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Payment Terms: How to Use Them for Small Business

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Table of Contents

What does an invoice include?

What are the most common payment terms, why should you include payment terms in invoices/contracts, tips for payment terms, how to include payment terms.

Payment terms are the conditions of a sale. They’re usually associated with invoice payments, and specify how and when clients provide payment for goods or services.

Terms include when payment is expected, accepted payment methods and any discounts for early payment and/or late fees. They help confirm expectations for clients and business owners alike, ensuring mutual understanding and consistent cash flow for the business.

Invoicing software can help you add payment terms into your invoices, track recurring payments and monitor your cash flow.

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QuickBooks Online

The payment terms in an invoice can vary, but most invoices should have the following components:

Invoice date.

Invoice number to track invoices chronologically.

Total amount due.

Due date and payment period.

Goods or services provided.

Payment plan details.

Accepted payment methods.

Stipulations for an advance or deposit.

Contact information.

Common invoice payment terms specify details including the time period a client has to pay the total amount owed, discounts for early payment, and any partial or advance payment expectations.

Advance payment

Partial or full payment in advance can help reduce the risk of cancellation or loss. You can offer discounts for clients who pay in advance and use a partial payment as working funds to complete a client’s project.

PIA: Payment in advance; fully paid before the project begins. CIA, or cash in advance, and CWO, or cash with order, are also used.

50% upfront: Half of the total amount paid in advance, commonly used for long-term projects. Allows clients and businesses to take on equal financial risk.

CND/CBS: Cash next delivery or cash before shipment; payment must be made before the next delivery is initiated or before the product is shipped.

Immediate payment

COD: Cash on delivery, otherwise known as payable upon receipt; customer pays as soon as they receive the goods or services. “Cash” here refers to any accepted payment method.

Dated payment

Net payment: Typically appears as Net 7, 10, 15, 30, 60, 90 or N/7, etc. The number refers to the number of days the client has to pay the total amount; “net” refers to the total after any discounts. For example, if your term is N/30 for an invoice dated Oct. 15, the full payment must be submitted by Nov. 14.

EOM, MFI: You can also add “end of the month” to designate payment by the end of the month. MFI specifies payment due the month following the invoice date, often the 15th or 21st.

This payment term does require you (the business) to expense the project without receiving income, so make sure the payment period is within a reasonable time for you to recover the funds.

Some situations require future dating an invoice — a product may not yet be in stock, or payment is designated for a future earnings period. However, backdating an invoice, especially at a client’s request, is not recommended: It can be risky and, in some cases, considered fraud.

Partial payment

Stage payments: You can also choose to offer clients the option of paying small installments over a longer period of time, usually monthly or quarterly payments. Payments can also be made after the delivery of certain products or segments of a project.

Lines of credit: These terms give buyers credit toward their purchase, repaid in scheduled installments. This is usually only done in larger organizations that can handle the financial risks if a customer defaults.

Cumulative quantity discount: Also known as accumulation discount, offering a reduced price for bulk quantities or large bundled orders.

Partial payment discount: Typically offered to clients when the business has a low cash flow, motivating the client to pay some of the total amount as early as possible so the business can secure the materials or labor needed to complete the project.

Contra: Payment offset by the cost of supplies, used when the customer is the supplier. You’ll need to create both a sales and a purchasing invoice, then create a separate account for these payments; accounting services often have specific templates for this process.

Early payment discount: Reduced cost for payment received before the net payment period. For example, 1% 10 Net 30 or 1/10 Net 30 means a 1% discount if payment is received within 10 days, otherwise, regular payment is due in 30 days.

Rebate: Partial refund sent to the client immediately after purchase or at a specified later date. Most commonly used for volume-based pricing, the business can offer a delayed discount based on the actual purchase quantity, not the estimated or promised amount.

Small businesses are dependent on a consistent cash flow to keep operations running. Payment terms ensure that you have the funds needed to perform a service or manufacture a product, and accurate invoices help you predict future income.

According to a 2019 State of Small Business Cash Flow analysis by QuickBooks, 80% of small-business owners worry about their cash flow, and more than half of those owners say late customer payments are the primary cause. Clear payment terms — with penalties for late payments and discounts for timely ones — can reduce this stress and ensure that your business can perform well and grow.

Client relationships

Clear payment terms set clear expectations for both parties. When terms are specified, clients and businesses alike know when to expect payment, products and discounts. Payment terms can be negotiated with clients, increasing communication and understanding in the professional relationship.

Legal protection

U.S. small-business owners had an average of $78,355 in outstanding receivables in 2019, according to QuickBooks’ analysis. When your payment terms are clearly documented and agreed upon by your client in a contract, you have legal standing if you don’t receive payment on time or at all.

» MORE: NerdWallet's best small-business apps

Discuss with your client

Payment terms should be negotiated between you and your client to minimize conflict and increase convenience for both parties. The right terms can ensure that you receive payment in a reasonable amount of time and your client understands your expectations.

Invoice quickly

Creating an invoice as soon as possible prevents payment delays and interruptions. Especially with date-specific and time-sensitive payment terms, sending an invoice to a client immediately is essential.

Enforcing your payment terms with late fee conditions makes sure that you aren’t financially impacted by late or incomplete payment. Including late fees leads to a higher percentage of paid invoices, according to a 2019 FreshBooks data analytics study.

Late fee charges typically range from 1.5% to 3% interest per month. Maximum annual interest rates vary between states, so make sure to check that your late fees are in line with state laws.

Reward early payment

On the flip side, offering discounts for early payment can be an incentive for clients to complete payment as soon as possible — and give your business additional funds to complete the project.

Shorten payment periods

With the increased use of online payments and ACH bank transfers, payment periods do not need to be as long as the standard 30 days. Even slightly shorter payment periods, like 15 or 21 days, can make a big difference in cash flow.

Polite wording

Including polite phrases like “please” and “thank you” in your invoice can actually impact your payment returns. According to the 2019 FreshBooks study, using this kind of language increases the percent of invoices paid by 5%.

Flexible payment methods

Offering clients as many payment options as possible increases convenience, which makes them more likely to pay sooner. In addition to cash, checks and credit cards, setting up automatic bill payments through ACH bank transfer can streamline the process.

Credit card payments may be the most convenient option for many customers, but make sure to specify which party is responsible for the fees in your contract.

You can create an invoice with a Microsoft Word or Excel template, but online invoicing software has advanced features that can automatically add payment terms and keep track of payments received.

Accounting software like QuickBooks can set up automatic and recurring payments and email invoices to customers with direct payment links. QuickBooks also offers pay-enabled smart invoices that clients can pay using credit cards, debit cards and ACH bank transfers.

Invoice-specific options with a free plan, such as InvoiceNinja, provide dedicated invoicing features like time tracking, expense logs and estimates. Not all invoice software integrates with accounting services, however, so a paid, all-in-one option like QuickBooks or FreshBooks may provide a more seamless payment process for your business.

» MORE: NerdWallet's best accounting software

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Payment Terms: Examples and How to Use Them on Invoices

By Hannah Donor • Apr 4, 2023

When you invoice a customer or client, there are certain expectations for both sides. Just as your clients expect you to complete the work they are being billed for, you expect them to do their part and pay what is due, on time. Business owners should use payment terms on every invoice to keep the client-contractor relationship healthy and avoid any conflicts (or even awkward conversations).

What are Payment Terms?

It is crucial to set clear expectations and include all relevant payment terms when sending an invoice , leaving no room for confusion or misinterpretation. Payment terms enable you to convey to your customer when the invoice is due and how you prefer to be paid.

Payment terms may also detail penalties for late or missed payments, as well as incentives for clients who fulfill invoices early. The goal when invoicing is to be as transparent as possible, explicitly detailing your client’s responsibilities upon receiving an invoice, as discussed during the onboarding process .

Benefits of Using Payment Terms

Although you should communicate expectations in your initial discussions with a client, and lay them out in your contract, including payment terms on invoices adds another layer of protection for your business. Doing so will:

• Enable you to secure payments from clients, on-time
• Help you better organize and manage your cash flow
• Avoid the risk of payment-related conflicts with clients

When you understand all of the possible payment terms you may use on an invoice, your business will be well-positioned in any payment-related communications with your client.

What Payment Terms Should Be Included on an Invoice?

Every invoice has a few payment terms that must be included to ensure it is both official and professional. These terms give your client all the information they need to pay what they owe while also helping you maintain an organized bookkeeping system.

Invoice Date

This is the date your client receives the invoice. Depending on your contract with a client, this date may be the same every month (i.e. always invoicing on the 15th), may occur after work is completed, or may occur before work can begin.

This refers to the date by which payment is due from your client. It’s important to have a different due date from the invoice date in order to give your client time to pay and to help set reasonable expectations for payment.

Invoice Amount

This is the total amount the client is expected to pay. If you are billing your client for multiple projects or separate elements of a single project, these should be detailed in the invoice, with a total invoice amount at the end.

If your clients are located within the same country as you, currency shouldn’t be a complicating factor. However, if you are working with an international client, it’s important to state the currency you wish to be paid in.

Payment Procedures

To avoid having to deal with clients who haven’t paid you , your invoice should outline payment terms that reinforce your expectations of payment. These may include incentives for early payment, or penalties for late payments.

Examples of Common Payment Terms

Beyond the essential invoicing terms listed above, there are several other payment terms you may want to include on your invoice that ensure clarity in the payment process and enable you to maintain a healthy working relationship with your clients. Many of these terms may not be immediately relevant for your business, but are still helpful to know, as they may come up at some point in your business accounting. Here are some common payment term examples you should know:

Net 7/10/15/30/60/90

Net terms specify the number of days a client has to pay an invoice. The most common net term is Net 30 , which means payment is due by the 30th day from the invoice date. The 30th day following the issue date serves as the invoice due date.

2/10 Net 30

If you want to offer clients a discount as an incentive for paying an invoice early, you can add those details to your net terms. In this case, 2/10 Net 30 means a client will receive a 2% discount if they pay by the 10th day from the invoice date. Otherwise, payment is due by the 30th day.

Line of Credit [LOC]

This term is especially common for corporations. A line of credit allows customers to pay invoices in installments over a period of time. These payments may occur weekly, monthly, or quarterly throughout the payment period.

Payment in Advance [PIA]

If a business or independent contractor expects to receive payment in full before work begins, this is known as “payment in advance.” This may be received in the form of a deposit, where a percentage is due up front and the remainder will be paid after work is completed.

Typically used for product invoicing, such as office supplies or produce orders for a restaurant, 1MD denotes a monthly credit payment for a one-month supply of product. If the credit payment is for two months of supplies, it is written as 2MD.

Cash In Advance [CIA]

Similar to Payment in Advance, Cash in Advance (or CIA) means the full payment is due in cash before work can begin.

Upon Receipt

“Upon Receipt” means the customer or client is expected to pay the invoice immediately when they receive it. This is common with home maintenance businesses like plumbers, who will hand the customer an invoice after work is completed and expect payment before they leave the house.

End of Month [EOM]

EOM means payment is due at the end of the month that the invoice was received. Typically, this payment term is used when an invoice is sent within the first 15 days of the month, giving the client sufficient time to pay.

Invoices with “15 MFI” payment terms are due on the 15th of the month following the invoice date. For example, an invoice sent on January 5 with 15 MFI terms would be due February 15.

Cash on Delivery [COD]

COD means goods or services must be paid for in cash at the time of delivery. This is common for projects that involve the final product being delivered to the client, such as a custom piece of art ordered from a local artist.

Cash Next Delivery [CND]

If payment for a product or service is due in cash before the next delivery, the invoice should include this term. Cash Next Delivery is typically used in ongoing business relationships that involve regular deliverables.

Cash Before Shipment [CBS]

Similar to Cash Next Delivery, CBS means payment must be made before the next shipment can occur and is typically used for recurring deliveries.

Cash with Order [CWO]

Whereas Cash Before Shipment expects the invoice to be fulfilled before goods will be shipped, Cash with Order requires a customer to pay in full before goods will be produced.

Accumulation Discount

This discount is provided as an incentive for large orders, saving customers money in the long run if they buy a larger supply of goods or services.

Stage Payments

Stage Payments refers to payment made in installments over a period of time, as agreed upon in advance by the client and service provider.

Forward Dating

Forward Dating refers to the issuance of an invoice prior to an order being received or work being completed, however the invoice is not due until after the client receives the completed work or order.

Partial Payment Discount

If you are offering a discount for early payment, the client receives a partial discount for paying a portion of the invoice early. The amount they pay early will be discounted, and the rest of the invoice will be billed at the full rate.

A rebate is a refund the customer receives after they’ve made a purchase. It’s a way of discounting a product or service after it has already been paid for.

If your customer is also a supplier for your business, you may offset the amount they owe you by the amount you owe them for supplies purchased. The remaining amount is the total payment they owe.

How to Write Payment Terms and Conditions for an Invoice

Depending on the nature of your agreement with a given client, including too many payment terms on an invoice can be confusing. It’s important to outline the payment terms and conditions on your invoice as clearly as possible. As well, make sure to use only the payment terms that are necessary to help your client pay faster and more easily.

