Payment terms explained

Payment terms tell a client when to pay and what happens if they don't. The shorthand (net 30, 2/10 net 30, EOM) saves space but starts arguments, so print the actual due date next to it. Here's what each term means, with dates worked out for an invoice dated Monday, October 5, 2026.

Common terms at a glance

The generator's payment terms menu covers due on receipt and net 7, 14, 30 and 60, and fills in the due date for you. For anything else, set the due date yourself; the net 30 due date calculator saves counting on a calendar.

Due on receipt

The client should pay as soon as the invoice arrives. It suits one-off jobs, consumers and small amounts, but it has no date attached, so a business client's accounts team may simply add it to its next payment run. Net 7 gives a firm date that's harder to ignore.

Net 7, 14, 30, 60 and 90

Net terms count calendar days from the invoice date, starting the day after, weekends and holidays included. If the due date lands on a weekend, as net 90 does above, treat payment on the next business day as on time and don't charge a late fee in between.

Some contracts count from delivery or from the day the client receives the invoice, which is why the printed date matters: "Net 30, due November 4, 2026" leaves nothing to interpret.

Net 30 is the most common term for business clients in the US. Larger companies often impose net 45, 60 or 90 through their supplier agreements, which are easier to negotiate before you sign than after.

End-of-month terms

EOM terms tie the due date to the calendar month, which suits clients that pay suppliers in one monthly run.

• EOM: due on the last day of the month the invoice is dated. An October 5 invoice is due October 31.
• Net 30 EOM: due 30 days after the end of that month. An October 5 invoice is due November 30.

Watch the stretch: under net 30 EOM, an invoice dated October 1 isn't due until November 30, 60 days later.

Early payment discounts: 2/10 net 30

2/10 net 30 means the client can take 2% off if it pays within 10 days; otherwise the full amount is due in 30. On a $5,000.00 invoice dated October 5, 2026:

• Paid by October 15: $5,000.00 × 2% = $100.00 off, so $4,900.00.
• Paid by November 4: $5,000.00.

The discount looks small until you annualize it. A client who skips it keeps $4,900.00 for 20 more days, from day 10 to day 30, at a cost of $100.00:

1. Cost for 20 days: $100.00 ÷ $4,900.00 = 2.04%.
2. Twenty-day periods in a year: 365 ÷ 20 = 18.25.
3. Annual rate: 2.04% × 18.25 = 37.2%.

As a formula: discount ÷ (100 − discount) × 365 ÷ (full term − discount period), which here is 2 ÷ 98 × 365 ÷ 20, or about 37.2%. With compounding it's about 44.6%.

That's what the early money costs you, and what your client earns by taking the discount. Offer it only when 20 days of cash is worth that much, for example to meet payroll without expensive credit; a deposit or shorter terms cost nothing.

If you offer it, print both amounts and both dates, and state that the discount applies only to payments received by the discount date, because some clients take it and pay on day 30 anyway.

Deposits and 50% upfront

A deposit covers materials and protects you if the client cancels halfway through. Half upfront is common for custom and creative work.

Invoice the deposit on its own, due on receipt, before work begins. On the final invoice, list the whole job and enter the deposit as an amount paid so the invoice shows the balance due. An $8,000.00 project becomes a $4,000.00 deposit invoice, then a final invoice for $8,000.00, less $4,000.00 paid, with $4,000.00 due on net 14.

Check your state's rules before asking for a large deposit on home improvement work. California, for example, generally caps the down payment on a home improvement contract at $1,000 or 10% of the contract amount, whichever is less (Business and Professions Code section 7159.5).

Milestone payments

For projects longer than a few weeks, split the price into payments tied to results the client can see. A $12,000.00 website project might bill 30% ($3,600.00) on signing, 40% ($4,800.00) on design approval and 30% ($3,600.00) at launch.

Tie milestones to deliverables rather than dates, invoice each one when it's reached, and put net 7 or net 14 on each invoice. Add a clause for client delays, for example that a milestone held up by the client for more than 30 days becomes payable anyway.

Retainers

A retainer is a regular fee paid in advance. Two kinds are common:

• Monthly retainer: a fixed fee for a set amount of work or availability, such as $2,000.00 a month for up to 15 hours, invoiced on the 1st and due by the 7th. Say whether unused hours roll over and what extra hours cost.
• Prepaid balance: the client pays, say, $5,000.00 upfront, you bill your hours against it, and you ask for a top-up when the balance falls below an agreed amount.

With Pro, recurring invoices can create the monthly invoice for you.

Late fees

A late fee is easiest to collect when the client agreed to it before the work started. Put it in the contract or quote, print it on every invoice, and state it precisely:

• The rate or amount: 1.5% per month on the overdue balance, or a flat $35.00.
• When it starts: the day after the due date, or after a grace period such as 10 days.
• How it's calculated: simple interest on the unpaid amount, not compounded.

At 1.5% a month, a $2,400.00 invoice paid one month late picks up $36.00. Try other figures in the late fee calculator.

United States. State law limits what you can charge, and the limits differ from state to state, sometimes depending on whether the customer is a consumer or a business. Check your state's usury and late-fee rules, or ask an attorney, before you choose a rate. A rate of 1.5% a month is 18% a year, which is higher than the general interest limit in some states.

United Kingdom. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business can claim statutory interest from a late-paying business customer at 8% plus the Bank of England base rate, plus fixed compensation of £40 (debts under £1,000), £70 (£1,000 to £9,999.99) or £100 (£10,000 or more). With no agreed payment date, payment is late 30 days after the customer receives the invoice or you deliver, whichever is later, and statutory interest doesn't apply if your contract sets its own rate. The Commercial Payments Bill, introduced in the House of Lords in May 2026, would make statutory interest mandatory and cap most business-to-business payment terms at 60 days; it isn't expected to take effect before 2027.

For what to send once a payment is overdue, see how to chase late payments.

How to choose your terms

• Who the client is. Consumers: upfront or due on receipt. Businesses: net 14 or net 30.
• Your cash position. If you can't cover a month of fixed costs while waiting 30 to 60 days for payment, ask for a deposit or milestones instead of accepting long terms.
• The job. Anything that runs longer than a month, or needs materials bought upfront, calls for a deposit or milestones.
• The client's payment runs. Ask when the client pays suppliers. If it pays on the 15th and the last day of the month, an invoice due just before a run is paid about two weeks sooner than one due just after.
• Track record. Start new clients on a deposit and short terms, and relax them after a few on-time payments.

Wording for the Terms field

Paste any of these into the Terms field and change the figures:

• Due on receipt: "Payment is due on receipt. Please pay by bank transfer to the account below and use the invoice number as your reference."
• Net 30 with a late fee: "Payment is due within 30 days of the invoice date, by November 4, 2026. As agreed in our contract, overdue balances incur a late fee of 1.5% per month, charged as simple interest from the day after the due date."
• 2/10 net 30: "Pay $4,900.00 by October 15, 2026 to take a 2% early payment discount. Otherwise the full $5,000.00 is due by November 4, 2026. The discount applies only to payments received by October 15."
• Deposit: "A 50% deposit of $4,000.00 is due before work begins. The balance of $4,000.00 is due within 14 days of the final invoice."
• Retainer: "Monthly retainer of $2,000.00, invoiced on the 1st and due by the 7th, covering up to 15 hours. Additional hours are billed at $140.00 per hour. Unused hours do not roll over."
• UK business clients: "Payment is due within 30 days of the invoice date. We reserve the right to claim interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998."