Understanding Invoice Payment Terms

A lot of small businesses run into problems when they try to set up their invoice payment terms. These payment terms and conditions for invoices help to ensure that your clients pay you on time and that everyone understands the payment terms and schedule. Without them, it’s common for clients to pay weeks late, and it can cause you to have to chase the client for your money.

This is why it’s essential that you understand invoice terms and conditions. You can get paid quicker, and this is better for your business’s bottom line. Below, we’re going to give you invoice payment terms examples that you can personalize for your own business, outline why it’s so common for businesses to have payment delays without them, and list out which payment terms you should include in your invoice payment terms.

The Evolution of Invoice Payment Terms

Originally, it was very common for businesses to mail their clients paper copies of their invoices once a month, at the end of the month. Then, the business would give their clients a decent amount of time to make payments. While this did work and continues to work, it’s very slow. It could be weeks before you see payments, especially when you factor in that clients have the option of mailing you a money order or check back. It’s also easy for the invoice or payment to get lost on the way.

Today, online invoice templates allow you to quickly and easily generate custom invoice terms and conditions for each client, send it electronically, and set up options for instant payments. This is great for helping you get the money they owe you quicker, and it also helps cut down on your total paper waste. There’s a very small chance of anything getting lost on the way, and you can digitally track everything to ensure nothing falls through the cracks.

Basic Invoice Terms and Conditions and Their Functions

Your invoice payment terms should outline a basic contract for your business that highlights when the client has to pay for your services. If the client doesn’t pay on time, your invoice terms and conditions could spell out late penalties that you can add and levy each time they’re late. This gives the client more incentives to pay on time each time they work with you.

If you’re an international business or you work with international clients with different currencies, you must include the currencies you accept on your payment terms and conditions for invoices. It also has to have the correct conversion rate for each different currency you accept, and it has to be able to accurately convert the currency each time you work with these international clients.

Which forms of payment does your business accept? The invoice template usually has space that outlines which payment types you do and don’t accept. For example, many businesses are moving away from accepting bank wires or checks because there is a high amount of risk associated with them. There are also risks associated with credit cards and chargebacks, so many businesses don’t accept them. Let your clients know right away how they’ll have to pay to avoid trouble later.

It’s essential that you clearly state the date the payment for your services is due. A lot of businesses have a simple 30-day payment rule from the date you issue the invoice, but this isn’t set in stone. You can set your payment due date at any time frame that is convenient for you and your clients. You can usually issue an invoice and get payments as soon as a day later, or within a week. You don’t have to wait a month or more to get paid anymore.

One of the most important factors with your invoices is getting them out the door in a timely manner. The prep and setup time for sending invoices dropped significantly due to the fact that you can use online templates through Google Docs and other places. You can easily craft a professional-grade invoice in a few minutes and send it electronically to your client straight away. Some businesses have a point where they have to get all of their invoices for the month. So, if you miss this set point, you could find yourself setting your receipts back to your next pay period.

If you experience delays in creating or issuing your invoices, you can end up with a payment receipt delay for that customer. This is why you want to track everything electronically and do everything you can to ensure that each invoice goes out quickly after you render services. There are several invoicing systems available like Billdu that can help you speed up this process, and it’s now possible to draw up an invoice and set your various invoice terms and conditions from your tablet, smartphone, Mac, or PC.

Common invoice payment terms explained 1

Important Payment Terms and Conditions for Invoices

Any invoice payment term you have should use different codes to set them apart. There are dozens of codes available, but the most common ones you can consider incorporating into your invoice terms and conditions include:

  • 30 MFI – 30th of the Month after your Invoice Date
  • Cash Account – No Credit – Account Conducted on a Cash Basis
  • CBS – Cash Before Shipment
  • CND – Cash Next Day
  • COD – Cash on Delivery
  • CONTRA – Payments Offset Against Supplies Purchased from the Customer
  • CWO – Cash with Order
  • EOM – Payment at the End of the Month
  • Net 10 – Payment 10 Days after the Invoice Date
  • Net 30 – Payment 30 Days after the Invoice Date
  • Net 60 – Payment 60 Days after the Invoice Date
  • Net 7 – Payment 7 Days after the Invoice Date
  • Net 90 – Payment 90 Days after the Invoice Date
  • PIA – Payment in Advance
  • Stage Payment – Payments at Agreed Stages

When you set your payment terms up, whether it’s with a brand new client or a returning one, it’s essential that you be as clear as you possibly can. You want to avoid abrupt changes in payment scheduling or terms to prevent potential confusion on the clients’ behalf.

This is especially true if it’s a returning client who is used to making payments at a specific time and a certain way. When you offer consistency, conciseness, and clarity in your invoice terms and conditions, it’s much more likely that your clients will honour the agreement and pay you on time.