If you’re new to online invoicing, you can make use of an invoice template that offers a clear structure and includes the fields you need to include all relevant payment terms. While an invoice template may work for a one-time payment, if you invoice clients regularly you might consider using invoicing software. Lili’s Invoicing Software not only enables you to send customized invoices with clearly defined payment terms, but you’re also able to track your invoices conveniently within your Lili account, and set up invoice payment methods to receive payment directly to your Lili account. And, invoice payments made to your Lili account will be included in monthly, quarterly and yearly reports that are automatically generated for you.

If any of that sounds like something your business needs, consider opening a Lili account today !

Hannah Donor is a freelance copywriter and social media strategist with 5+ years of experience helping small businesses authentically curate the written word to reach and inspire their target market.

By Hannah Donor • Nov 12, 2023

By Melissa Pedigo, CPA • Dec 12, 2023

By Andrea Jacobs • Aug 22, 2023

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15 Accounting Payment Terms and How to Work With Them

Get your customers to pay their bills quickly by understanding these accounting payment terms and strategies.

Table of Contents

When you’re a small business owner, getting paid on time is a top priority. If you don’t set up the right payment terms with your customers, it can lead to late payments, poor cash flow and unnecessary stress in your business.

Fortunately, there are simple steps you can take to improve your billing methods. We’ll look at 15 standard accounting payment terms and how to use them in your business to streamline customer payments and stabilize cash flow.

What are payment terms?

Payment terms are an agreement between you and your customers that details precisely when and how they’ll pay you. When you create an invoice , you’ll note the payment terms for a particular customer and transaction — setting clear expectations about future payments, including how and when you prefer to be paid. Payment terms may also explain penalties for missed or late payments.

Setting up transparent payment terms is essential to ensure customers know what to expect. The more straightforward your payment terms, the easier it will be for customers to pay promptly. They’re also crucial because your small business’s cash flow depends on how quickly your customers pay you. Clearly defined payment terms will make it easier to forecast cash flow, accept new projects and invest in new opportunities.

What are standard accounting payment terms?

Specific payment terms that outline how and when you must be paid are often abbreviated on an invoice. Here are 15 of the most common invoice payment terms you’ll likely encounter.

• 1MD: 1MD denotes a payment credit for a full month’s supply.
• PIA: PIA stands for “payment in advance.” This term indicates that payment must be made in full before the goods or services will be delivered.
• CIA: CIA is short for “cash in advance.” Adding this term means the full payment must be made in cash before the goods or services will be delivered.
• Upon receipt: When you indicate that payment is due upon receipt, you expect payment as soon as the client receives the invoice.
• Net 7: Net 7 means payment is due in seven days.
• Net 21: Net 21 indicates payment is due in 21 days.
• Net 30: Net 30 terms mean payment is due in 30 days. (You may also see Net 60, Net 90 and similar terms.)
• EOM: EOM means payment is due at the end of the month the invoice was received.
• 15 MFI: If you see 15 MFI, payment is due on the 15th of the month following the invoice date.
• 2/10 Net 30: This term means that payment is due in 30 days, but the customer can receive a 2 percent discount for payment within 10 days.
• COD: COD denotes “cash on delivery.” It means the goods or services must be paid for in cash at the time of the delivery.
• CND: CND indicates “cash next delivery.” It means the payment must be made before the next delivery. This payment term is usually reserved for recurring payments for subscription deliveries.
• CBS: CBS stands for “cash before shipment.” It means the balance must be paid before the product is shipped to the customer.
• CWO: CWO means “cash with order.” It means the customer must pay the invoice in full before the goods are produced and shipped.
• Accumulation discount: An accumulation discount is a discount given on a large order.

What should an invoice include?

Your invoices should clearly outline the transaction’s payment terms — including the amount due, when payment must be made and the acceptable payment forms. They should also include general essential information that ensures timely, accurate records.

Include the following information on your invoices to properly convey your payment terms:

• Invoice date : All invoices should include the date you send the invoice.
• Amount due: The invoice should clearly state how much the customer owes you.
• Payment due date: The payment due date is when you expect to receive payment. Some invoices are due immediately, while others specify that payment is expected at a later date. For example, as explained above, if payment is due in 30 days, the payment terms would specify “Net 30.” The payment due date parameters are also referred to as “invoice terms.”
• Invoice number: The invoice number allows customers and your accounting team to track your invoices.
• Acceptable currency: If you frequently work with international clients, you will specify the currency you want to be paid in.
• Acceptable payment methods: The invoice should include a list of acceptable payment methods. For example, you might accept credit cards, online payments and ACH payments .
• Additional payment terms: Your invoice should include any other payment terms the customer should know. For example, you may offer an early payment discount or expect an upfront deposit.

How to use payment terms to your advantage

Businesses have unique situations that may dictate specific payment terms. Consider the following tips on setting payment terms that work to your advantage:

• Set specific invoice terms according to unique customer situations. You may work with specific clients periodically or regularly. The invoice terms you select should make sense for each situation. For example, you may prefer that some clients pay their invoices in full upon receipt. For others, Net 14, 30 or even 90 terms may make sense. Your cash flow situation and client relationships will play a role in these decisions.
• Ask for upfront payments when appropriate. Service providers and small businesses may function better in an upfront payment model. Asking for payment upfront guarantees cash flow, but not all customers may be willing or able to accommodate these terms.
• Request a deposit to help ensure adequate cash flow. If upfront payments aren’t realistic for some clients, consider asking for a deposit. This setup is another good option for freelancers and solopreneurs. For example, requesting a 50 percent upfront deposit before embarking on a larger project ensures some cash flow without overly burdening the client.
• Create monthly retainers for ongoing clients. If you work with clients on an ongoing basis, e.g., a business consultant , consider setting up a monthly retainer they’ll pay to access your services. Under these payment terms, you and your client will agree to a set amount and work parameters.

How to set up effective payment terms

If you struggle to get your clients to pay their invoices on time, you may need to set up more effective payment terms. Here are seven tips for setting up better payment terms for your clients.

1. Use accounting software to set payment terms.

Accounting software simplifies the entire invoicing process, including setting payment terms. You’ll also be able to send invoices more quickly, make fewer errors, track upcoming payments, send automated late payment reminders and easily reconcile your account.

Additionally, accounting software ensures your financial records stay organized and helps you manage your small business taxes . (We’ll detail some specific accounting software solutions below.)

2. Be upfront about your payment terms.

Before working with a new customer, ensure they understand and agree to your payment terms. Explain the terms verbally and include a written description in your employment contract or agreement. This level of clarity and transparency will help eliminate any misunderstandings about how much customers owe you and when payment is due.

3. Be polite when invoicing clients.

Want an easy hack to get your clients to pay you faster? Be polite when invoicing them, and include the words “please” and “thank you” somewhere on the invoice.

A study by FreshBooks found that invoices that include a “thank you” in the invoice payment terms get paid almost 90 percent faster; 45 percent of those invoices get paid in seven days or less, while 12 percent get paid in 14 days or less. Using “please” has a similar result; these invoices get paid 88 percent faster.

4. Accept various payment methods.

Have you ever tried to make a purchase at a store and discovered the business only accepts cash payments? Consider how you felt when you realized this — were you frustrated and annoyed by the inconvenience?

That’s likely how your customers feel if you offer them limited payment options. If you want them to pay on time, make it as easy as possible. Allow them to pay with credit cards, debit cards, online payments, ACH, digital payments or even cryptocurrency payments .

5. Set shorter payment terms when possible.

One of the best ways to get your clients to pay sooner is to shorten the due date. It sounds obvious, but if you give your clients a long time to pay, they’ll usually take it.

For many industries, Net 30 is considered the gold standard for payment due dates. That’s a reasonable time frame; however, if you have a client who regularly ignores your Net 30 due date, you might consider shortening it to Net 21 or Net 14.

6. Be flexible.

While you want your clients to pay on time, your customers — particularly B2B customers — may be experiencing cash flow issues. Some businesses can’t accommodate Net 14 or even Net 30 payment terms and will appreciate more flexible conditions. When possible, accommodate these customers to engender loyalty and dependable payments.

7. Offer a discount for early payment.

Early payment discounts are a common B2B billing best practice that can benefit you and your clients. For instance, your standard terms could be Net 30, but customers receive a 2 percent discount if they pay the invoice within seven days. So, if they owe $5,000 on an invoice, they’ll receive a $100 discount for paying early. These discounts add up over time, so many customers may take advantage of them.

Of course, this type of discount means you’ll accept less money on the invoice. But the improved cash flow may be worth it for your business.

Best accounting software for managing payment terms

Choosing the right small business accounting software can help you better manage invoicing and payment terms; this, in turn, helps build a stronger company on sounder financial footing. Consider the following platforms, which are among the best accounting software solutions for small businesses.

• QuickBooks Online: QuickBooks Online is versatile, cost-effective and one of the most popular accounting software packages around. It offers custom invoicing and allows you to select from numerous payment terms and set default terms for specific clients. Our QuickBooks Online review explains this platform’s customizable invoices and forms, invoice tracking functionality, ability to accept payments via invoices, and much more.
• Plooto: Plooto is an excellent option for businesses that want to streamline their payment processes and clearly communicate payment terms to their clients; this, of course, ensures a smooth accounts receivable process. It also allows you to automate customer payments and supports payments via credit and debit cards, EFT, ACH, e-transfers and more. Our detailed Plooto review explains this platform’s automated invoice management and robust accounts payable tools.
• Zoho Books: Zoho Books is a highly cost-effective solution that can help small businesses automate their accounting processes, invoicing, online payments and more. You can easily send recurring invoices and payment reminders to ensure steady cash flow and quickly convert sales orders or estimates to invoices. You can easily configure new payment terms for customers or set custom payment terms for specific situations. Our comprehensive Zoho Books review outlines this solution’s affordable pricing structure and easy user interface.

Accounting payment terms can work for your business

Managing invoicing and payments is a crucial yet stressful aspect of running a small business. However, setting reasonable payment terms that work for your customers ensures ample cash flow and business continuity. Consider your unique needs and customer relationships, make it easy for customers to pay you, and tailor your invoices and payment terms to keep money flowing steadily.

Matt D’Angelo contributed to this article.

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The Guide to Payment Terms and How to Optimize Them

Payment terms are essential in any business transaction as they define the cash flow cycle. They are the rules that ensure vendors and suppliers get paid on time and customers know when to expect payments. When discussing payment terms, we refer to the conditions that dictate when and how payments should be made. Payment terms define when you get paid —at least regarding accounts receivable (AR). For accounts payable, payment terms usually refer to paying vendors and suppliers. But regardless of who is paying who, the terminology is the same. The most significant difference is strategy. Setting your payment terms means you set the cash life cycle. Of course, customers don't always abide by your words — but failing to have them can result in chaos.

What do the Payment Terms Include?

Payment terms usually appear in two places: In the initial contract and every invoice . A payment term highlights when an invoice needs to be paid, how often, and if there are penalties for late payments . When printed on an invoice, include the following:

• Invoice date
• Payment date
• Period for payment ("net")
• Invoice amount
• Rules for deposits or advanced payments
• Payment plan details
• Accepted payment methods

The payment terms on the invoice must match those in the contract. B2C and eCommerce businesses have a "Terms and Conditions" page instead of a contract.

What are the Standard Payment Terms?

Payments have a unique vocabulary. You probably know the "net term." This is the period for accepting payments. If you have a Net-7 payment period, your customers should send the money within seven days of receiving the invoice. There are several options: Net-7, 10, 15, 30, 60, or 90. Net-30 is the norm for most B2B businesses, but depending on your industry, it could be shorter or longer. In some cases, you may request immediate payment. This is common when taking advanced payments or a one-time project. However, you can use a much longer list of abbreviations on your invoices.

What Are The Most Common Invoice Payment Terms?

While using net payment terms is the norm for most industries, other jargon describes different payment patterns. Here are some of the most common acronyms and terms:

• 1MD: Monthly credit payment of an entire month's supply
• 21 MFI: 21st of the month following invoice date
• Accumulation discount: Discounts on large orders
• CBS: Cash before shipment
• CIA: Cash in advance
• CND: Cash next delivery
• COD: Cash on delivery
• Contra: Payment from the client, offset by the cost of supplies purchased
• CWO: Cash with order
• EOM: End of month
• Forward dating: Invoicing for payment to be made after the customer gets the order
• Partial payment discount: When a seller offers a partial discount due to low cash flow
• PIA: Payment in advance
• Preferred payment method discount: A lower or " zero-fee" transaction for customers who pay with your preferred method.
• Rebate: Refund sent to the buyer after they've bought a product or services
• Stage payments: Set payments over some time
• Trade-in credit: A discount for something that is returned

Should I Charge a Late Fee?

If slow cash flow is a constant issue in your accounts receivable department, you must have heard the most common late payment excuses by now. One method of reducing this is to highlight a late payment fee. Organizations with a high percentage of high-risk transactions would likely want to use this to deter intentional delays. The average late fee ranges between 1% and 1.5%. While it may seem low, it does incentivize customers to pay on time and is low enough to avoid allegations of usury. When implementing a late fee, it's best practice to:

• Offer a brief "grace period" in case of unanticipated delays. This can be anywhere from 3-7 days.
• Reference the specific late fee in both the contract and individual invoices.
• Remind customers of the potential late fee in your collections process.

How to Deal with Unpaid Invoices?

