Invoice payment terms explained — Net 30, due on receipt, and the rest

Payment terms are the part of an invoice that says when the money is due. "Net 30" means the full amount is due 30 days from the invoice date. "Due on receipt" means immediately. "2/10 Net 30" means the customer can take 2% off if they pay within 10 days, otherwise the full amount is due in 30.

The important thing about all of them is that they are shorthand, and shorthand gets counted differently by different finance teams. Whatever term you use, also print the actual due date.

What do the common terms mean?

Why does "Net 30" cause arguments?

Because it does not say 30 days from what. Three readings are all common in practice:

• 30 days from the invoice date — what most suppliers mean.
• 30 days from receipt of the invoice, which may be days later.
• 30 days from the end of the month of receipt, which is how many large companies run their payment runs and can mean up to 60 days.

None of these is wrong. They are just different, and neither party usually discovers the mismatch until the invoice is a week "late" and someone sends an awkward email.

The fix costs nothing: put the calendar date on the invoice. Due 28 September 2026 cannot be counted two ways.

Which terms should a small business use?

Shorter than you think, and shorter than the customer will suggest.

• Default to Net 14 for new customers and small amounts. It is short enough to protect your cash flow and long enough to be unremarkable.
• Net 30 is the standard most businesses expect and most will not query.
• Net 60 or longer is a loan you are making to a larger company. Price it accordingly, or do not offer it.
• Payment in advance or 50/50 for new customers, large projects, or anyone you have not worked with before. This is not distrust; it is how most of the trades and most agencies operate, and it is very rarely refused.

The most useful lever is not the number of days. It is how easy paying is on day one — see how to write an invoice.

Do early-payment discounts work?

Sometimes, and they are more expensive than they look. 2/10 Net 30 gives up 2% to be paid 20 days sooner. Annualised, that is roughly 37% — far more than any financing you could arrange. It is worth it only if you genuinely need the cash sooner than 30 days, and it is worth remembering that many large customers will take the discount and pay at 30 days, which you then have to chase.

Should you charge late-payment interest?

You can, and in some jurisdictions you have a statutory right to it whether or not it is on the invoice. In the UK, for example, statutory interest on late commercial payments is 8% above the Bank of England base rate, plus a fixed recovery charge.

In practice, stating a late fee on the invoice matters more than collecting it. It shifts the default expectation, and it gives you something to reference in a reminder that is not simply asking again.

How do payment terms interact with your cash flow?

Your terms set the earliest you can expect money, not the average. Real collection is usually terms plus a lag — a business on Net 30 typically sees money at 35–45 days. If your own suppliers are on Net 14 and your customers are on Net 30, you are financing the gap out of your own balance.

Two things shorten the lag more reliably than shortening the terms: a saved payment method, and a reminder that arrives before the due date rather than after it. There is a practical sequence for that in chasing late payments.

Frequently asked questions

What does Net 30 mean on an invoice? The full invoice amount is due 30 days after the invoice date. Because some finance teams count from receipt or from the end of the month instead, always print the actual calendar due date alongside the term.

What does due on receipt mean? Payment is expected immediately, as soon as the customer receives the invoice. It is appropriate for small amounts, one-off jobs and new customers, and unusual for ongoing commercial relationships.

What does 2/10 Net 30 mean? The customer may deduct 2% if they pay within 10 days; otherwise the full amount is due within 30 days. Annualised, that 2% is roughly 37%, so treat it as expensive financing rather than a courtesy.

What are the best payment terms for a small business? Net 14 for new customers and small amounts, Net 30 as a standard, and payment in advance or 50/50 for large projects or customers you have not worked with before.

Can I charge interest on a late invoice? Yes. Many jurisdictions grant a statutory right to interest on late commercial payments even if the invoice is silent, and you can also set your own rate by agreement. Stating it on the invoice is what makes it enforceable in practice and what changes behaviour.