Payment Terms: Net 30, Due on Receipt & Late-Payment Rules

Payment terms are the part of an invoice that decides when you actually get paid. They turn a bill into a clear agreement: how long the client has, what happens if they pay early, and what happens if they pay late. Vague or missing terms are one of the most common reasons invoices drift past their due date. This guide explains the most common payment terms, what each one means, how to word them on an invoice, and how they shape your cash flow.

What are payment terms?

Payment terms are the conditions under which you expect to be paid — primarily the deadline, but also the accepted methods, any early‑payment discount, and any late‑payment penalty. They convert a payment request into a specific, enforceable expectation.

The most important element is the due date. "Please pay soon" has no teeth; "Payment due within 30 days of the invoice date (by 26 August 2026)" does. Clear terms protect your cash flow and remove the awkward guesswork that leads to late payments and uncomfortable follow‑up emails.

Common payment terms

Most invoices use a small set of standard terms. Here is what each one means, the due date it produces for an invoice dated 15 November 2026, and when it fits:

Count the days from the invoice date unless your terms say otherwise, and write the resulting date on the invoice. "Net 30" alone leaves the client to do the arithmetic; "Net 30, due 15 December 2026" leaves no room for doubt.

Pick the terms that match your cash‑flow needs and your relationship with the client, and use them consistently so clients know what to expect.

How to choose

Choosing terms is a trade‑off between getting paid quickly and staying easy to work with. Shorter terms like Due on Receipt or Net 15 improve your cash flow but can feel demanding, especially to a new client. Longer terms like Net 60 win larger accounts but make you wait — and effectively lend the client money in the meantime.

For most freelancers and small businesses, Net 30 is a sensible default, with Net 15 for smaller or newer clients and an early‑payment discount when cash flow matters. Consider requesting a deposit for large projects so you are not carrying all the risk until the end.

It also helps to agree terms before you start, not when you send the invoice. Raising payment terms during the proposal or contract stage sets expectations early and avoids awkward surprises later — a client who agreed to Net 15 up front rarely pushes back when the invoice arrives. For longer engagements, structure the work into milestones and bill at each one, so a single late payment never puts the whole project at risk.

Payment terms and cash flow

Payment terms are, in effect, short‑term financing decisions. Every day between doing the work and getting paid is a day you fund the client's operations out of your own pocket. Net 60 might win a large account, but if your own suppliers expect Net 15, that 45‑day gap has to come from somewhere — usually your cash reserves.

Map your terms against your outgoings before you commit. If your costs fall due quickly, favour shorter terms or a deposit so money comes in before it needs to go out. Predictable, well‑chosen terms are what keep a profitable business from running into a cash‑flow squeeze.

How to word them on an invoice

State your terms plainly and back them with a concrete date. A few good examples:

• "Payment due within 30 days of the invoice date (by 26 August 2026)."
• "Due on receipt. Bank transfer details below."
• "2% discount if paid within 10 days; full amount due in 30 days."

Always pair the term with the actual due date, list your accepted payment methods, and include your bank details for transfers. The less a client has to work out, the faster they pay.

Ready‑to‑copy wording

Three versions you can paste into the terms section of an invoice and adapt. Replace the dates and figures with your own.

Standard Net 30

Payment terms: Net 30. Payment is due within 30 days of the invoice date, by 15 December 2026. Please pay by bank transfer using the details below and quote the invoice number as the reference.

UK business client, with the statutory interest notice

Payment is due within 30 days of the invoice date. If this invoice is paid late, we reserve the right to claim interest and fixed‑sum compensation under the Late Payment of Commercial Debts (Interest) Act 1998.

Early‑payment discount

2/10 Net 30: you may deduct 2% from the total if payment reaches us by 25 November 2026. Otherwise the full amount is due by 15 December 2026.

The UK notice only works for business‑to‑business invoices, because that is the only situation the Act covers. The next section explains what it entitles you to.

What the law says when a client pays late

Your payment terms are a contract term, so the first place to look when a client pays late is what you agreed. Some jurisdictions also give suppliers rights that apply even when the contract says nothing about late payment. Here is the short version for the UK, the EU and the US.

General information, not legal advice. Late‑payment rules depend on the contract, the jurisdiction, and whether the client is a business or a consumer.

United Kingdom: statutory interest and fixed compensation

When another business pays you late, the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim:

• Statutory interest of 8% plus the Bank of England base rate, as simple interest. The base rate used is fixed for six months at a time: the rate on 31 December applies when interest starts to run between 1 January and 30 June, and the rate on 30 June applies when it starts between 1 July and 31 December.
• A fixed sum for each late invoice, on top of the interest: £40 for debts up to £999.99, £70 from £1,000 to £9,999.99 and £100 for £10,000 or more. If your reasonable costs of recovering the debt are higher, you can claim the difference as well.

These rights are implied into business contracts, so they apply even if your contract never mentions them. You cannot claim statutory interest if the contract sets a different interest rate, and a contract can only replace or exclude statutory interest if it provides a "substantial remedy" for late payment.

If you agree a payment date with a business, it must usually be within 60 days; you can agree longer, but only if it is fair to both businesses. Public authorities must usually pay within 30 days. If no payment date was agreed, the payment becomes late 30 days after the customer receives the invoice or you deliver the goods or service, whichever is later.