Let's assume you have your payment terms in place, and all clients have agreed to them via a signed contract. You've decided to stick with the Net-30. What does this look like in real time? According to Deloitte, payment takes about 30 days , and 47% of suppliers are paid late. While payment terms can help streamline the process, they are the prologue, not the last chapter. Late fees can help. But you'll also want a sound collections strategy to improve cash flow. There are three ways to do this:

• Call and email your customers until they finally pay up.
• Hire a collection agency to shake off the bad debt (and give them a slice of the pie).
• Create an automated collections follow-up sequence and spend time on the real offenders.

In the worst-case scenario, you can threaten a non-paying customer or take legal action and file a claim. However, this can reduce customer base trust, affect insurance premiums, and cause you to end up with a legal bill bigger than your payout.

Accepting Different Payment Methods

Offering as many payment options as possible is ideal. Choice makes it convenient for customers and also makes it harder to say "no" when you're selling to prospects. But there's also a hierarchy here. For example, you may prefer ACH and bank-to-bank transfers and offer credit card payments for convenience. With the right payment platform, you can turn the credit card processing fee into a convenience fee to encourage customers to choose more affordable options and cut costs. Likewise, you can offer "zero-fee" payment options to promote your preferred method. You need a range of options to incentivize and discourage payments. For example, if you only accept credit cards and charge a convenience fee, the added cost could create friction in the long term. However, giving customers a second or third option makes it seem more reasonable.

What are the Standard Payment Terms by Industry?

Every industry has its payment terms. In terms of payment period:

• Agriculture: Immediate to 3 days
• Auto Repair: 30 to 90 days
• Cleaning: Immediate to 14 days
• Construction : 30-90 days
• Finance: 30 days
• Food and Beverage : Immediate to 3 days
• Insurance : Immediate
• IT: 30 days
• Marketing: 30 days
• Manufacturing : 30-60 days
• Medical Supplies : Immediate-30 days
• Landscaping: Immediate to 7 days
• Professional Services: 14-75 days
• Retail: 3-7 days
• Renewables and environment : 30-60 days
• Transportation: 30 to 120 days

An organization's size can also affect its payment due date. Smaller businesses tend to have faster cash lifecycles, but larger enterprises may take 60 or 90 days for payment. This can be due to several factors, such as concerns about their accounts payable and quarterly supplier deals.

How Can I Negotiate Better Payment Terms?

The goal is to have customers pay on time or earlier than the due date. You can offer small discounts, such as 2% or 5% for early payments. For example, consider having a Net 30 but offering a 5% discount for clients who pay within seven days. And this logic applies to preferred payment methods, too. You may give clients who pay with ACH a 2% discount over those who pay with a check or credit card. It's also possible to extend your customers a line of credit, mainly if you've worked with them long. A customer credit line allows them to settle bills over time, usually monthly or quarterly. While this does decrease your cash flow, it can be a way to keep larger clients. Since there is a higher degree of risk, it's better to be selective using this strategy. The biggest challenge is ensuring that your accounting software or ERP can handle customized invoicing. The last thing you want is to change the default payment term for each invoice and manually review monthly credit payments. The more detailed the payment terms and the more customized your payment strategy, the larger the margin for error becomes when performing AR tasks by hand. If you plan to streamline your standard payment terms for a better customer experience and faster payments, it's best to automate the AR process.

How Do You Communicate Payment Terms?

For B2B companies, the contract is the first place a customer will see and agree to your payment terms. Usually, it's written up in much legal language. For example:

Section 5. Billing and Payment Terms. (a) All amounts due under this Agreement shall be billed and paid for in the following manner: (i) Company A shall invoice the customer every month for the supplies that Company A delivered or caused to be delivered during the preceding month, (ii) each such invoice shall be payable within 30 days after the date of the invoice, (iii) payments late by seven days will accrue 1% in late fees per month until the invoice is paid, and (iv) payment of all invoices in respect of the Services provided hereunder shall be made in U.S. Dollars.

Adding payment details to an invoice is often shown at the top. In a web portal for online payments, the payment terms show at the top, as in a traditional invoice, after the payment options, or as part of a separate "terms and conditions" page.

What Are Advanced Payment Terms and Conditions?

Advanced payments offset potential non-payment and are used when working with a new customer. These payments are made before a service or product is delivered, and businesses benefit from the immediate cash flow. If you plan to request an advanced payment, you can ask for 25%, 50%, 75%, or 100% of the payment upfront. This depends on your reason for requesting an advance and may be negotiated. For example, you may only need 25% of an advance to order the initial supplies required to complete an order. When designing an advance payment option, it's essential to lay out critical information:

• Timeline of deliverables
• Payment milestones, if applicable
• Process in case of non-delivery

How Can Businesses Get Paid Faster?

When paying is easy for your customers, you'll get paid faster . But reducing friction doesn't have to be a complicated process. The cornerstone of being user-friendly is being clear. First, write them in plain English in your contracts and invoices. But there's more you can do. Self-service payment portals, accepting multiple payment methods, secure payment method storage , automated collections, and verified receipts are all customer-centric initiatives that keep your books organized. Paystand is a solution that integrates with your ERP or accounting software. It lets you sync your invoice data in real time and streamline your AR process. You can spend more time on what matters—forecasting, strategizing, and following up with new or high-risk payments—without worrying as much about cash flow. At Paystand, we offer all these features and more. Book a demo today to find out if we're a good fit for you and your team.

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The Ultimate Guide to Payment Terms & How To Optimize Them

Many factors can go into setting payment terms for your customers, particularly for large or recurring sales. These terms outline not only how much a buyer owes you but whether particular buyers can pay you in installments when they need to have the full payment ready and what the consequences will be if their payment is delinquent.  

Optimized payment terms consolidate these critical details — the what, why, and how — into a common, centralized, and contractually obligated format. In this article, we’ll explore common payment terms and how to optimize them so you can get paid faster. 

Why are payment terms important? 

Payment terms are crucial in streamlining business-to-business (B2B) sales interactions.  Unlike consumer transactions, in which payments often occur upfront and with an immediate exchange for goods, B2B deals typically involve a delay between the delivery of the product and the actual payment. This delay is based on a promise to pay later, which can offer flexibility to your customers but also creates opportunities for payment challenges. 

Having clear payment terms is essential for managing cash flow effectively. Not knowing precisely when funds will come into your bank account limits when you can send money out of that account to cover your operating expenses and purchases. Well-defined payment terms help eliminate much of the guesswork surrounding payment timelines while providing clarity — and accompanying incentives — to discourage your customers from not paying on time .

What are the payment terms on an invoice? 

You’ll want to inform current and potential buyers of your payment terms early on and often. Your buyers will most likely notice payment terms when they are outlined on your invoices , but they can also be found on initial contracts, company websites, or other sales materials. 

The invoice terms that you’ll want to include on every payment request are the following:

• Invoice date
• Payment due date
• Discounts (e.g., early payment discount , accumulation discount)
• Rules for deposits or advanced payments
• Payment plan details
• Accepted payment methods
• Currency requirements

These terms ultimately highlight when and how often payments are due, as well as any penalties for late payments, to ensure your business gets paid. 

Common invoice payment terms

Given the vast amount of detail you need to include on a given invoice, many fields and descriptors rely on short-hand labels and acronyms to save space. If you’re new to invoicing, some of these turns of phrase can be difficult to parse. Here are some of the most common invoice terms you’ll need to know:

• 1MD: Identifies a credit payment for an entire month’s supply
• Accumulation discount: A pricing reduction for larger orders
• CBS: Cash before shipment — the purchased item will not be shipped until payment is received
• CIA: Cash in advance — a strategy that moves all of the risk to the buyer, requiring upfront payment before anything is produced or shipped
• CND: Cash next delivery — commonly used for reoccurring purchases or subscription plans, this descriptor indicates that full payment is due before the next delivery date
• COD: Cash on delivery — the payment must be rendered at the time of product or service delivery
• CWO: Cash with order — an alternate phrasing for cash in advance
• EOM: End of month — typically used to identify that a payment is due on the last day of the same month as when the invoice was created
• Forward dating: Indicates that the invoice date has been artificially pushed back (commonly until after the delivery date) to offer the buyer more time before the payment terms take effect
• Partial payment discount: During times of low cash, a seller might offer special price reductions for partial invoice payments made within a set time period
• PIA: Payment in advance — an alternate phrasing for cash in advance
• Preferred payment method discount: A price reduction or waived processing fees when a buyer pays through a specific, favored channel, such as an automated clearing house (ACH) payment
• Rebate: A full or partial refund is sent out to the buyer after payment has been rendered
• Stage payments: Reoccurring partial payments that transpire over a set period of time
• Trade-in credit: A discount applied to the buyer’s account after an item was previously returned
• Upon receipt: The payment is due when the buyer receives the invoice
• X MFI: A due date that occurs on a specific day of the month following the invoice date, where X = the specific date of the month 
• Y/Z Net X: A common descriptor for an early payment discount where Y = the percentage of the discount, Z = the number of days that the discount is available after the invoice date, and X = the number of days after invoicing when full payment is due

Types of payment terms

Now that you know how payment terms work and what they mean, the next step is to decide how you will accept payments. Some of the more common plans are:

Immediate payment

The most low-risk option, terms that require immediate payment upon delivery, eliminates the possibility of generating bad debt . However, this approach will also severely limit the size of your potential customer pool, given that many buyers will want to leverage their payment timelines to enact more nuanced control over their cash flows.

Installment agreements

For larger, long-term projects, consider installment agreements that allow buyers to break up their purchases over multiple payments. The timing for these sub-charges can be based on a set period or triggered when certain project milestones are reached.

Lines of credit 

Predominantly offered by larger businesses, a line of credit allows buyers to finalize an initial purchase while extending the actual payment timeline. In contrast to an installment agreement, lines of credit typically set a minimum monthly payment — commonly a percentage of the total balance — that needs to be rendered during each pay period. The outstanding balance, in turn, is charged an ongoing interest rate until the total balance is paid in full.

Net X 

Also known as the standard payment term, this approach reflects one of the most straightforward and common credit-based payment options. The “X” indicates how many days the customer has after the invoice has been created to render payment without incurring late fees — typically 7, 10, 15, 30, 60, or 90 days.

Partial payment 

Partial payments are a hybrid approach in which a certain percentage of the total invoice amount must be paid within a specified timeframe before the full payment is due for the entire purchase. With this approach, sellers can better control and predict their cash flows without placing too much of a financial burden on buyers. Typically, partial payment terms are only offered for brief periods.

An advanced billing strategy will improve your cash flow and shift nearly all transactional risk to the buyer. However — just as with immediate payment terms — solely offering this payment approach will artificially limit the available pool of potential customers that you can reach. Typically, businesses that offer prepayment options will bundle these with a corresponding discount that encourages prepayment without demanding it.

Subscriptions and retainers 

These subscription payment strategies, common among software vendors and service providers, establish an ongoing cost for the relevant offering that must be paid on a recurring basis to maintain access.

How to use payment terms 

Your payment methods should align with your sales cycle, business plans, and cash flow needs. You have the flexibility to adjust these methods based on changes in your financial situation. It’s important that your payment policies benefit your business and provide advantages for your customers, such as flexibility, control, competitive pricing, and incentives for positive payment behavior. 

Payment terms example  

As we’ve previously mentioned, you’ll want to document all relevant payment terms on every invoice you send out. Typically, these details should be centralized into a handful of areas on the actual invoice. Let’s take a look at an example invoice with several payment term elements:

How to optimize your payment terms so you can get paid faster 

Most payment terms are designed to provide flexibility to your customers and attract new business. However, being overly generous with these terms can quickly eat away at your cash reserves and threaten your business’s financial health. As such, when establishing payment terms, you should also utilize them to incentivize faster payments—particularly since the more time that passes after an invoice has been sent, the less likely that the bill will actually be paid.

Some effective strategies you can try are to:

1. Charge a late fee

Typically, your customers want to pay the lowest possible price for their purchases, so applying additional charges to past-due invoices will often encourage prompt action. Of course, you’ll need to balance this “punitive” measure against the potential annoyance to your customers — with most organizations keeping this fee between 1% to 1.5% of the total amount due.

If you choose this approach, clearly document the potential late fee in the initial contract, submitted invoices, and any payment reminders. Consider applying an internal grace period of a handful of days before adding these fees to a customer account to allow for short, unexpected delays.

2. Automate your collections follow-up 

Ask yourself this: How much time and effort do you want to spend chasing after your money? Yes, you can dedicate multiple employees to your dunning efforts — the various phone calls, emails, and texts you send out as reminders for payment. But is that the best use of their time?

Automating these efforts can significantly benefit your A/R team. For instance, utilizing features like Invoiced’s Smart Chasing as part of our Accounts Receivable Automation software can deliver consistent, repeatable reminders to your customers through multi-channels. This approach helps ensure that your customers stay aware of their outstanding debt, keeping it at the forefront of their attention. 

3. Accept different payment methods

This strategy will offer more convenient options for your customers to close out their purchases and open up a broader market of potential buyers. Of course, not all payment types — and their accompanying processing fees — are equally lucrative for your business. So, while you should offer a broad set of payment options, prioritizing cost-effective channels will benefit your bottom line. Alternatively, you can charge customers convenience fees or other costs to cover processing expenses more effectively. Invoiced’s A/R software makes it possible to add these fees when applicable. 

