Invoice Payment Terms Explained: Net 30, Due on Receipt and More

Net 30 is normally read as 30 calendar days, counted from the invoice date unless your terms say otherwise. Weekends and public holidays are included. Because some clients count from the date they receive the invoice instead, it is safest to define the starting point in your contract and always print the actual due date on the invoice so there is no room for interpretation.

There is no universal rule. Many businesses treat payment on the next working day as on time, while others expect payment by the previous working day. If it matters to you, say so in your terms, for example "if the due date is not a business day, payment is due the preceding business day". Simplest of all, choose a due date that falls on a working day when you create the invoice.

They can ask, and many large organizations have standard 45, 60 or 90 day policies, but terms are a negotiation. Some laws limit how long payment terms can be. Under the EU Late Payment Directive, for example, business-to-business terms generally cannot exceed 60 days unless expressly agreed and not grossly unfair, and public authorities usually must pay within 30 days. If you accept longer terms, build the cost into your price.

That depends on local law. In the UK, if no payment date was agreed in a business-to-business contract, statutory late payment interest can generally start 30 days after the later of delivery or receipt of the invoice. EU countries have similar default rules under the Late Payment Directive. In other places, a court may simply look for a "reasonable" time. Agreeing terms in writing avoids the uncertainty.

Yes, but do it by agreement and in writing. Tell the client what is changing, why and from which date, and apply the new terms only to invoices issued after that date. Check your contract first, because it may fix the terms or require a notice period. Shortening terms suddenly can strain a relationship, so many businesses introduce changes at contract renewal or alongside a new project.

"Prox" is short for the Latin proximo, meaning the next month. Net 10th Prox means payment is due on the 10th day of the month following the invoice date. So an invoice dated 18 October would be due on 10 November. Terms like this suit clients who pay suppliers in a monthly run. Because not everyone knows the abbreviation, also print the calculated due date on the invoice.

It is common and reasonable. With a new client you have no payment history, so a deposit, payment on receipt or a short term such as Net 7 limits your risk. Once a client has paid reliably for a while, you can offer longer terms as a goodwill gesture or to win more work. Whatever you offer, record it in writing so each client knows exactly what applies to them.

Not always. Terms are strongest when they are agreed before the work starts, in a contract, accepted quote or signed proposal. Terms that first appear on an invoice, after the work is done, may not bind a client who never agreed to them, particularly for late fees. Put your terms in your quote or contract first, then repeat them on every invoice so the two always match.

Retainage, also called retention, means the client holds back a percentage of each payment until the project is finished and any defects are fixed. It is common in construction. Your invoices should show the gross amount, the retention deducted, and the amount due now, and you then invoice the retained sum once the release conditions are met. Some jurisdictions regulate retention, so check the rules for your sector.

Often, yes. Consumers are usually protected by consumer law, which may restrict late fees, interest and automatic charges, and business late payment laws, such as the UK's statutory interest regime, typically do not apply to them. Consumers also tend to expect payment at the time of purchase or on receipt. Keep consumer terms short and clear, and check your local consumer protection rules before adding penalties.