Handbook / Invoicing and getting paid

Invoice payment terms: choosing, wording and enforcing them

Payment terms decide when your money arrives. For a business of one, the difference between being paid in a week and being paid in two months can be the difference between a calm month and a cash crisis. Good terms are clear, agreed in advance, appropriate to the client and the job, and backed by a consistent routine of reminders. This guide covers how to choose and word them.

Terms belong in the agreement first

The invoice is the wrong place to introduce terms for the first time. Put them in your proposal or agreement, so the client accepts them before work starts. The invoice then repeats what was already agreed. A client who signed "payment within 14 days of invoice" has much less room to argue than one who sees it for the first time on the bill.

The main choices

Due date. Either a number of days after the invoice date or a specific date. Common forms are "due within 14 days" or "net 30", meaning payment due 30 days after the invoice date. The guide on net 30 covers that term. Whatever you choose, print the actual date on the invoice: "Due: April 14, 2027".

Deposit. A payment before work begins. Deposits reduce risk and confirm commitment. Many service businesses require one from new clients or for larger projects.

Milestones. For longer projects, payments at defined points, such as approval of a draft. This keeps money flowing and matches payment to progress.

Recurring billing. For retainers or ongoing services, invoicing at the start of each period, in advance, is common and keeps you from working weeks unpaid.

Accepted methods. List how clients can pay: bank transfer, card, an online payment service or check. Note that some methods carry fees for you.

Wording that works

Plain and specific beats legalistic:

Example terms paragraph: Payment is due within 14 days of the invoice date, by bank transfer or card through the payment link on the invoice. New projects require a 40% deposit before work begins. Invoices unpaid 30 days after the due date may incur a late fee as set out in our agreement.

Put the same paragraph in your proposal template and your invoice template.

Late fees and interest

Late fees can encourage prompt payment, but rules differ by state and by type of transaction, and a fee a client never agreed to is hard to enforce. If you want one:

• include it in the signed agreement, not just the invoice
• keep it reasonable
• check what your state allows before relying on it

Many small businesses find that a polite, consistent reminder routine does more than a fee.

Choosing terms for different clients

• New clients: deposit and short terms until trust is built.
• Established, reliable clients: standard terms, perhaps no deposit for routine work.
• Large organisations: they may have fixed payment cycles and require purchase order numbers or supplier registration. Ask before invoicing so the paperwork does not delay payment. Factor longer waits into price and cash planning.

The follow-up routine

Terms work only if you follow up. A simple sequence:

1. One or two days before due: a friendly reminder with the invoice attached.
2. On the due date or the day after: a short note that payment is due, with a payment link.
3. About a week overdue: a firmer message referring to the agreed terms.
4. Two or more weeks overdue: a phone call, and pause further work if appropriate and permitted by your agreement.

Keep messages factual: invoice number, amount, due date, how to pay. The working-alone guide on late payments covers what to do when reminders fail.

Records

Keep every invoice and record the date and amount of each payment. The IRS lists invoices among the supporting documents that show gross receipts. A list of open invoices with due dates, checked weekly, tells you at a glance who owes what and when.

Cash flow

Terms are part of cash flow planning. If your clients pay 30 days after invoicing and you invoice at the end of a month, money for work done early in the month may take six weeks or more to arrive. Shorter terms, deposits, milestones and prompt invoicing all shrink that gap.

Agree terms before the work, print a real date on every invoice, ask for deposits where risk is high, and follow up on a schedule rather than when you remember.