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

You've just received an invoice that says "Net 30" at the bottom. What does that actually mean? When are you supposed to pay?

Invoice payment terms are full of jargon, abbreviations, and assumptions. This guide explains every common term you'll see, what it means, and when to use it.

What are payment terms?

Payment terms are the conditions under which a seller expects to be paid by a buyer. They appear on every invoice and quote and tell the customer:

• When payment is due
• How payment should be made
• What happens if payment is late
• Any discounts for paying early

Clear payment terms protect both parties. Without them, "I'll pay you soon" can mean anything from tomorrow to never.

The most common payment terms

Here's a quick-reference table of the terms you'll see most often:

Let's break down the most common ones in more detail.

Net 30 (the most common)

Net 30 means the buyer must pay the full invoice amount within 30 days of the invoice date.

So if an invoice is dated 1 June with Net 30 terms, payment is due by 1 July.

It's the default for most B2B transactions and gives the buyer enough time to process payment through their accounts system. The downside for you (the seller) is that it can squeeze your cash flow if you're waiting on multiple Net 30 invoices.

When to use it: Established clients, larger businesses, recurring relationships.

Net 7 and Net 14 (faster payment)

Net 7 and Net 14 are the same idea but shorter. Payment is due within 7 or 14 days of the invoice date.

These are common for:

• Freelancers and small businesses (you need cash sooner)
• One-off projects with new clients
• Service-based work where you've already delivered value

When to use it: When you need faster cash flow, or for smaller clients who can pay quickly.

Due on Receipt

Due on Receipt means payment is expected immediately upon receiving the invoice.

In practice, this rarely happens literally. Most clients still take a few days. But it sets the expectation that this isn't a job they can sit on.

When to use it: Final invoices on completed work, small one-off jobs, when working with new clients you don't fully trust yet.

EOM (End of Month)

EOM means payment is due at the end of the calendar month the invoice was issued.

So an invoice dated 5 June EOM is due by 30 June. An invoice dated 28 June EOM is also due by 30 June. This can be tough for the buyer if you invoice late in the month.

A variation, Net EOM 30, means payment is due 30 days after the end of the month. So an invoice dated 5 June with Net EOM 30 is due by 31 July.

When to use it: Subscription services, recurring work, when aligning with the client's monthly accounting cycle.

15 MFI (15th of Month Following Invoice)

15 MFI means payment is due by the 15th of the month after the month the invoice was issued.

An invoice dated 20 June 15 MFI is due by 15 July. Some larger companies use this because it aligns with their twice-monthly payment runs.

When to use it: When the client requests it. Don't volunteer this unless you have to.

Early payment discounts (2/10 Net 30)

2/10 Net 30 means the buyer gets a 2% discount if they pay within 10 days, otherwise the full amount is due in 30 days.

The format is [discount %] / [days for discount] Net [full payment days].

So 1/15 Net 45 would mean 1% discount if paid within 15 days, otherwise full amount in 45 days.

Early payment discounts are a way to encourage faster payment without hassling the client. For you, even 2% feels expensive, but if you'd normally wait 30 days for $5,000, getting $4,900 in 10 days might be worth it for cash flow.

When to use it: Larger invoices where cash flow matters and you can afford the discount.

COD and CIA (paid upfront)

COD (Cash On Delivery) means payment is made when goods are physically delivered.

CIA (Cash In Advance) means payment is required before work starts or goods are shipped.

These are common for:

• New customers with no credit history
• Industries with high risk of non-payment
• Custom orders that can't be resold

When to use it: New clients, high-risk projects, custom or one-off work.

Deposit terms (50% upfront, etc.)

50% upfront (or any other percentage) means the buyer pays part of the total before work begins, with the balance due on completion.

Common splits:

• 50% deposit, 50% on completion (standard for trades and creative work)
• 30% deposit, 30% at midpoint, 40% on completion (for larger projects)
• 25% deposit, balance on completion (for smaller jobs)

A deposit protects you if the client backs out partway through and forces them to be committed to the project.

When to use it: Any project over a few hundred dollars, especially with new clients. Always for construction work, renovations, custom products.

What terms should you use?

There's no universal right answer, but here are some guidelines:

The shorter your terms, the faster you get paid. But terms that are too aggressive can scare off clients. Match your terms to the client and the project.

How to communicate payment terms

Payment terms should appear in three places:

1. Your quote before the client agrees to the work
2. Your contract (if you have one) as a binding term
3. Your invoice when payment is requested

If your terms only appear on the invoice, the client can argue they didn't know. Always state them upfront.

A good way to phrase it:

Payment terms: Net 14. Payment is due within 14 days of the invoice date. Late payments may incur a 2% monthly interest charge.

Make payment terms work for you

Clear, consistent payment terms are one of the easiest ways to improve cash flow. The other is sending professional invoices that clearly state those terms.

EasyNest lets you set default payment terms once, then every quote and invoice you send includes them automatically. Free to start, no credit card required.

Set up your payment terms with EasyNest.