invoice is received; best for one-off jobs or point-of-sale transactions

Shorter terms are becoming standard. Major corporations like Rio Tinto now pay most suppliers within 20 days.

How to choose the right payment terms for your business

The right payment terms depend on your cash flow needs, industry norms, and customer relationships. Consider these factors when deciding:

• Consider your cash flow: Use shorter terms like Net 7 or Net 14 if you need money quickly to pay suppliers or staff
• Check industry standards: Review what competitors offer; construction often uses progress payments, while retail typically requires immediate payment
• Assess customer type: Set shorter terms for new customers until they prove reliable; long-term clients might earn more flexibility
• Review invoice size: Consider deposits or milestone payments for large invoices to reduce your risk

Start with shorter terms. You can always extend them for trusted customers, but shortening terms later is harder to negotiate. Even large companies like Telstra recently cut its payment terms from 62 down to 20 days for small suppliers.

How to write payment terms on your invoice

Payment terms should appear clearly on every invoice so customers know exactly when and how to pay. Follow these steps:

1. State the due date clearly using a specific date (for example, "Due: 15 March 2025") or payment term (for example, "Net 14: Due 14 days from invoice date")
2. List accepted payment methods such as bank transfer, credit card, or direct debit
3. Include your bank details or payment link so customers can pay immediately
4. Add late payment terms if applicable, such as "A 2% monthly fee applies to overdue invoices"
5. Place terms prominently near the total amount where customers will see them

Example wording: "Payment due within 14 days of invoice date. Pay by bank transfer to 12-3456-7890123-00 or click the Pay Now button above. Late payments incur a 2% monthly fee."

Short payment terms get you paid quicker

Shorter payment terms result in faster payments, even when customers pay late. Research based on millions of invoices found:

• 7-day terms: Average payment in 14 days
• 14-day terms: Average payment in 14–21 days
• 30-day terms: Average payment in 28+ days

The shorter your terms, the sooner you get paid.

Get clients on the clock quickly

Payment terms only start counting when customers receive the invoice.Send invoices immediately after completing work to maximise your payment window.

Speed up your invoicing process:

• Use templates to reduce invoice creation time
• Send electronically to eliminate postal delays
• Invoice from mobile to bill immediately after job completion
• Automate reminders to follow up without manual effort

Read our guide on developing an awesome invoicing process for your small business.

Payment terms are getting shorter

Industry trends show a clear shift toward faster payment expectations.

75% of invoices now request payment within 14 days. Short payment terms have become the standard expectation for small businesses, and New Zealand is even considering legislating a maximum payment term of 20 days.

When negotiating with customers, large invoices may require flexibility. When customers ask for price reductions, offer a discount in exchange for faster payment. You can also offer early payment incentives, such as 2% off if paid within 10 days.

Follow up on payments proactively

Send payment reminders before the due date. Following up early keeps invoices top of mind and reduces overdue payments.

Effective follow-up sequence:

1. Before the due date: Send a friendly payment reminder
2. On the due date: Follow up with an email if unpaid
3. After the due date: Call the client directly

You can automate follow-ups using invoicing software for automatic reminders, or ask your accountant to handle overdue collections.

Get more tips in our guide on how to handle outstanding invoices.

Top 7 tips to get paid faster

Businesses that get paid fastest follow consistent practices. Based on research with 1,500 small businesses, these seven strategies help you get paid faster:

• Set expectations upfront by discussing payment terms before starting work.
• Track everything by maintaining detailed records of time and materials.
• Create clear invoices that are easy to read and understand.
• Address correctly by sending invoices to the decision-maker who approves payments.
• Invoice immediately by billing as soon as work is completed.
• Communicate regularly by staying in touch about outstanding payments.
• Charge late fees by adding penalties for overdue invoices.

Streamline your payment process with the right tools

Accounting software automates your payment process so you spend less time on admin and get paid faster.

Automated invoicing and follow-ups free up your day. Software helps by:

• Creating professional invoices with your payment terms built in
• Sending automatic reminders before and after due dates
• Offering multiple payment options so customers can pay online instantly

This simplifies your bookkeeping and helps you focus on running your business. Start your free trial to see how it works.

Download the free invoice template

A template can help you create professional invoices quickly.

Fill in the form to get a blank invoice template as an editable PDF, with a how-to guide. There's a version for goods and services tax (GST) and non-GST businesses.

FAQs on invoice payment terms

Find answers to common questions about invoice payment terms.

What are the standard payment terms for invoices in New Zealand?

Net 7–Net 14 is now standard for most small businesses in New Zealand. While Net 30 was traditional, shorter terms improve cash flow. Even Inland Revenue aims to pay suppliers within five working days.

Do invoices legally require payment terms?

Payment terms aren't legally required in New Zealand, but including them protects you if you need to chase payment or take legal action. Clear terms establish the payment expectations from the start.