4. Leverage early payment discounts

Another strategy that directly impacts your customer’s bottom line is early payment discounts, which take a more positive approach to encouraging prompt responses from buyers. These price reductions reflect a 1% to 2% discount on average. Typically, you’ll only want to offer this incentive for limited periods — particularly when facing a temporary drop in cash flow. Depending on your profit margins, maintaining such a price reduction for an ongoing period could quickly eat into your financial progress and overall business growth.

5. Request an advanced payment 

This approach is commonly reserved for new customers or buyers with a poor credit history. While you can ask for the total payment upfront, it’s often wiser to ask for only the amount that covers material costs and initial labor for the product or service. With this approach, businesses can limit risk exposure without overburdening the customer.

If you do opt for this approach, you’ll also want to amend your payment terms to outline any protections for the buyer, such as obligated delivery timelines and the refund process in the event of non-delivery.

6. Offer customizable payment terms 

Not all customers will be in the same financial situation, so it’s important not to take a one-size-fits-all approach to your payment terms. You should provide buyers with options not only in the type of payment terms but also in their underlying conditions. 

Some businesses—particularly those with a longer sales cycle—might need Net 60 terms, or they might be more responsive to a 2/5 early payment discount over a 1/10 one. The more closely you can match the incentives and options that you offer to your customers’ unique business needs, the more likely your customers will choose your business as a preferred vendor.

Of course, accommodating these varying conditions can quickly become complicated to manage. Investing in an automated payments platform is one solution that allows self-service payment controls that can natively manage automatic payments, short payments, discounts, taxes, fees, and more. With Invoiced Accounts Receivable software, you can create customized payment terms on a customer-by-customer basis and, if desired, invoice-by-invoice basis, all while maintaining the automated nature of your dunning efforts.  

Create customized payment terms and get paid faster  with Invoiced

Invoiced is an all-in-one Accounts Receivable solution that offers a wide range of strategies to optimize your payment terms. Our software gives you nuanced control over your payment terms and the ability to set company-wide standards or create individual conditions for each unique customer or invoice. 

At the same time, our platform can automatically process deductions, apply discounts, and chase payments with little human intervention. The built-in payments portal empowers buyers to place orders, review invoices, finalize payments, dispute charges, and negotiate terms from one interface.

Schedule a demo today to explore how you can get paid faster using our A/R automation software.

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Invoice payment terms: How to set them for your business

PayPal Editorial Staff

July 25, 2023

One of the most important parts of doing business is getting paid — and that starts with sending invoices.

Think of an invoice as a confirmation that a service has been performed or a product was shipped. Their main purpose, however, is to get businesses paid.

No matter what kind of company you run, there are a few details that invoices should always include, such as:

• Company name and address
• Client or customer information
• Invoice number
• Invoice date
• Product or service provided
• Invoice payment terms
• Additional invoice terms and conditions

Invoice payment terms are a particularly important detail to include. Not only do they define when payment is expected, but they can also help small businesses forecast revenue, manage cash flow, and identify potential shortfalls. Plus, they can help reduce late payments and serve as evidence in case of disputes or non-payment.

Read on to learn more about invoice payment terms, the most popular types of payment terms, and how to choose the best ones to serve your business.

What are invoice payment terms?

It's important your customers know the details of what they bought from you — amounts, dates, accepted payment methods, descriptions, and quantities — but just as important is laying out the rules for customers to pay you.

An invoice is a legal document that provides proof of sale. Without any payment terms, how would a third party (think a lawyer, judge, or arbitrator) determine if a customer is behind on payment?

So, what are payment terms and conditions on an invoice?

When it comes to payment terms on an invoice, here’s some information to include:

• Payment due date
• Taxes and fees (if applicable)
• Early payment discount (if applicable)
• Late payment penalties
• Accepted payment methods
• Payment instructions
• Payment plan options (if applicable)

Learn more about how to create invoicing solutions for your business.

Standard payment terms

You can invoice your customers all day but if they're not paying you, you may not stay in business very long. That's where standard payment terms come into play.

Standard payment terms outline when you expect to receive payment from your customers. You can have different standard payment terms depending on the industry you’re in and the customer you’re billing. However, your payment terms on any single invoice should always be clear, understandable, and consistent.

You should agree to the terms in advance (when you take the order or sign the contract), and your invoice should reflect that.

Types of standard payment terms include:

• 2/10 Net 30
• End of Month (EOM)
• Upon Receipt

Examples of payment terms

Choosing the right invoice payment term for your business is a personal decision that depends on various factors, from what industry you’re in to whether or not you’re short on cash.

Net 30 is generally one of the most common invoice payment terms. But that doesn’t mean you can’t establish something different for your business, especially if you find yourself looking for tips to address a cash flow crunch .

For example, 2/10 Net 30 is another type of popular business invoice payment term, giving your customers a choice to pay early and receive a minor discount.

Check out our invoice templates , plus learn how to create an Excel invoice .

Here are types of payment terms for businesses:

• Net 7, 10, 15, 30, 60, or 90:  With this payment term, payment is expected within 7, 10, 15, 30, 60, or 90 calendar days from the invoice date.
• 2/10 Net 30:  When you give customers a 2/10 Net 30 payment term, you're telling your customer that although the invoice is due in 30 days, you'll give them a 2% early-payment discount if it's paid in 10 days. If you need to increase your cash flow , giving this incentive for early payment can be a big help. 1/10 or 3/10 means the same thing, except the discount is 1% and 3%, respectively.
• End of the Month (EOM):  EOM means payment is due at the end of the calendar month. This is a less common invoice payment term and typically applies to businesses that send recurring, monthly invoices.
• 15 MFI:  Another less common term, 15 MFI translates to payment being due by the 15th of the month following the invoice date.
• Upon Receipt:  When an invoice is due upon receipt, it means payment is due as soon as the customer receives the invoice. When customers agree to this term, it can boost your cash flow  and give you a head start on collecting the payment because you don't have to wait 30 days. Though you may find that not all customers receive these invoices with the same level of urgency as it is intended.
• Payment in Advance:  This payment term requires the customer to pay the invoice amount upfront, typically before any work begins or before the products are shipped.
• Cash in advance:  Similar to Payment in Advance, this requires the customer to make full payment before receiving the goods or services. However, payment must be made in cash.
• 50% Upfront:  A 50% deposit is required before receiving the goods or services.

Tips to write effective payment terms and conditions for invoices

Not sure how to write payment terms and conditions for an invoice? Here are some quick tips to get started:

• Be clear.  Avoid using complex legal jargon or ambiguous phrases. Use simple and straightforward language that can be easily understood by your clients. The goal is to ensure clarity and avoid any misunderstandings.
• Specify payment terms and due date:  Clearly state the exact due date by which the payment must be made. For example, "Payment due within 14 days of the invoice date, or July 14."
• Outline accepted payment methods:  Specify the acceptable forms of payment you are willing to accept, such as credit cards, bank transfers, or checks.
• Communicate late payment fees:  Indicate late payment fees, interest charges, or penalties that may be applied.

If you take your payment terms seriously, your customers will, too. If you say Net 30 and a customer doesn't pay, then consider charging interest or holding out on orders or services.

It’s a good idea to develop and implement a formal collection process and policy for late payments. And if a customer is a known late-payer, then try to up your prices to cover the additional time and effort it takes to collect from them or take a deposit upfront.

Most importantly, give customers an easy way to pay, which, in turn, may help you get paid faster.

Get helpful strategies for keeping track of accounts receivable .

Invoice payment terms by industry

Most companies should follow their designated standard payment terms by industry. In other words, when you state your terms for payment, make sure they're something your customers will recognize. For example, most manufacturers expect 30-day payment terms, whereas the construction industry typically settles for 60- or 90-day terms, and government agencies prefer 90- or 180-day terms.

Companies selling commodities may want payment within a few days at most. If you ship products to consumers, it's not uncommon to ask for COD (cash on delivery).

The takeaway here: You shouldn’t do anything out of the ordinary or you could wind up creating confusion and risk receiving a late payment. Talk to others in your industry, ask questions at trade shows, and do your research.

To learn more about invoicing – and to download customized invoices for your industry – visit our Billing & Expenses resource page .

Invoice payment terms FAQs

What does it mean “invoice paid in full”.

Invoice paid in full means the full amount billed on the invoice has been paid by the recipient, and there are no outstanding or remaining dues related to that specific invoice.

What are the best invoice payment terms for small businesses?

The best invoice payment terms for small businesses can vary. It's important to consider your company’s cash flow needs, industry norms, and client relationships when determining the best payment terms.

Should you use Net 30 for your business?

Net 30 is a popular standard payment term, giving customers 30 days to make payment. To determine whether you should use Net 30, assess your cash flow needs, and consider industry standards, your customers' payment behaviors, and the potential impact on your operations.

What does it mean “payment is due at time of service”?

This term indicates that payment is expected upfront or prior to receiving the goods or services. It ensures that the customer settles their financial obligation before or at the exact moment the service is provided, ensuring that payment is received without any delay.

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Invoice payment terms: a guide to get paid faster.

When a business sends out an invoice, it should include clear payment terms that outline how and when the customer needs to pay. Setting expectations for timely payments ensures customers understand their responsibilities for payment, reducing the risk of miscommunication and delayed payments.

Payment terms also help businesses manage their cash flow, follow up on late or unpaid invoices, and find legal recourse in the event of refusal to pay. 

We’ll explore common types of payment terms, methods for choosing your payment options and terms, and best practices to help you create your small business invoices.

Key Takeaways

• Payment terms outline payment due dates, payment methods, and late payment fees. 
• Every invoice should include clear payment terms.
• Researching your industry can help you determine common invoice payment terms.
• Payment terms specify payment due date and may also include incentives, interest, and fees.

Table of Contents

What Are Payment Terms on an Invoice?

21 types of payment terms, invoice payment terms example, when are payment terms created and updated, how to choose invoice terms and conditions, 14 best practices for invoice payment terms, use freshbooks to ensure timely payments.

Payment terms on an invoice let clients know when they’re expected to pay the invoice and what methods they can use to submit payment. There are a range of payment terms businesses can choose to include on their invoices.

Explore common payment terms and their meanings to discover the right fit for your next invoice.

1. CIA (Cash in Advance)

Cash in Advance requires the client to make a full payment before goods or services are provided. It’s popular for transactions that require delivery of goods but can be used for any business interaction.

2. CBS (Cash Before Shipment)

Cash Before Shipment is similar to CIA in that it requires the client to make a full or partial payment in advance. However, while the CIA can apply to goods or services, CBS is used for business transactions that require a shipment.

3. CND (Cash Next Delivery)

If a customer is receiving multiple deliveries of goods or services, Cash Next Delivery details the amount they have to pay on or before the next delivery date. This term is common for subscription shipment services.

4. COD (Cash on Delivery)

Cash on Delivery, also called Immediate Payment or Payment on Receipt, means that payment is due when the project is delivered to the client. This may allow for same-day payment processing or require immediate payment for work done on-site.

5. CWO (Cash with Order)

Cash with Order requires the customer to pay when they first place the order. Payment must be approved and fully processed before goods or services are produced or delivered to the client.

6. EOM (End of Month)

End of Month means that the customer must pay on or before the end of the month in which the invoice is delivered. This specifies payment in relation to the invoice date rather than the delivery of the product or service.

7. PIA (Payment in Advance)

Payment in Advance is any type of payment made prior to work. This can include a full payment, but may also be partial payments such as down payments or payments to cover the cost of materials and other expenses.

8. PPD (Prompt Payment Discount)

A Prompt Payment Discount confirms that the customer can receive a discount on their order if they pay within a specified time frame. This discount can be added in addition to other payment terms on an invoice.

9. CAD (Cash Against Documents)

Cash Against Documents is used for international shipping transactions between importers and exporters. The importer must provide full payment before the exporter will release the required shipping documents that allow for the importer to receive the goods.

10. MFI (Month Following Invoice)

Month Following Invoice stipulates that the customer must pay their invoice in the month following the invoice delivery. Typically, the payment is due on the 15th or the 30th of the month.

11. Net 7/10/30/60/90

Net Payment terms outline the amount of time a client has to make a payment—for example, 7, 10, 30, 60, or 90 days. Clients are welcome to pay sooner, but the net payment day is the latest allowable payment day.

12. 2/10 Net 30

2/10 Net 30 is a variation on Net 30, where the customer receives a 2% discount if they make the full payment within ten days of receiving the invoice. Payment is still required within 30 days.

13. Interest Invoice

An Interest Invoice is an invoice that contains all of the relevant interest charges for a customer. This is sent in addition to a standard invoice if the customer owes interest on one or more unpaid invoices.

14. Early Payment

Early Payment is a payment term that specifies a discount if the customer pays the invoice before the due date. The exact time and early payment discounts amount vary, and can be included on any type of invoice.

15. Contra Payment

Contra Payments are used when the customer is providing supplies for the good or service they have purchased. The contra payment is offset against the value of the supplies provided.

16. Terms of Sale

Terms of Sale are a part of the business contract that outlines the buyer’s and seller’s responsibilities for a business transaction. This can include things like delivery dates, payment dates, and obligations in case of late payment. 

17. Payment Plan Details

Payment plan details outline the payment process for an individual contract. This typically includes a payment schedule, for example weekly, bi-monthly, or monthly payments. Payment plan details may also include payment methods.

