Invoice payment terms for small businesses: How to set and write your terms to get paid faster

Published Friday 5 December 2025

Table of contents

• What are invoice payment terms?
• Common types of payment terms
• How to write payment terms on your invoices
• Your legal rights with payment terms in the UK
• Short payment terms get you paid quicker
• Get clients on the clock quickly
• Don't be afraid to chase payment
• Top seven tips to get paid faster
• Creating an invoicing system that works
• Set up payment terms that work for your business
• FAQs on invoice payment terms

Key takeaways

• Implement shorter payment terms of 7-14 days instead of the outdated 30-day standard to accelerate cash flow, as research shows short terms result in faster overall payment even when invoices go overdue.

• Send invoices immediately upon work completion using electronic delivery methods and standardised templates to start your payment clock as quickly as possible.

• Include clear, comprehensive payment terms on every invoice specifying the due date, accepted payment methods, payment details, and late fee policies to prevent confusion and establish expectations.

• Establish a proactive follow-up system that sends pre-due reminders 2-3 days before payment deadlines and immediate overdue notices, rather than waiting until after payments become late.

What are invoice payment terms?

Invoice payment terms specify how and when customers must pay you. They include:

• Payment methods: Which forms of payment you accept
• Currency: What currency you require for international work
• Due dates: When payment must be received
• Late fees: Penalties for overdue payments

The due date is your most important payment term. It determines when you get paid and affects your cash flow directly.

30-day payment terms are outdated.Electronic invoicing and online payments make faster payment possible.

If you deliver quality work on time, you can reasonably expect payment within a week.

Common types of payment terms

You'll see different terms used on invoices, but most are straightforward. Understanding them helps you set clear expectations for your customers.

• Net 7, Net 30, Net 60: payment is due in 7, 30, or 60 days from the invoice date
• Payment in advance (PIA): you require payment before you provide the goods or services, which helps you secure cash flow on large projects
• Cash on delivery (COD): the customer pays at the time of delivery, often used for physical goods
• End of month (EOM): payment is due at the end of the month the invoice is dated, for example an invoice dated 10 May is due on 31 May

How to write payment terms on your invoices

Clear payment terms prevent confusion and help you get paid on time. Make sure your terms are easy to find and understand on every invoice you send.

Include these key details:

• The due date: State it clearly, for example, 'Payment due within 14 days of invoice date'.
• Accepted payment methods: List how customers can pay you, such as by bank transfer or credit card.
• Payment details: Provide your bank account number and sort code for transfers.
• Late payment policy: Mention if you charge interest or fees for overdue payments.

Your legal rights with payment terms in the UK

In the UK, you have rights when it comes to getting paid. For business-to-business transactions, UK law states that unless you've agreed to a different timeframe, the customer must pay you within 30 days of receiving your invoice or the goods and services.

If a payment is late, you're entitled to charge statutory interest, which for B2B transactions is set at 8% plus the Bank of England base rate. While it's always best to maintain a good relationship with your client, knowing your rights gives you confidence in your payment discussions.

Short payment terms get you paid quicker

Short payment terms get you paid faster overall, even when invoices go overdue. Our research of millions of invoices showed:

• 1-week terms: Average payment in 2 weeks
• 2-week terms: Average payment in 2-3 weeks
• 3-4 week terms: Average payment in 1 month

Short payment terms are now standard. Close to 75% of invoices request payment within 2 weeks.

Large invoices may need longer terms, but you can negotiate. If customers request discounts, offer faster payment terms instead.

Get clients on the clock quickly

Timing matters more than terms. Your payment clock only starts when customers receive the invoice.

Speed up your invoicing process by:

• Using templates: Standardise your invoice format
• Sending electronically: Email invoices immediately
• Mobile invoicing: Invoice on-site using your phone
• Never delaying: Send invoices the same day work is completed

Read our guide on an awesome invoicing process.

Don't be afraid to chase payment

Follow up before invoices become overdue. Send reminders as due dates approach, not after they pass.

Your follow-up process should include:

• Pre-due reminder: Email 2-3 days before payment is due
• Overdue notice: Email immediately when payment is late
• Phone follow-up: Call if emails get no response
• Persistent contact: Don't let overdue invoices drift

If you don't have time for all the follow-up, consider:

• consider: using invoicing software that automatically sends reminder emails for you
• asking your accountant if they'll call overdue clients for you

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

Top seven tips to get paid faster

Seven proven strategies help you get paid faster. Based on feedback from 1,500 small businesses:

1. Agree terms upfront: Discuss payment terms before starting work
2. Track everything: Keep detailed records of time and materials
3. Write clearly: Make invoices easy to read and understand
4. Target the payer: Address invoices to whoever approves payments
5. Invoice immediately: Send bills as soon as work is completed
6. Stay in contact: Maintain regular communication with customers
7. Charge late fees: Add penalties for overdue payments

Creating an invoicing system that works

Your invoicing system should grow with your business. Basic tools like Word become inadequate as transaction volume increases.

An effective invoicing system should:

• Incorporate best practices: Build in the strategies that get you paid faster
• Speed up processes: Reduce time spent creating and sending invoices
• Improve cash flow: Accelerate payments and track outstanding amounts
• Scale efficiently: Handle increased volume without proportional effort

Billing software can help. As a bonus, it generally comes as part of an accounting package, which means your books are automatically updated as invoices are issued and paid.

Set up payment terms that work for your business

Proper invoicing setup saves time and improves cash flow. The initial effort to streamline your process pays dividends through faster payments and reduced administrative work.

A well-designed invoicing system reduces the time you spend collecting payments, letting you focus on growing your business.

With tools that automate reminders and offer flexible payment options, you can make it easy for customers to pay you on time. Try Xero for free to see how you can create and send professional invoices in minutes.

FAQs on invoice payment terms

Here are answers to some common questions about invoice payment terms.

What are the 30 days payment terms for an invoice?

This means the payment is due in full within 30 days of the date the invoice was issued. It's often written as 'Net 30'.

What are reasonable payment terms in the UK?

Reasonable terms depend on your industry and relationship with the client. While 30 days is a standard for business-to-business transactions, many small businesses use shorter terms like 7 or 14 days to maintain healthy cash flow.

Can I charge interest for late payments?

Yes, for commercial transactions in the UK, you can charge statutory interest on late payments. The rate, as confirmed by the UK's Small Business Commissioner, is currently 8% plus the Bank of England base rate. It's a good idea to mention this policy in your payment terms.