Invoice payment terms: Definitions, tips and best practices

Published Friday 5 December 2025

Table of contents

• Why payment terms matter for small businesses
• Most common payment terms for small businesses
• Short payment terms get you paid quicker
• Payment terms are getting shorter
• Get clients on the clock quickly
• Don't be afraid to chase payment
• Top 7 tips to get paid faster
• Invoicing tips from other small businesses
• Streamline your payment process with the right tools
• Download the free invoice template

Key takeaways

• Implement shorter payment terms of 7-14 days instead of the traditional 30 days to receive payments faster, as research shows 7-day terms result in average payment within 14 days while 30-day terms take 4+ weeks.

• Send invoices immediately after completing work and follow up with payment reminders before the due date rather than after, as payment terms only begin counting when customers receive the invoice.

• Utilize online invoicing software and multiple payment options to streamline your payment process and make it easier for customers to pay you quickly and on time.

• Establish clear payment terms upfront including payment methods, due dates, and late fees, then communicate these expectations before starting any work to avoid disputes and ensure professional relationships.

Why payment terms matter for small businesses

Clear payment terms aren't just about getting paid – they're about managing your cash flow and building trust with your clients. When everyone knows what to expect, you can spend less time chasing payments and more time focusing on your business. It shows you're professional and helps you plan for the future with confidence.

Most common payment terms for small businesses

Choosing the right terms can feel tricky, but most businesses use a few standard options. Here are some of the most common ones you'll see:

• Payment in Advance (PIA): You get paid before any work begins or goods are delivered. This is great for managing cash flow on big projects.
• Net 7, 14, 30, 60: Payment is due within 7, 14, 30, or 60 days of the invoice date. Shorter terms are becoming the new standard, with major corporations like Rio Tinto bringing forward its payment terms to 20 days for most of its suppliers.
• Cash on Delivery (COD): Payment is made at the time of delivery. This is common for shipped goods.
• Immediate payment: The invoice is due on receipt. This is perfect for one-off jobs or point-of-sale transactions.

Short payment terms get you paid quicker

Short payment terms get you paid faster overall, even when invoices go overdue. Research based on millions of invoices showed:

• 7-day terms: Average payment in 14 days
• 14-day terms: Average payment in 2-3 weeks
• 30-day terms: Average payment in 4+ weeks

Payment terms are getting shorter

Short payment terms are now standard: 75% of invoices request payment within 14 days.

Negotiating payment terms: Large invoices may require flexibility, but you can trade faster payment for discounts. When customers request price reductions, offer lower rates in exchange for quicker payment.

Get clients on the clock quickly

Send invoices immediately after completing work. Payment terms only start counting when customers receive the invoice.

Speed up your invoicing process:

• Use templates: Reduce invoice creation time
• Send electronically: Eliminate postal delays
• Invoice from mobile: Bill immediately after job completion
• Automate where possible: Use software to streamline the process

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

Don't be afraid to chase payment

Follow up before invoices become overdue. Send payment reminders as the due date approaches, not after it passes.

Effective follow-up sequence:

• Before due date: Send friendly payment reminder
• After due date: Follow up via email
• No response: Call the client directly

Automate follow-ups: Use invoicing software for automatic reminders or ask your accountant to handle overdue collections.

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

Top 7 tips to get paid faster

7 proven strategies to get paid faster, based on research with 1,500 small businesses:

• Set expectations upfront: Discuss payment terms before starting work
• Track everything: Maintain detailed records of time and materials
• Create clear invoices: Make invoices easy to read and understand
• Address correctly: Send invoices to the decision-maker who approves payments
• Invoice immediately: Bill as soon as work is completed
• Communicate regularly: Stay in touch with clients about outstanding payments
• Charge late fees: Add penalties for overdue invoices

Invoicing tips from other small businesses

Only around half of invoices are paid on time. But some businesses consistently get paid in days instead of weeks.

Research insight: We surveyed 1,500 business owners and analysed millions of invoices to identify the payment term strategies that work best. The businesses that get paid fastest all follow similar practices.

Streamline your payment process with the right tools

Setting clear terms is the first step. The next is making it easy for clients to pay you. Manual invoicing and follow-ups can eat into your day. Using accounting software helps you create professional invoices, send automatic reminders, and offer multiple payment options online.

It simplifies your bookkeeping and helps you get paid faster, so you can run your business, not your books. Try Xero for free to see how it works.

Frequently asked questions (FAQs) on invoice payment terms

Here are answers to a few common questions about invoice payment terms.

What are reasonable payment terms for small businesses?

While terms like Net 30 are traditional, many small businesses now use Net 7 or Net 14 to improve cash flow—a reasonable goal when even New Zealand's Inland Revenue aims to pay its suppliers within 5 working days.

Do invoices legally require payment terms?

It’s not a strict legal requirement, but without clear terms, the client must pay within a reasonable time, which can still be unclear. Including clear terms on your invoice and in your contract helps avoid disputes and ensures you get paid on time.

How long should I give clients to pay an invoice?

The standard is often 30 days or less, but you can set any time period you like. Many businesses find that giving 7 to 14 days is effective, especially when using online invoicing that makes it easy for customers to pay instantly.

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

Use this as a chance to discuss the terms and negotiate an agreement that works for both of you. You can discuss their concerns and find a middle ground, like offering a payment plan for a large invoice or adjusting the terms for a long-term client. It's always best to agree on terms before you start the work.

Can I change payment terms for existing clients?

Yes, but it's important to communicate the change clearly and give them plenty of notice. Explain why you're making the change and update your service agreements. For a good client relationship, it's best to discuss it with them first.

Download the free invoice template

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.