Invoice payment terms: what Net 30, EOM and due on receipt mean, and which to use

What payment terms are

Payment terms are the part of your agreement that says when the customer must pay, how much, and sometimes how. They usually appear as a short code such as “Net 30” on the invoice, backed by fuller wording in your quote or contract.

Terms do two jobs. They set the date after which a payment is late, which matters if you ever charge a late fee or chase a debt. And they decide how long your money sits with the customer instead of in your bank account.

The clock normally starts on the invoice date, not the day the customer opens it. That is why the due date itself should always be printed, so nobody can argue about when the 30 days began.

Common payment terms and what they mean

These are the terms you will see most often on small-business invoices in the US, UK and elsewhere. The examples assume an invoice dated March 10.

• Early payment discounts like 2/10 Net 30 can cost the seller more than they look. Our guide to 2/10 Net 30 works through the numbers.
• If you take a deposit before supplying goods, a proforma invoice is often the document used to request it.

What longer terms cost you

When a customer pays 30 days after the invoice, you have done the work and paid your own costs a month before the cash arrives. On a steady flow of invoices, there is always roughly a month of sales sitting in unpaid invoices. That balance is your accounts receivable, and it is money you are lending your customers for free.

Days sales outstanding (DSO) measures this. It is the average number of days customers take to pay. Multiply your daily credit sales by your DSO and you get the money tied up in receivables at any moment.

Take a consultant who invoices $8,000 a month, treating a month as 30 days so daily sales are about $266.67. If every customer pays exactly on the due date, the table shows how much cash is out with customers at any time, and what that costs if you would otherwise borrow it on a line of credit at 10% a year.

DSO = Receivables ÷ Credit sales × Days in period Money tied up = Credit sales per day × DSO Yearly cost of waiting = Money tied up × Your borrowing rate

How to choose your terms

Start from your own cash flow. If you pay staff, suppliers or yourself every two weeks, Net 60 terms mean two months of those costs come out of your savings before the first invoice is paid. The table above is a quick way to see whether you can carry that.

Then look at what your customers expect. Consumers and very small businesses are used to paying on receipt or within a week or two. Large companies often have fixed supplier terms of 30, 60 or more days and may not change them for you, so price that delay into your quote rather than discovering it after the first invoice.

Finally, check your real DSO against your terms. Our financial ratios calculator works out DSO from your receivables and credit sales. For example, $12,000 of unpaid invoices against $24,000 of credit sales in a 90-day quarter gives a DSO of 45 days. On Net 30 terms, a DSO of up to about 40 days is generally fine; 45 means customers are paying around two weeks late on average.

• New customer or one-off job: due on receipt, Net 7 or a deposit.
• Large project: 50% upfront or milestone payments, so you are never owed for more than one stage.
• Regular business customer with a good record: Net 15 or Net 30.
• Large corporate buyer: accept its standard terms if the contract is worth it, and build the cost of waiting into your price.

Payment terms wording you can copy

Put the terms in your quote or contract, then repeat them in the notes or terms box on each invoice. Short, specific wording works best. Replace the dates, percentages and payment details with your own.

• Due on receipt: “Payment is due on receipt of this invoice. Please pay by bank transfer to the account shown below.”
• Net 30: “Payment terms: Net 30. Please pay the full amount by April 9, 2026, quoting invoice number 1042.”
• Net 15 with a late fee: “Payment is due within 15 days of the invoice date. Overdue balances may be charged a late fee as set out in our agreement.”
• EOM: “Payment terms: Net 10 EOM. This invoice is due on April 10, 2026.”
• Deposit: “A 50% deposit of $2,400 is due before work begins. The balance of $2,400 is due on completion.”
• Milestones: “This invoice covers milestone 2 of 3 (design approval). Payment is due within 14 days.”

How to change terms with an existing client

You cannot change terms on work already done under an agreement. New terms apply from a date you give notice of, to new work or new orders.

Write to the client in plain terms: what is changing, from when, and why if you want to explain. For example: “From June 1, all new invoices will be due in 15 days rather than 30.” Give at least one full billing cycle of notice, update your quote template and contract, and make sure the next invoice shows the new terms and due date.

If a client pushes back, offer a middle ground such as a deposit on large jobs, or keep their old terms in exchange for paying by bank transfer instead of card. Clients who regularly pay late are the ones to move first.

Legal points to know

Payment terms are mostly a matter of contract, but some rules apply on top. They differ by country and, in the US, by state.

In the US, there is no general federal rule on business payment terms. Whether you can charge a late fee or interest, and how much, depends on your contract and on state law, which often caps interest rates. Agree any late fee in writing before the work starts.

In the EU, the Late Payment Directive (2011/7/EU) says business-to-business payment periods should not exceed 60 calendar days unless expressly agreed and not grossly unfair to the supplier. Where no date is agreed, interest runs after 30 days. Statutory interest is at least 8 percentage points above the reference rate, plus at least €40 compensation for recovery costs.

In the UK, a business can claim statutory interest on late payments from another business at 8% plus the Bank of England base rate, plus fixed compensation, unless the contract sets a different remedy. Our late payment fees guide covers the UK and US rules in detail.

Frequently asked questions