Change may be coming. The Commercial Payments Bill, which would set maximum payment terms of 60 days with limited exemptions, passed the House of Lords in October 2026 and is now before the House of Commons. It is a proposal, not yet law. For the VAT side of a UK invoice, see our guide to UK VAT invoice requirements.

Worked example: UK statutory interest

An example with illustrative figures. A designer invoices a business client for £2,500 on 1 September 2026 on Net 30 terms, so payment is due on 1 October. The client pays on 15 November, 45 days late.

Interest starts to run on 2 October, so the reference rate is the Bank of England base rate on 30 June 2026: 3.75%. The statutory rate is therefore 8% + 3.75% = 11.75% a year.

• Annual interest: £2,500 × 11.75% = £293.75
• Daily interest: £293.75 ÷ 365 = about £0.80
• Interest for 45 days: £293.75 ÷ 365 × 45 = £36.22
• Fixed sum for a £2,500 debt: £70

The designer can claim £106.22 on top of the £2,500, plus any reasonable recovery costs above the £70. The general formula is: amount × (8% + base rate) ÷ 365 × days late. If interest starts to run between 1 January and 30 June 2027, use the base rate on 31 December 2026 instead, and check the current rate on the Bank of England website before you send a claim.

European Union: the Late Payment Directive

Across the EU, Directive 2011/7/EU sets minimum rules for payments between businesses, and from public authorities to businesses. It does not cover consumers. Each member state writes it into national law, and countries may give suppliers more than the EU minimum.

• No payment date agreed: payment is due 30 calendar days after the customer receives the invoice.
• Agreed terms between businesses: no more than 60 calendar days, unless the contract expressly says otherwise and the longer term is not grossly unfair to the supplier.
• Public authorities: 30 days as a rule. Member states can allow up to 60 days for public undertakings and for public healthcare bodies.
• Interest: simple interest of at least 8 percentage points above the European Central Bank's reference rate.
• Compensation: at least €40 per late invoice, plus reasonable recovery costs above that.

National rules can be stricter. Germany, for example, sets interest on late business payments at 9 percentage points above its base rate. A proposed EU Late Payment Regulation, published in 2023, would tighten these rules, but it has not been adopted: as of October 2026 it is still waiting for the Council's first‑reading position.

United States: the contract decides, and some states protect freelancers

The US has no general law that sets payment deadlines or late‑payment interest between private businesses. Your terms are a matter of contract, so anything you want to rely on, such as a late fee or an interest charge, should be written into the agreement before the work starts. The federal Prompt Payment Act covers only federal agencies paying their contractors.

Several freelancer laws do set a payment deadline:

• New York State, under the Freelance Isn't Free Act (in force since 28 August 2024): when a freelancer is hired for services worth $800 or more, the hiring party must provide a detailed written contract and pay on the date it sets or, if no date is given, within 30 days of the work being completed.
• New York City has had its own Freelance Isn't Free Act since 15 May 2017. It covers contracts worth $800 or more, including all agreements with the same client that reach $800 in any 120‑day period, with the same 30‑day rule.
• Illinois, under the Freelance Worker Protection Act, which applies to contracts taking effect after 1 July 2024: work worth $500 or more over a 120‑day period needs a written contract, and payment is due by the contract date or within 30 days of completing the services.

For what a US invoice should show, including sales tax and Form 1099‑NEC, see our guide to US invoice requirements.

Late payment and follow‑up

Even with clear terms, some invoices run late. Set expectations up front by stating a late‑payment policy — for example, "A 2% monthly charge applies to overdue balances." Agree it with the client before the work starts, and in the UK remember that a contractual rate replaces statutory interest. Then follow up politely but promptly: a friendly reminder a few days before the due date, and another soon after if it passes.

Most late payments are simple oversights that a timely, courteous nudge resolves. Consistent follow‑up signals that you track your invoices and expect to be paid on schedule.

How to set payment terms in Invoice Builder

The free invoice generator covers the basics of payment terms directly on the invoice:

• Due date: every new invoice starts with a due date 30 days after the issue date, which matches Net 30. You can change it to any date with the date picker, so Net 7, Net 15, EOM or Net 60 take a few seconds.
• Due date label: click the "Due date" label to rename it, for example to "Payment due (Net 15)". The new wording appears on the PDF.
• Terms & conditions: paste your payment‑terms wording, late‑payment notice or discount terms into this section. Whatever you type is printed under its heading on the exported PDF.
• Late fees: there is no dedicated late‑fee field. If a client pays late, you can add the interest and fixed sum as a separate line item on a new invoice.

What it does not do: it does not calculate late‑payment interest automatically, track whether an invoice has been paid, or send reminders. Diary the due date and follow up yourself.

Tips for faster payment

• Invoice immediately after the work is done — delay in sending means delay in paying.
• Keep terms short and clear, and make the due date prominent near the top.
• Offer an early‑payment discount if faster cash flow is worth a small cut.
• Make paying easy with complete bank details and multiple methods.

Clear terms are one of the most effective tools you have for getting paid on time. For the wider context, see how to write an invoice, and to keep your payment records straight understand the difference between an invoice and a receipt.