18. Payment Method

Payment Method specifies what methods the customer can use to pay their invoice. Common payment methods include e-transfer, cash, credit card, online payment, and check. Businesses may offer one or more payment methods.

19. Shorten Payment Periods

Shorten Payment Periods refers to a business decreasing the length of time that a customer has to pay their invoice. This is often used to provide a warning for changes in payment terms, for example from 90 days to 30 days.

20. Upfront

An Upfront payment is a type of advance payment where the customer pays before work begins. Upfront payments may be a flat rate per job or may be a percentage of the total invoice amount.

21. Overdue Fees

Overdue Fees details the amount that a client must pay if they fail to pay by the due date specified on the invoice. Overdue fees may be charged as a percentage or a flat rate per day, week, or month.

The example invoice below shows payment terms outlined in the bottom left-hand corner. This invoice includes a Net 30 payment term that specifies payment is due 30 days from the invoice date. It also outlines the fee structure for late payment. Including clear payment terms and specifying consequences for delayed payment can encourage customers to pay on time.

Payment terms are created before the invoice is sent and may be updated if a business’s payment structures change. Payment terms cannot usually be changed after an invoice is delivered. It’s generally recommended to maintain consistent payment terms and accepted payment methods so customers know what to expect when they place an order with your business.

Assessing your business needs, customer reliability, and project demands can help you choose the best terms and conditions for a particular invoice.

Monitor Cash Flow

Setting the right payment terms can ensure your business receives cash when you need it. For example, if you’re regularly running short on cash at the end of the month, consider payment terms that specify payment on the 15th to provide smoother cash flow.

Consider Industry Standards

Most industries have payment terms that are commonly accepted. Aligning your terms with the industry standard ensures customers know what to expect from your invoice. Do some research to learn which payment terms are most common in your industry, then decide which of those aligns best with your needs.

Review Client History

While it’s generally recommended to maintain consistent payment terms, you may want to modify terms for certain customers. If a customer is regularly behind on payments, consider including stricter payment terms or late fees. Conversely, you may choose to offer discounts for reliable customers who always pay promptly.

Implement Late Fees and Interest Terms

Late fees and interest terms can motivate clients to pay on time and are also important in case you need to pursue legal recourse for late or unpaid invoices. Make sure to outline all payment terms, including how much interest to charge on overdue invoices , on your contract in addition to on the invoice.

Assess Invoice Size

Some projects incur a larger financial risk for small businesses, especially if the project requires a large amount of time and resources. On major projects with large invoices, you may want to consider payment terms that include a deposit or partial payment to minimize your financial risk.

Browse best practices for creating your invoice payment terms, including methods for automated reminders, effective payment periods, and professional invoice wording.

1. Automate Invoicing

Automating invoicing is an easy, efficient way to send invoices, prompt reminders, and organize payments. FreshBooks invoicing software lets you customize your payment terms, generate professional invoices in minutes, and automate your payment reminders. You can also track invoices and payments to streamline your organization and ensure you never miss an invoice.

2. Add Late Fees

Late fees are an important motivator to encourage clients to pay on time. Even if you expect the customer to adhere to payment terms, clearly outlining your late fees can provide a valuable legal recourse in the event of an unexpected delay.

3. Incentivize Early Payments

In addition to outlining the consequences of late payment, you can also choose to incentivize early payment with a flat rate or percentage discount for paying by a certain date. Offering a small discount for prompt payments can encourage punctuality and help improve your business’s cash flow. 

4. Shorten Payment Periods

If you’re running into cash flow issues or noticing that clients are delaying payments until the last possible date, it may be an indication that you should shorten your payment period. Many businesses choose to switch from Net 60/90 to Net 30 to address this issue.

5. Offer Flexible Payment Methods

Offering multiple ways to pay makes it easier for customers to find a method that works for them. FreshBooks Payments lets customers pay online directly from their invoice with payment links for your business, making it a breeze to pay in minutes. Acceptable payment methods like online payment, credit card, and mobile payments offer extra flexibility. 

6. Due Date

Make sure that you set a clear due date so clients know exactly when they have to pay. You may choose to outline an exact date—for example, the 15th or 30th of the month—or you may specify a certain number of days from the invoice date.

7. Set Specific Deadlines

In addition to the invoice due date, you can outline additional payment deadlines that may apply in case of late or non-payment. This can include the date on which interest or late payments apply, and the date after which legal recourse may be pursued.

8. Total Invoice Amount Due

Ensure that customers understand how much they owe by including the total invoice amount due. While it’s also important to include a breakdown of costs, concluding the invoice with a total amount due encourages customers to pay the full amount on time.

9. Be Flexible

Some flexibility is important when creating invoices so that customers feel they have a convenient and reasonable way to pay. One option for including flexibility is to offer multiple payment methods. This enables customers to choose the method that works best for them, reducing the likelihood of delayed payments.

10. Invoice as Early as Possible

Sending prompt invoices ensures that your work remains fresh in the customer’s mind. It also gives them time to review the invoice and address any concerns that may arise. Aim to send out your invoices immediately after work is done, ideally the day of the order, job, or delivery.

11. Make Payment Easy for Customers

Encourage customers to pay on time by making the process as easy as possible. Offer multiple payment methods, clearly state the total amount, and outline the due date and payment process. Make sure your contact information is readily available so customers can reach out with any questions.

12. Politely Word Your Invoice Payment Terms

Maintaining a positive relationship with your customers is essential to getting paid. Make sure all your payment terms are worded in polite and professional language. You may also choose to omit harsher terms like legal recourse dates and simply outline basic incentives and late fees.

13. Use Simple Language

Make payments easier for your customers by using simple, clear language. Be direct and to the point—specify the amount due, when they need to pay, and how they can pay. Avoid abbreviations and technical terms; instead, use complete language and common names for all payment terms.

14. Follow Up

Remember to follow up with customers and gently encourage them to pay. You may employ different follow–up reminders depending on the customer’s payment history. For example, a customer who regularly pays at the last minute may benefit from a reminder the week before the payment due date. 

Creating effective invoices is essential to creating a positive customer experience and getting paid on time. Choosing the right payment terms and conditions helps improve cash flow, build strong customer relationships, and reduce the risk of late payment.

FreshBooks invoicing software offers an efficient way to create professional invoices for your small business. Browse invoice templates , customize your payment terms, send automated reminders, and let customers pay directly from their invoices. Try FreshBooks for free to discover how the right invoicing software can help you get paid and grow your business today.

Michelle Payne, CPA

About the author

Michelle Payne has 15 years of experience as a Certified Public Accountant with a strong background in audit, tax, and consulting services. Michelle earned a Bachelor’s of Science and Accounting from Minnesota State University and has provided accounting support across a variety of industries, including retail, manufacturing, higher education, and professional services. She has more than five years of experience working with non-profit organizations in a finance capacity. Keep up with Michelle’s CPA career — and ultramarathoning endeavors — on LinkedIn.

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How to State Invoice Payment Terms (with Example Wording)

April 25, 2023 by .blog-post-attribute a:before { background-image: var(--wpr-bg-59cb4af0-085c-4eb0-8d1b-648c1f4d9b13); } invoice simple.

There are many things a business owner can put off, but invoicing is not one of them. Timely invoices help ensure a healthy cash flow so you can keep your business running. However, it’s not enough to just tell your customers how much is due. You need an invoice that includes:  

• the date of the invoice   
• An invoice number
• the total amount due  
• payment terms  

The last invoice item on our list–payment terms–is what this article focuses on.    

Invoice Payment Terms

Payment terms are used to let customers know when and how to pay. For example, net 30 means the invoice total is due in 30 days. In some cases, payment terms incentivize quicker payments by offering a discou n t . Let’s take a closer look .  

What are the best or typical payment terms?

Typical payment terms spell out how much is due, when it is due, if discounts apply, and what methods customers can use to pay. The best terms are clear and easy to understand (we cover this wording in detail below).  

How you structure payment terms can be influenced by the industry you work in. For example , many food and beverage suppliers require immediate payment while construction providers are known to allow 90 days for payment. If you don’t know what’s standard in your industry, consider asking in an industry forum, like a field-related r/subreddit.  

Do you NEED payment terms on an invoice?  

Theoretically, you could skip having payment terms on your invoices but then how will your customers know your expectations for paying you? One of the biggest challenges for businesses is cash flow. To help keep your cash flow healthy always include payment terms on your invoices.    

Plus, including payment terms helps you stay in control of the billing process. When you know when invoices are due, you also know when payments are late. Always follow up on late payments—the financial health of your business depends upon it.      

Example Invoice Payment Terms Wording  

Adding payment terms to invoices is as simple as adding a note. A short sentence or two is all you need to let customers know when and how they’re expected to pay. Feel free to copy the wording from any of the following examples and paste it in your invoices.  

• When payment is required in advance:  Pay in advance.  
• When you expect customers to pay right away: Payment due upon receipt.  
• To incentivize faster payments net terms are combined with a discount. For example:  Terms: 5% 10 net 30. If you pay within 10 days, we’ll discount this invoice 5%, or you can pay the full amount due within 30 days   
• When you extend a line of credit, and the client pays invoices monthly or quarterly: Line of credit.  
• To inform customers what happens if payment is late:  A monthly late fee of 1% of the total amount due will be charged on overdue payments.   

RELATED ARTICLE:   How to Accept Payments Online    

Tips for Making Your Invoice Payment T erms More Effective  

Effective invoice terms are clear , as described above. They also show up on every invoice you send. Here more tips on managing your invoices and accepting payments.

Use an invoice management system

An invoice management system allows you to invoice, email, track payments, and follow up on late payments all in one place, without feeling like you need to be an accountant to manage your business.   

A robust system allows you to see when invoices are delivered and read, find invoices by client, makes it easy to export data, and is always up-to-date on which invoices are coming due or late.  

Use a super simple payment gateway  

The more options available for receiving customers’ payment s ( often called payment gateways ) the easier it is to get paid. By accepting multiple forms of payment you also make it more convenient for customers to pay.    

Need a better way to get paid?

Try Invoice Simple

Write a s trong i nvoice e mail & f ollow u p

Stay on top of invoicing and late payments like the life of your business depends on it—because it does!   

Every successful business has a plan in place for sending invoice emails and following up with customers who don’t pay on time.   

Whenever an invoice is even a day late, initiate communication with the customer. Typically, this means sending an email. It’s a good idea to start the conversation with a reminder that payment was expected by the due date. If the customer doesn’t pay or respond, send a second email. If they still don’t pay, don’t give up. MYOB reports that 59% of overdue invoices require three or more follow ups before they get paid.   

And if you don’t know what to say in your emails, copy our free templates .    

In addition to emailing, you can phone customers who are late on payments. Be courteous. Thank them for their business. Then firmly let them know payment is overdue and ask them to pay via one of your payment gateways.   

Offer d iscounts (& p otentially l ate f ees)  

Adding a note on a line or two is all it takes to convert a standard invoice into one that 

Nobody likes assessing or paying late fees. An alternative to punishing customers for paying late is to reward them with a discount for paying quickly. Remember the term 5% net 10 that provides a 5% discount for paying within ten calendar days? A carrot like this is often better than the stick of late fees.    

However, for overdue accounts you may charge a late fee . Typically, late fees are a percentage of the invoice total, such as 1.5%. However, regulations on late fees and interest vary from state to state, so find out what’s legal where you are.  

If invoices remain unpaid after several attempts to collect, you may need to take more drastic steps. Options include hiring an attorney or collection agency or filing a claim in small claims court. And if, in the end, you find that you’ve exhausted your options, it may be possible to write off that unpaid invoice (see “ Can You Write off Unpaid Invoices? ” for more info).  

Key Takeaways of Stating Payment Terms on an Invoice       

If you’re new to using payment terms, all this can seem like a lot. However, once you understand the terms and start using them on invoices, you’ll improve your cash flow. Here are the key payment terms takeaways:  

• A short sentence or two is all it takes describe your payment terms. You can customize the examples provided in italics above.
• Multiple payment gateways allow customers to pay in a way that’s convenient and helps you get paid on time.
• Discounts for early payment are an alternative to punishing customers for late payment with late fees.  

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What are Invoice Payment Terms?

Invoice payment terms are the contractually decided payment terms between a business and its customers. Invoice terms are also called payment terms when payments are due relative to the date on which goods or services were delivered or when the product or service’s invoice was delivered.

These invoice payment terms help the business predict when cash payments will start and when to start collection activities against customers who still haven’t paid. These terms differ from customer to customer as customers with big orders may demand longer payment terms. In contrast, more problematic customers may be required to make cash payments in advance or upon receipt of associated goods. Another way is to provide early payment discounts to motivate customers to pay the invoice amount within a short period.

How do invoice payment terms work?

Payment terms are essential for bargaining a contract. They are designed to maximise how quickly the customers pay you and minimise inconvenience for the client—a good set of payment terms benefits both parties involved. As the company starts invoicing customers, remember that your standard payment should match the goals of your large or small business. Choosing the right payment terms is crucial in establishing and maintaining a healthy business and seamless client relationship.

