Choose the shortest payment term the client’s real approval process can meet. Due on Receipt fits immediate, simple work. Net 7 or Net 15 fits small service engagements. Net 30 fits established business procurement where the price covers the working-capital delay.
Terms compared
| Term | Meaning | Best fit | Main risk |
|---|---|---|---|
| Due on Receipt | Payment expected immediately | Deposits, consumer-like sales, completed small jobs | Ambiguous if “receipt” is disputed |
| Net 7 | Due 7 days after the defined start date | Fast-moving freelance and small-business work | Too short for formal accounts payable |
| Net 15 | Due 15 days after the defined start date | Ongoing service clients with simple approval | Still requires prompt invoice routing |
| Net 30 | Due 30 days after the defined start date | Established business procurement | You finance delivery for longer |
Always print the actual due date. “Net 30” can mean 30 days from invoice, receipt, month end or acceptance in different organizations. “Due September 30” removes the arithmetic and the argument.
Calculate the cash cost
A business bills 60,000 a month and moves average payment from 15 to 30 days. Roughly another half-month of sales, 30,000, becomes tied up in receivables.
Additional working capital ≈ monthly credit sales x added days / 30.
Terms are part of price. A client asking for longer credit is asking the supplier to finance more work.
Choose by client and engagement
- New or high-risk client: deposit plus a short balance term.
- Large company: match its real approval cycle and price for it.
- Recurring retainer: invoice before the service period or use automated collection.
- Milestone project: tie due dates to accepted milestones, not final completion only.
- Pass-through cost: collect before committing cash or set a short reimbursement term.
Write complete terms
A payment term should state:
- Invoice currency and amount.
- Exact due date and what starts the clock.
- Accepted payment methods and reference.
- Who bears bank and conversion charges.
- Deposit, milestone and partial-payment rules.
- Dispute-notice process.
- Any late fee, suspension or collection step permitted by contract and law.
Early-payment discounts
A term such as “2 percent discount if paid within 10 days, otherwise due in 30” has a real annualized cost to the seller. On a 10,000 invoice, giving up 200 to receive money 20 days earlier is expensive financing. Use discounts when they improve a constrained cash position or commercial relationship enough to justify the cost.
Deposits and partial payments
A deposit reduces delivery risk more effectively than a short term on the final invoice. For project work, a 30/40/30 schedule can align cash with commitment, midpoint and acceptance. Define whether deposits are refundable and how they appear on the final invoice.
When clients demand Net 60 or Net 90
Decide commercially. Options include a higher price, smaller scope, deposit, milestone billing, card collection, a credit limit, or declining the term. Do not accept long credit by accident in a purchase-order footer after agreeing a different proposal.
Using Invoice Crowd
The invoice editor applies payment terms and shows an exact due date, while reminders, partial payments and the customer portal keep the remaining balance visible. Set terms in the accepted proposal or contract first, then make the invoice reflect them rather than introducing new conditions after delivery.
Frequently asked questions
What does Net 30 mean?
Payment is due 30 calendar days after the defined starting date, commonly the invoice date. Print the exact due date because organizations can interpret the starting event differently.
Is Due on Receipt the same as immediate payment?
It signals immediate payment, but the receipt moment can be ambiguous. Use a specific due date and a payment link or instructions so the client knows exactly what to do.
Should freelancers use Net 15 or Net 30?
Use the shortest term the client can realistically approve. Net 7 or Net 15 often fits smaller clients, while established corporate accounts may need Net 30 and pricing that covers the delay.
How do longer terms affect cash flow?
They increase receivables and the amount of delivery you finance. Added working capital is roughly monthly credit sales multiplied by the added days divided by 30.
Are early-payment discounts worth it?
Only when faster cash or the relationship is worth the discount. Calculate the cash benefit and annualized cost rather than treating a small percentage as trivial.
Can I add late fees if the invoice is overdue?
Only when the contract and local law allow them. State the rate or amount, calculation, grace period and effective date before the work is delivered.