Different Invoice Payment Terms Examples

The invoicing process can be very complex, and this is more true when you consider that you have to set up different payment terms. Many people are unaware of the importance of having the right invoicing system in place, and this isn’t a trap you want to fall into. This is why you want to have a good understanding of the different invoice payment terms, including:

Split Payments

If you routinely deal with expensive services, luxury items, or big-ticket sales for your business, you should offer split payment options on your invoice terms and conditions. The strongest asset in your business is your cash flow. If you try to request full payment for very expensive services or items, it could put your clients or potential clients off. It’s important to have an effective accounts management system in place if you plan on accepting split payments from your clients. However, Billdu can help you accomplish this, and you could see your business continue to grow because of it.

Net 30 or Net 60

If you have the term Net 30 or Net 60 on your invoicing template, it could confuse your clients. Instead, you might want to write out “30 days” or “60 days” to indicate that your clients have up to 30 days or 60 days from the receipt of the invoice to make a full or parietal payment. You also want to include a hard due date on each invoice you send out so there is no confusion. Failure to include clear writing or hard due dates is one quick way to end up with non-payments, overdue payments, or partial payments.

Most manufacturers in every sector offer Net 30 invoice payment terms. If your business is a manufacturing business and you decide to change your terms, your customers are likely to push back. Fashion and construction industries like to use Net 30 or Net 60, so keep this in mind if your business or client pool falls into one of these sectors.


If you plan to include a discount system as an incentive to get faster payments from your clients, you want it to stand out on your invoice terms and conditions. It’s good practice to highlight it in bold so it jumps off the invoice. For example, you could offer a 1% discount if clients make the full payment within 7 days of the receipt date, or you could have a 2% discount if they make the payment the next day. This discount-style system works to motivate clients to make prompt payments to help save a little on their bills.

Invoice payment terms for freelancers

Invoice Payment Terms Examples for Freelancing

If you work in the freelance industry, you should require partial upfront payments as a down payment. Then, the rest of your payments should be escrow-style until you complete the work. Depending on how well you know the clients, you could also offer Net 30, Net 60, or full fee upfront invoice payment terms. In any case, you want to fall in line with industry standards to avoid complications with your clients.

When you set up your Word invoice template, there are other important factors to keep in mind. There is no blanket solution that will work with all of your clients. Even inside specific industries, you could end up with a client who gives you immediate payments as soon as they get the invoice, but another client could require you to offer Net 60 terms. It’s on you as a freelancer to work out payment terms that suit both your business and the clients.

Enticing Customers to Stay Inside Your Invoice Terms

There are certain elements that will dictate how long you let invoices go without payment from the client. The smaller your invoice value is, the quicker clients generally send payments. Invoices with a higher value on them may be harder for clients to fulfill in one go, and this can result in delayed payments. However, you do want to clearly state in your invoice terms and conditions whether or not you charge late fees once you go past a certain date with no payment. Set these terms and don’t change them to ensure that both you and your clients are on the same page.

The quicker your clients pay you, the better your business’s cash flow will be. You can set up your invoices several ways to prompt quick payments to improve your cash flow. One way to do this is to offer a discount if the client pays early. You can include Prompt Payment Discounts (PPD) on your invoices, and they’re very common with small businesses.

One invoice payment term example of this is to set up a Net 30 due date. If the client pays within two weeks of the receipt date instead of waiting the full 30 days, you could reward them with a small discount. How much of a discount they get depends entirely on you. Typically, the discounts start at 1% and go up to 3% for early payments. An easy Excel invoice template offers you a way to create favourable terms for your clients.

Say your customer pays the invoice in full within 10 days of getting the receipt for services with Net 30 terms. You could offer them a 2% discount, and you’d write this out as 2%/10-Net 30 on the invoice. Clients will always appreciate discounts, and it helps you pull money back into the business faster. In turn, you’ll be able to meet any payment deadlines you have and keep your business in the black.

These terms are extremely important because they act as an official channel to help you get your payments. They also establish a framework that is legally enforceable between you and your clients regarding payments. If you sell big-ticket services or goods to people and your clients habitually pay you late, you will find yourself financing payments to your creditors to carry your clients. You don’t want this to happen, and this is why you set up iron-clad payment terms and conditions for invoices with every transaction.

As you know as a business owner, not being able to meet your financial requirements can cause your business to fold and go under. Luckily, invoice payment terms aren’t as challenging as many people believe them to be if you have a little insight into how they work and the conditions for your business’s specific category, sector or industry. Pick out a reputable and user-friendly invoicing system to help make your life easier and ensure you get paid quicker like Billdu.

Start Your Free Billdu Trial and Work Out Your Invoice Terms and Conditions

If you’re a business owner and you want to learn a new way to create and track custom invoices for your clients, try Billdu’s software with a free trial. You can easily add your logo, input your payment terms, add discounts, offer different payment options and track dozens of invoices from one centralised dashboard. You can choose from a host of templates to help you create your invoices, send them out and get money flowing back into your business.

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