The Scheme of Invoice Payment Terms

To ensure that customers carefully follow invoice payment terms, a business can start collection activities instantly thereafter or impose a late fee with a few days grace period. Components of typical invoice payment terms include:

• Date of invoice
• The total due amount of the invoice
• The due date and time that the customer has to pay the owed amount
• Details of the payment plan
• Stipulations for a deposit or advance
• The currency the company wants to be paid in. If a company deals with international clients, it is essential to highlight the money used clearly
• Several accepted payment methods

A couple of other things should be included in the invoice, such as the invoice number that will enable the business and the customer to track invoices chronologically. Contact information of both parties should be clearly stated in case problems need to be solved immediately. The company can also indicate where the customer wants to send the invoice payment receipt. Invoices with payment terms generally outline when the organisation receives the money, and the invoicing system should benefit the company strategically.

Glossary of payment terms

There are numerous payment terms associated with invoice payments. Listed below are some of the most common payment terms that owners of small businesses should remember when preparing invoices.

• PIA : Payment in advance
• EOM: End of the month
• CND: Cash next delivery
• CBS: Cash before shipment
• CIA: Cash in advance
• CWO: Cash with order
• COD: Cash on delivery
• 1MD, 2MD: Monthly credit payment of a complete month or two months
• 21 MFI: 21st day of the month following the date of invoice
• Net 7, Net 10, Net 15, Net 30, Net 60, or Net 90: Payment expected within a week, 10 days, 15 days, 30 days, 60, or 90 days post the invoice date.
• Stage payments are pre-determined by the buyer and the seller and spread over time.
• Partial payment discount: This kind of discount is offered due to the company’s low cash flow.
• Contra: Payments the customer sends, balanced by the cost of the materials bought.
• Accumulation discounts: These types of discounts are paid on large orders.
• Forward dating involves an invoice payment once the customer has received the goods or services.
• 2/10 Net 30: Net 30 requires the customer to complete the payment within 30 days. However, under this method, if they pay their dues within 10 days, they will be subjected to a 2% discount. The terms are variable and will differ from one business to another. For example, the discount could be a whopping 5% if the client pays within seven days.

Why are payment terms important for your business?

Invoice payment terms are integral for a business since knowing how much money flows into the account and when is required for accurately making cash flow statements. When businesses thoroughly understand their cash inflows and outflows, they can plan their taxes and other expenses, helping the company run more smoothly. A detailed and well-made invoice can help the seller be sure that the buyer will pay on time. Communicating the terms of payments effectively will ensure that you and your clients know each other’s requirements before starting a business deal. Here are some statistics showing the importance of an optimum cash flow.

💡 Around 80% of small-scale businesses worry about their cash flow.

💡 Over 50% of small businesses with poor cash flow blame late customer payments.

💡 62% of small-scale businesses are unaware of how much money flows into the business every month.

💡 58% of business owners claim that the reason behind their poor decision-making was the result of cash flow problems.

Getting paid can be quite a big challenge for many businesses in the B2B sector since approximately 63% of industry sales are made on credit. This puts plenty of pressure on company owners and CFOs to find ways of funding their working capital. For this reason, it becomes critical for them to rely on payment terms to create a foreseeable schedule that will enable them to precisely calculate their cash flows. Knowing your monthly inflows can help a business significantly minimise various fiscal challenges and make room for improved budgeting, invoicing, and financial forecasting.

Simple Example of How Payment Terms Work

Organisations generally use standard terms of payment for daily transactions for credit-worthy clients. For instance, customers with monetary issues might be given the Cash in Advance (CIA) approach, Cash on Delivery (COD), or Payment in Advance (PIA) by the seller’s credit control department to avoid the risk of non-payment. A COD client pays through the delivery company when the bought items are finally delivered. The delivery company transfers payments to the company through direct deposit within 2 to 3 days.

To properly understand the mechanics of payment terms, here is an example. Imagine you have decided to open a small flower shop. You require raw materials and equipment totalling around $5,500. A customer gives you a big order of $6,000, estimated to be paid by the end of the month. Unfortunately, the customer fails to pay on time, pushing back your plan to buy the required equipment. This puts you in a tight spot – you have to pay rent for the flower shop despite not carrying out any business deals outside the location. You start losing money due to the late payment.

This example shows the importance of preparing well-timed invoice payments. Making a simple and precise invoice helps you receive timely payments, so you are never short on working capital. This allows you to maintain business operations while helping you meet your growth goals.

Common payment terms cases

Early payment.

Companies can offer their clients a motivator to pay early, such as providing a specific percentage of discounts if the customer pays the total amount before the due date.

50% Upfront

You may choose a partial payment of 50% of the total cost of a client’s purchase. Partial payments offer working capital a business might need to complete a customer’s order. They may also benefit the client by breaking costs into smaller parts, increasing sales and order value. If you go with the partial payment method, clearly define the due date of the remaining invoice and other important terms.

In this payment method, customers will be required to pay cash in advance for services. Advance payments help improve the company’s cash flow and minimise the risk of losing money. Suppose you have a small business, for example, a wedding photography or cake delivery business. In that case, you might want to avoid any cancellation risk by asking your customers to pay upfront. Some businesses give discounts to clients who pay in full.

Lines of Credit

Line of credit provides buyers credit toward the services and products they buy. Customers typically then repay the remaining amount on the agreed payment schedule. Large businesses generally use this method for customer financing.

Instalment agreements

Partial agreements are a common component of installment agreements, where the business breaks their clients’ payments into smaller parts to be paid over time. Instalment agreements and line-of-credit are similar, except that the former is entirely cash-based. Some organisations divide big projects into smaller milestones, and the client is expected to pay once each milestone is completed. A good rule is to implement these instalments based on every three months, let’s say when a particular part of the project is fully delivered.

Immediate payment (payment due upon receipt)

Also referred to as immediate payment, payment due upon receipt is a payment method for which payment is to be made as soon as the goods or services are delivered. These include payables upon receipt or cash on delivery. A company can bargain a clause into the contract, enabling it to repossess goods if the client is overdue.

Net 7, 10, 15, 30, 60, or 90

These terms demonstrate the number of days after which a payment is overdue. For example, N/10 or Net 10 implies that a client must pay their bill within 10 days of the date written on the invoice. So, if a Net 10 term is applied, and the invoice is dated 10 November, customers are liable to pay before 20 November. The best way to pick the proper Net payment term is by meeting your clients midway, a date that works for both parties.

Subscriptions and retainers

Retainer and subscription payment terms require clients to make regular payments within 10 and 30 days. Usually, businesses that use retainer agreements issue invoices to customers periodically.

How to control payment methods with payment terms efficiently?

Companies can use payment terms to control when and how their clients pay them. These terms set the general expectations on payment to avoid confusion or conflicts later. Here are a few tips to control payment methods with payment terms effectively.

The easiest way to determine your payment policies is by making the process crystal-clear and convenient for the customer. For example, if you are only used to accepting cash or cheque payments, broadening your line of payment methods may increase the possibility of timely payments.

Credit card payments

Credit card payments are easy and widely familiar in all parts of the world and can therefore encourage timely payments. You can ask clients to provide credit card numbers or accept payments through a mobile application. Credit card payments come with a certain fee, sometimes paid by the company and others by the client. If you choose the second option, you should clearly state that clause in the contract. It should be clearly stated that the customer will be charged a card fee if they pick this payment method.

Smart invoices

A range of software available allows clients to make online payments with a pay-enabled smart invoice. Thanks to these intelligent invoices, clients can use their automated clearing house, debit cards, and credit cards to process their bank transfers. Another way is by setting up automatic and recurrent payments, eliminating the uncertainty of invoicing. If you do not set up the option of recurring payments, you can directly email the invoices to the clients containing the payment link. These useful features will keep the client wary of deadlines and are ideal if you have uncompleted contracts.

What are the Most Common Payment Term Challenges among Small Businesses?

Creating a system of practical invoice payment terms is fundamental for safeguarding a company’s financial interests but is not free of challenges. Below are some of the issues small businesses face and ways to overcome.

Unpaid invoices

Small businesses are seriously hit by overdue payments, many of which halt their operations. To ensure the smooth running of a business, it is essential to set up comprehensive payment guidelines and terms for payments past the deadline. Additionally, adding penalties for late payments can help deter clients from going overboard on the deadline and paying sooner than the required date. Earlier payment collections and invoice factoring are other ways to avoid unpaid invoices. Invoice factoring is when businesses hand over their invoice to an invoice factoring company which employs different tactics to retrieve the payment from the customer. The company then takes a certain percentage of the amount received plus a fee.

Payment Security

Online payments are ever-advancing, and with that comes the introduction of an array of payment platforms. However, not all media and means of transferring amounts are secure and trustworthy. To stay on the safe side, it is best to pick a platform that is well-reputed and known for providing maximum security and excellent customer service in case a security breach occurs. Estimating and invoicing software with combined payment channels and other gateways can help a company win the trust of its clients.

Managing payments and invoices

For some businesses, size can be a significant detrimental factor that might pose problems dividing the money among different departments. An excellent way to overcome this problem is by using invoicing software that will not only create invoices but also enable companies to add their invoice payment terms.

How to Set Late Fees For Unpaid Invoices?

Before you set a late fee for unpaid invoices, it is essential to properly decide the penalty rate and then precisely draft it in the contract. This s done by negotiating your payment terms with the clients before a project begins. It is best to work alongside them to find the perfect approach to benefit both sides rather than just one. Once a mutual decision has been made, highlight the terms in the contract.

Defining and listing your terms clearly will give you a legal edge if the customer does not abide by the rules. If payments are late and the client ignores the deadline repeatedly, you will be in a position to take legal action to retrieve the payment. An invoice is not a legally-binding document, but a contract is. So, you must create a detailed contract that doesn’t list all the payment terms to have legal standing in court. You can include a range of penalties for late payments. For example, you can add fees for EOM, non-payments, or Net 10.

Remember that a late payment penalty is not to generate revenue but to push your client into paying on time. For this reason, the penalty fee should not be too high, or your client may start looking for a seller elsewhere. A reasonable rate for a late fee is 1.5% interest per month, which is sufficient for incentivising appropriate behaviour without leaving the client feeling exploited. If you don’t get paid, send another invoice, including the original cost and the late fee. Attach a polite note, such as “Second Notice – 15 days past the deadline”. Continue following up with the client until you have received the money or determined a payment plan.

Besides adding penalties, sending your clients invoices when you provide the goods or services is critical. Any delay might cause cash flow problems in future payments.

How to Choose the Best Invoice Terms for Your Business?

Choosing the ideal payment terms for your business is essential since it helps regulate the cash flow and influences the clients’ payment habits. Listed below are a few things to consider before establishing your terms.

👉 Cash Flow

Even though customer expectations are essential when creating invoice payment terms, your primary consideration should be the company’s cash flow needs. The ideal invoice payment system provides sufficient liquid cash for your business to keep running smoothly while considering your clients’ needs closely.

👉 Industry Considerations

Knowing the industry standards is also essential before choosing payment terms. The Net 30 is the most common term, but it might not necessarily be standard in your industry. For example, in the landscaping sector, the norm is Net 7, whereas, in the construction industry, the most common term is Net 90.

👉 Client’s History

If you have a returning client, you can base the invoice terms depending on your experience with them. Are they reasonably prompt with their payments, or do they well past the deadline? The answer will help you decide whether or not you should keep things as they are or lengthen/shorten the payment deadline.

👉 Invoice Size

Always take into account the invoice amount. The smaller the amount, the less time you need to chase after it. Larger payments require extended deadlines so the customer has enough funds to finance the ongoing project. A good rule is to ask the client for an upfront deposit if you are dealing with a large project, as this will help cut down the risk of non-payment.

👉 Early Payment Discounts

These discounts act as a reward for customers to pay before the due date and help your company meet its financial obligations. Most invoices paid after a month or more are generally coupled with early payment discounts. Not only does this help you receive payments quicker, but it also creates a sense of trust between you and your clients.

The Bottom Line

Establishing invoice payment terms requires careful consideration of your company and the clientele. These payment terms prioritise account receivables and create expectations for your clients, strengthening the relationship and making business operations more seamless. With the right tools and techniques, your company, too, can stay on top of the cash flows and avoid financial risks.

We would be delighted to meet with you, discuss your business case, and explore how we can be of assistance. Don’t hesitate to reach out to us through this contact form . Our team is always happy to help you in any way we can.

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Understanding Invoice Payment Terms and Conditions

DAVID FAČKO

June 17, 2024

No one likes fine print – not even those who have to write it. Invoice payment terms and conditions are particularly problematic, especially for small businesses trying to set them up for the first time. Unfortunately, they’re vital in ensuring that your clients understand your payment terms and schedule and that you get paid on time.

So to make sure your bottom line doesn’t suffer, we’ve created this article about understanding invoice payment terms. On top of all the necessary explanations, you’ll also find invoice payment term examples below, which you can customize to your company’s unique needs.

And now, without further ado, let’s jump right in.  Contents hide Key Takeaways The Evolution of Invoice Payment Terms Most important payment terms and conditions for invoices What are invoice payment terms? What are standard payment terms? How different Invoice Payment Terms help your Business 1. Split Payments 2. Cash Before Shipment (CBS) & Cash Before Delivery (CBD) 3. Letter of Credit (LOC) 4. Rolling Deposit (RD) 5. 50% Upfront 6. Net 30 & Net 60 7. Discounts Why you should use Invoice Terms and Conditions Invoice Payment Terms Best practices for Freelancing Start Your Free Billdu Trial and Work Out Your Invoice Terms and Conditions

Key Takeaways

• Understand Common Terms : Familiarize yourself with terms like Net 30, EOM, and PIA to set clear expectations and manage cash flow effectively.
• Set Industry-Standard Terms : Align your payment terms with industry norms, such as Net 60 in construction, to facilitate smoother transactions.
• Evaluate Client Reliability : Review the payment history of clients to choose appropriate terms, reducing the risk of late payments.
• Incorporate Discounts for Early Payments : Offer incentives like 1% discount for early payments to encourage prompt settlements.
• Include Late Fees : Clearly state late fees to motivate timely payments and protect your cash flow.

The Evolution of Invoice Payment Terms

But first, a little history lesson. In the olden days, companies used to physically mail their clients copies of their recurring invoices at the end of each month and give them a couple of weeks to finalize payments. And while this approach is still viable today, it’s painfully slow.

On top of the payment process, it takes time for the physical invoice to be delivered. Then, you need to consider that some customers will want to send you a cheque back instead of a wire transfer or an online payment. And that’s assuming neither of these documents gets lost in the mail.

Thankfully, we have better ways of doing this nowadays. Online invoice templates let you create and generate custom invoice terms and conditions for each customer. Then, all you need to do is send the finished document electronically.

You can also set up options for instant online or card payments to make the process even faster. For even better results, you can include an option that will automatically share a PDF version of the invoice terms and conditions if the customer pleases. 

Ultimately, that’ll allow you to get paid faster, prevent anything from getting lost on the way, and even help you cut down on your paper waste.

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Most important payment terms and conditions for invoices

Individual invoice payment terms and conditions are categorized by universally recognized codes . There are dozens to consider, but for the purposes of this article, we’ll outline the ones most helpful and commonly used by businesses of all sizes.

The invoice payment terms and conditions you should consider include:

• 15 MFI: Abbreviation for “Month Following invoice”, this means you expect the customer to pay their dues by the 15th of the month following the invoice issue date.
• 30 MFI: Abbreviation for “Month Following invoice”, you expect the customer to pay their dues by the 30th of the month following the invoice issue date.
• Cash Account – No Credit: You expect the customer to make all their payments in cash, and you won’t be offering any credit.
• Cash Account – Letter of Credit: You expect the customer to make their payments in cash but will accept credit confirmed by a bank.
• Upon Receipt: You expect the customer to pay immediately after receiving your invoice.
• EOM: Abbreviation for “End of Month”, you expect the customer to pay by the end of the month after receiving your invoice.
• Net 7: You expect the customer to pay 7 days after the invoice date.
• Net 10: You expect the customer to pay 10 days after the invoice date.
• Net 30: You expect the customer to pay 30 days after the invoice date.
• Net 60: You expect the customer to pay 60 days after the invoice date.
• Net 90: You expect the customer to pay 90 days after the invoice date.
• PIA: Abbreviation for “Payment in Advance”, you expect the customer to pay their dues upfront before you start working on the project / deliver the products.
• CIA: Abbreviation for “Cash in Advance”, you expect the customer to pay their dues upfront before you start working on the project / deliver the products by cash .
• 50% Upfront: You expect the customer to pay 50% of the total price upfront before you start working. It’s very common for long-term projects.
• CWO: Abbreviations for “Cash with Order”, you expect the customer to pay when ordering from you before you start working on the project / delivering the products.
• RD: Abbreviation for “Rolling Deposit”, means the customer can pay for your services with a limited credit you offer them by supplying a deposit receipt. Essentially, this works like a pre-paid secure card.
• CBS: Abbreviation for “Cash Before Shipment”, means you expect to take a down payment before shipping products / services to offset costs and get more security .
• CND: Abbreviation for “Cash Before Delivery”, means you expect to take a down payment before delivering products / services to offset costs and get more security.
• COD: Abbreviation for “Cash on Delivery”, means that the customer only has to pay after receiving the promised products / services. In this case, the risk is on the provider’s side. If something goes wrong, the customer may decide not to pay.
• CONTRA: Also known as a “Contra Payment”, is used when two companies that owe each other do business. A portion of the payment is provided for by services / products, and the remainder is paid.
• Stage Payment: Also known as “Process Payment”, this is used for long-term projects. Payments are scheduled according to milestones specified ahead of time and only paid after each is met and confirmed. It’s also common for penalties to be applied if milestone delivery dates are delayed.

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Depending on your business, you might be able to get away with creating general invoice terms and conditions that apply to all your clients. However, creating individual T&Cs for each customer can be worthwhile to make your cooperation as smooth as possible.  

Remember to always communicate your company’s payment terms and conditions clearly. Especially when starting a completely new project or making changes to the payment requirements of a returning customer. Doing so will prevent misunderstandings, help build a better professional relationship , and get you paid on time.

To expedite customer payments, implement professional payment reminders as part of your invoicing process.

What are invoice payment terms?

Invoice payment terms are the conditions set by a seller for how and when a buyer is to pay for the goods or services provided. These terms are usually specified on the invoice and include details like the amount of time a buyer has to pay the invoice (e.g., within 30 days), any discounts for early payment, and penalties for late payment.

The purpose of these terms is to clearly communicate the payment expectations between the seller and the buyer, helping to manage cash flow and reduce financial risk . For example, a business might use terms like “ Net 30 ” to indicate that full payment is due 30 days from the invoice date. Alternatively, terms like “2/10 Net 30” offer a discount (2% in this case) for early payment (within 10 days), while still requiring full payment within 30 days.

Invoice payment terms are an essential part of business transactions, ensuring that there is a clear understanding of when payment is expected, which can help businesses plan their finances and maintain a steady cash flow.

What are standard payment terms?

Standard payment terms are predefined guidelines that specify the expected duration within which customers should settle their payments. These terms can vary based on several factors including geographical location of the business, customary practices within a specific industry, and the credit terms a business is willing to extend to its customers.

In the United Kingdom, it is customary for businesses to adopt a 30-day payment term from the date of invoice issuance. In contrast, businesses in Scandinavian countries often operate with a shorter payment window, typically 14 days. Industry-specific norms also influence payment terms; for instance, in the construction sector, it is more common to encounter payment terms extending to 60 or 90 days from the invoice date.

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How different Invoice Payment Terms help your Business

Most companies just starting out think there’s only one payment process to worry about – delivering the promised services or products and getting paid. But in reality, there are several variations, each best fit for a different use case.

In this section, we’ll go further in-depth on some of the invoice terms and conditions we outlined in the previous part of the article.

1. Split Payments

If you routinely deal with expensive services, luxury items, or big-ticket sales for your business, you should offer split payment options on your invoice terms and conditions. The strongest asset in your business is your cash flow . Requesting full payment for expensive services or items could put your clients or potential clients off. 

It’s important to have an effective accounts management system in place if you plan on accepting split payments from your clients. However, Billdu can help you accomplish this, and your business can grow because of it.

2. Cash Before Shipment (CBS) & Cash Before Delivery (CBD)

Shipping products can be a risky business, especially if you make long-distance deliveries. Your products might get lost in the post or be damaged. If you don’t take precautions and the customer doesn’t pay, this can be a net loss for your business .  

By including a CBS or CBD term in your invoice, you can protect your bottom line by demanding a down payment before the products are shipped. That way, even if something goes wrong, you’ll be able to recoup some of your losses and avoid any significant damage to your company’s finances.

3. Letter of Credit (LOC)

Customers greatly value companies that offer them credit. This is especially common in the B2B sector , where you may have recurrent purchases from the same clients every few weeks/months. But how can you offer this privilege to customers you’ve not worked with in the past and have no professional experience?

That’s where LOC can help. This term requires customers to get approval for financing from their bank. If the delivery goes through as promised and they don’t have the money to pay, the bank will cover the charges and be reimbursed at a later date. And if something goes wrong, no one has to pay anything. 

However, since banks are a disinterested 3rd party in this business relationship, they want to cover their bases. This means going through a lot of documentation to specify requirements and conditions before they’re willing to send you a cent. 

4. Rolling Deposit (RD)

RD is another frequent payment process in the B2B sector. If you’re unsure about a customer’s reliability, you can oversee their payments by having them supply a deposit receipt, which acts as a pre-paid secure card they can draw on to purchase from you. 

This allows them to make purchases without having to worry about frequent payments and you to build a more trusting relationship with them before offering any additional credit. 

5. 50% Upfront

Asking for a 50% upfront payment may seem concerning to some customers, but it helps significantly smooth over long-term projects. You can cover associated costs without spending out of your pocket by receiving a portion of the total price ahead of time. 

Furthermore, it allows clients to break up more expensive payments into smaller, more manageable parts. Last but not least, it can be an excellent middle ground to take should your customers feel uncomfortable paying upfront for your services in full.

6. Net 30 & Net 60

“Net 30” or “Net 60” can be confusing to see in an simple invoicing template for customers and new businesses alike. In reality, it means nothing more than that your clients have up to 30 or 60 days after receiving an invoice to finalize payments. Thankfully, you can swap these terms out for “ 30 days ” and “ 60 days ” on your invoices to prevent any confusion and potential late payments, though we still recommend you include a specific due date as well.

If you’re wondering whether you should use Net 30 or Net 60 , consider the following. Net 30 is frequently used in all sectors, including both B2C and B2B. Meanwhile, Net 60 can be most often found in the fashion and construction industries.

7. Discounts

If you want your customers to pay you faster, you may want to consider a discount system. For example, you could offer a 1% discount if clients make the full payment within 7 days of the receipt date, or you could have a 2% discount if they pay the next day. It’ll save them a little bit of money and you a little bit of grey hair. 

However, If you plan to include a discount system, you want it to stand out on your invoice terms and conditions. So it’s good practice to highlight it in bold or color to make it jump out on your invoice.

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Why you should use Invoice Terms and Conditions

Your invoice payment terms and conditions act as a basic contract between your company and the customer. In the B2C sector, these are often intuitively enforced by your store’s or e-shop’s set-up (i.e., payment gates, registers, etc.) and common sense. Some outliers apply, like return policies, but that’s about the extent of it.

However, B2B works differently. You often work on projects and deliveries with customers individually, and your needs and requirements may change depending on the industry. Consequently, you need to consider aspects of your collaboration and stipulate in legal language to ensure expectations are met and no harm comes to either party.

Invoice Terms & Conditions use cases to consider:

• Payment Times & Late Payments Depending on your industry, you may need to cover costs, ask for upfront payments, etc. Even if your terms don’t stray from the standard, you need to state them to make them legally binding clearly. Therefore, you must specify what amount you expect when and what happens when the customer fails to deliver their payment in the agreed time frame.
• Currencies & Payment Forms If you do business internationally, you’ll invariably have to deal with different currencies. If the conversion rate is bad, you may end up getting paid less than what you were promised. Therefore, it’s important to state which ones you accept and which ones you don’t. Similarly, different forms of payment come with their own benefits and drawbacks. Do you take cheque, card, wire transfer, cash, or everything? The customer needs to know.

Invoice Delivery Let’s discuss your customers’ terms for a change. Thanks to Google Doc templates  and online invoice systems like Billdu, you can create professional and engaging invoices quickly and easily on any smart device. However, some companies may only accept physical invoices up to a specific month’s date. To avoid letting your invoice fall through and waiting for a long time, clear up these expectations ahead of time.

Invoice Payment Terms Best practices for Freelancing

Getting started with freelancing can be particularly hard for people with no previous experience. So, to help you avoid any potential trouble, we’ve compiled a few quick tips you can immediately incorporate into your business processes.

• Ask for Upfront Payments: Everyone’s heard the horror stories of freelancers getting taken advantage of. To ensure you don’t become a part of another such story, ask for down payments ahead of time. The rest of your payments should be escrow-style until you complete the work. Depending on how well you know the clients, you could offer Net 30, Net 60, or full fee upfront invoice payment terms. In any case, you want to follow industry standards to avoid complications with your clients.
• Make Individual T&Cs for Each Client When you set up your Word invoice template , there are other important factors to remember. No blanket solution will work with all of your clients. Even inside specific industries, you could end up with a client who gives you immediate payments as soon as they get the invoice, but another client could require you to offer Net 60 terms. It’s on you as a freelancer to work out payment terms that suit your business and the clients.
• Offer Benefits for Keeping to Your T&Cs Certain elements affect how long it takes for your clients to pay you. Smaller payments can be made quickly, but larger ones can take a while due to limited resources. However, like your customers, you depend on your company’s cash flow to make ends meet. To smooth things over for both sides, consider incorporating Prompt Payment Discounts (PPD) . Depending on how quickly customers pay you, you can offer small discounts on your prices (typically 1% – 3%). It’s not too big of a loss for you, but it’ll help the client save a bit of money and can serve as a great motivation.

Explore your possibilities by breaking down desirable outcomes in an Excel invoice template and assign them discounts as you see fit. From there, you can incorporate them into your business processes easily and monitor them with invoicing systems like Billdu. Tracking invoices and payments has never been easier.

Pro tip: To understand the differences between invoicing and billing , check out our top article.

Start Your Free Billdu Trial and Work Out Your Invoice Terms and Conditions

And that covers the basics of everything you need to know about Invoice Payment Terms & Conditions. If you’re a business owner and you want to learn a new way to track and create custom invoices for your clients, try Billdu’s software with a free trial. 

You can easily add your logo, input your payment terms, add discounts, offer different payment options, and track dozens of invoices from one centralized dashboard. Choose from a host of templates to help you create your invoices , send them out and get money flowing back into your business.

Master your invoice payment terms with Billdu!

Freelancer and contractor invoice templates from Billdu include various invoice payment terms to fit your specific needs. Simplify your billing process with our comprehensive templates.

SEO Specialist at Billdu

David Fačko works as an SEO and Content specialist at Billdu, globally recognized as one of the top-rated invoicing software solutions for freelancers and small businesses.

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Understanding 21 Payment Terms: A Comprehensive Guide for Small Business Owners

Payment terms in business is the agreement between a customer and a business owner regarding a sale. Typically, you’ll need to include payment terms when you send out invoices for your small business. Invoice payment terms clarify for your customers how and when to finalize the payment due to your business.

Including standard payment terms on your purchase orders can help your business avoid cash flow problems. Learn which payment terms to know, when to use payment terms, and which ones are right for your business in this article from Nav’s experts.

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Payment Terms Introduction

Payment terms tell your customers the payment due date, which can be either the day of service or a certain number of days from the invoice date. Your invoice should also spell out payment options for your customers, like whether you’ll accept debit cards, ACH, and/or online payments, along with your contact information for questions. Including appropriate payment terms on your invoice helps with your cash flow, enhances customer relationships, and offers your business better legal protections.

These are the five most common invoice payment terms that we’ll cover in this article:

• Advance payments
• Immediate payments
• Dated payments
• Partial payments

Advance Payment Terms

Let’s start with advance payment terms, which means you expect either full or partial payment ahead of completing the delivery or service.

1. Advance Payment / Payment in Advance

Payment in advance (PIA) means you want your client to pay in full before you begin work. This term can help to avoid last-minute cancellations. Additionally, you can use the payment toward any supplies you need to get started on the project.

2. Cash in Advance

Cash in advance (CIA) is another way of saying advance payment. You expect your client to pay in full before you start on the project. You can include a discount for early payment if you want. 

3. Cash With Order

Cash with order is another way of saying payment in advance. It’s when you expect your customer to pay you in full before you begin work. Be sure to outline your cancellation policy clearly since customers may ask you for a full or partial refund.

4. 50/50 Payment Term

A 50% upfront payment means you require customers to pay half of the total cost as a deposit before you start working on the task. This payment term is common for longer-term projects and minimizes your risk as a small business owner. 

5. Deposit Required

A deposit required means your customer must put down a deposit before the order is finalized. The amount of deposit is up to you, and is common when you’re creating custom pieces since it reduces the risk of not getting paid for work that you would have a hard time selling elsewhere. 

6. Cash Next Delivery

Cash next delivery (CND) is one way of saying your customer must make a payment before the next delivery gets going. This type of payment term is usually put into place for recurring shipments.

7. Cash Before Shipment

Cash before shipment (CBS) is similar to cash next delivery, but it’s not reserved for recurring shipments. It simply means your customer must pay before the product delivery is initiated. 

Immediate Payment Terms

When you require payment right away, you’re operating using immediate payment terms. Here are the most common kinds you’ll run into.

8. Payment on Delivery

If you deliver products to customers, payment on delivery (POD) means your customer must pay right when they receive their delivered product. You may allow customers to pay using cash, check, card, or digital wallet payments.

9. Cash on Delivery

Cash on delivery (COD) specifies the total amount of cash customers must pay immediately upon delivery of the product. This term requires payment to be made in cash. 

10. Payment at Time of Service

If your business performs a service, you may require customers to pay when they receive the service. This payment term is common for hair salons or restaurants, for example.

11. Due Upon Receipt

Due upon receipt means you expect your customers to pay the invoice as soon as they receive it. It helps if you allow your customers to pay their invoices online to make the task of payment easier for them and allow you to improve your cash flow quickly.

Dated Payment Terms

And it’s helpful to also understand dated payment terms, which means you offer credit to your customers for a certain number of days. Below, we talk about the most common examples.

12. Net Payment Term

Using net payment terms means you give your customers a specific number of days to complete the payment. These terms typically appear as “net 10,” meaning you have 10 days from the invoice date to make the payment in full. “ Net 30 ” means you have 30 days to make a full payment. The most common net terms are net 7, 10, 15, 30, 60, or 90.

Also, using a net-30 vendor can help your business to establish and build your business credit history. Learn how to establish business credit to get started.

13. End of the Month

End-of-the-month (EOM) payment terms mean your customer must pay within a certain number of days after the end of the month stated on the invoice. For example, “net 10 EOM” means they have 10 days after the end of the month to complete their payment. Typically, when the invoice date falls after the 20th of the month, the countdown starts on the first day of the next month. 

14. Month Following Invoice

Month following invoice (MFI) specifies the date in the following month that your customer must pay the full invoice by. If your invoice is dated after the 20th of the month, the clock usually starts on the first day of the following month to give customers enough time.

Partial Payment Terms

There is also the option to extend partial payments to your customers. Let’s go over those options now.

15. Stage Payments

Stage payments are where your customers pay in quarterly or monthly installments over a long period of time. You can also make specific payments due after you complete parts of a longer project or make certain deliveries. 

16. Lines of Credit

As a small business owner, you may be able to extend credit to your clients. In basic terms, you give your customer a line of credit for a product or service, and they make incremental payments over time, usually with interest. Larger organizations may be better suited to offering credit since you need to make sure you can manage the lack of payment by your customers. 

The final thing that’s important to understand are discounts that you can include in your payment terms, which we cover below. You’ll want to make the discounts obvious on your invoice to encourage customers to take advantage of them — even though you’re offering a discount, you’ll also benefit from your customers utilizing them in various ways.

17. Cumulative Quantity Discount

A cumulative quantity discount is when you offer your customers a lower price to order in large quantities or in bulk. This discount works best for wholesalers or similar businesses that can handle bulk orders.

18. Partial Payment Discount

If your business’s cash flow is low, you can offer a partial payment discount. This discount allows customers to pay less if they pay off part of their bill early. Customers will have incentive to pay earlier than is typical, which will allow you to use the funds from the partial payment for supplies you need to complete the work. 

19. Early Payment Discount

An early payment discount reduces the cost for customers if they pay before the net payment period ends. For example, you can write this as “1% 10 Net 30,” which means your customer gets a 1% price reduction if they pay within 10 days. Otherwise, full payment is due when the invoice says.

Contra payment terms are used when the customer is also the supplier, so the customer will purchase supplies instead of making a direct payment. You’ll make both a sales and a purchasing invoice, and you can often find templates for this process using accounting software . 

A rebate is a partial refund that you would send to clients right after purchase or at a specific date in the future. This is mostly used for high-volume purchases and can incentivize customers to make larger orders. 

Factors to Consider When Choosing Payment Terms

It can take some consideration to decide which payment terms make the most sense for your business. When you’re looking through the most common payment terms, think first about your cash flow. Shorter payment terms are more widely accepted these days, especially when you allow your customers to use online payment methods. When your accounts receivable are paid quickly, your cash flow can improve. 

Your invoicing process and payment process are other big factors to think through when choosing payment terms. Make sure that your payment terms are clear to your customers on the invoice so they know what is expected of them. Invoices should include details like:

• Invoice date
• What is being invoiced
• Invoice amount
• Payment period
• Acceptable payment methods
• Discounts and any fees for past due invoices

It’s also easiest if you automate follow-up for the amount due on unpaid invoices using business accounting software.

Negotiating Payment Terms With Clients

It is possible to negotiate with your customers regarding payment terms, but it completely depends on your relationship with them. When a customer pays on time every time, you may be willing to work with them more. However, if they are often making late payments and racking up late fees — or you’re experiencing non-payments — you’ll probably be less flexible. 

If you’re able and willing to offer credit to your customers, their interest rate is something you may be willing to work with them on. Offering a lower interest rate to a trustworthy customer that makes prompt payments may be in your business’s best interest to keep them around. You may want to work with new customers for a few months before negotiating with them.

How Nav Can Help

Small business owners need working capital to thrive, and that’s where Nav comes in. Work with Nav to find the right small business loans for your business — it’s the only place where you can see what you can qualify for before you apply. Find the right business credit cards to help with cash flow, as well. You can also find the best business solutions, like accounting software to help with automation of day-to-day accounting work or business checking accounts to make your money management easier. Also, Nav’s Cash Flow Tool helps you track your business’s cash flow. 

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Tiffany Verbeck

Tiffany Verbeck is a Digital Marketing Copywriter for Nav. She uses the skills she learned from her master’s degree in writing to provide guidance to small businesses trying to navigate the ins-and-outs of financing. Previously, she ran a writing business for three years, and her work has appeared on sites like Business Insider, VaroWorth, and Mission Lane.

Have at it! We'd love to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and protect yourself. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Responses have not been reviewed, approved or otherwise endorsed by the credit card, financing and service companies and it is not their responsibility to ensure all posts and/or questions are answered.

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• Financial management

What you need to know about payment terms

Payment terms regulate the payment that customers must make to a company for a delivery or service. Companies have a great deal of freedom in the design of their payment terms. However, it makes sense to stick to common formulations in order to avoid misunderstandings. We will show you here what this can look like with the help of a few examples.

Payment terms on an invoice in the UK - What are they and why are they important?

In the payment terms, a company specifies which conditions apply to its customers when paying their invoices . For example, when customers place an order in an online shop, they accept the seller's payment terms. If they do not, no business contract is concluded.

Payment terms apply wherever money is exchanged for goods or services. Payment can be made in various ways, e.g. by advance payment, payment on receipt of goods, or payment on account after receipt of goods.

The payment terms in the form of payment deadlines or payment periods are stated on the invoice, indicating the latest date by which the invoice must be paid. It may also indicate that a discount may be deducted for early payment.

What are normal payment terms?

Companies in the UK often choose the standard payment term of 30 days for their payment terms on invoices. This corresponds to the legal payment term. However, any other payment term can be chosen.

However, it must be ensured that customers can also meet these deadlines. Less than 7 working days is therefore unusual.

What are the best payment terms?

It is in a company's interest to be paid as early as possible. This means that up-front payment is best. Customers then pay the full amount or a partial amount before the company provides the service or delivery.

However, up-front payment is not always possible or can lead to customers choosing another company where they can pay on account. To avoid this, a compromise can be made: Offering discounts for earlier payment.

Customers receive an invoice upon delivery, which is payable in 30 days, for example. However, if they pay within 7 days, they can deduct a certain percentage (discount rate) from the invoice amount. This reduces the company's profit, but ensures a faster cash flow.

Payment terms: Examples

To illustrate the payment terms, we present some common situations from practice.

Upfront payment terms

If a company wants to be paid in advance for its service or delivery, this must be communicated to the customer when the sales contract is concluded. The amount to be paid in advance can be the full invoice amount or only a part of it.

Upfront payment terms look like this, for example: "Please find attached the invoice 12345 for our delivery/service. The total amount is £2,000, with an upfront deposit of £200 due by xx/yy/zzzz.

Our bank account details can be found below. Thank you very much"

30 days payment terms

30 days payment terms are often referred to as net 30 on invoices. This means that customers are granted a payment period of 30 calendar days (not working days).

The shortest form on a bill looks like this: "Payment terms: net 30"

Instead of 30 days, you can also give your customers a shorter or longer payment term, for example net 14 or net 60. However, to avoid confusion, we recommend that you emphasise the payment term even more clearly, because some customers do not know what the term net xy means. You can then formulate the payment terms like this:

• Payment terms: Payment is due within 30 days of invoice date
• Payment terms: Payment due 15 June, 2022

Discount rates

If you grant your customers a discount for earlier payment, you can also choose a short form, for example:

• 2/10 net 30: 2% discount when paid within 10 days; later payment: full amount
• 4/14 net 60: 4% discount when paid within 14 days; later payment: full amount You can also write out the short form:
• Payment terms: 2% discount for payments made within 20 days; 30-day due date

Payment terms for immediate payments

Immediate payment is referred to on an invoice as payment due upon receipt. This means that the invoice must be paid immediately upon receipt. Please note, however, that it may still take a few days before the transaction is credited to your account. We therefore recommend that you specify a clear date or deadline instead of immediate payment:

"Payment terms: Payment is due within 7 days of invoice date".

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Contract Payment Terms: Establishing a Fair Business Payment Agreement

Definition of Contract Payment Terms: These are the agreed-upon terms of payment between a business and its customers.

Importance of Clear Payment Terms: Clear payment terms reduce the likelihood of late payments and foster trust in business relationships.

Common Types of Payment Terms: Examples include net 10, net 15, net 30, net 60, and net 90.

Determining the Scope of Work: This is critical in establishing the basis of the entire contract and avoiding ambiguity.

Setting the Price and Payment Timeline: This establishes a clear payment schedule and ensures fairness.

Designing Fair and Flexible Payment Structures: Different payment structures have their own benefits and caveats.

Mitigating Risks: Including terms for late payments and defaults protects business interests.

Leveraging Payment Terms for Cash Flow Management: Clear and well-defined invoice payment terms help manage cash flow effectively.

Navigating Complex Contract Payment Terms: This may involve milestone payments, retainers, and upfront deposits.

Negotiating Contract Payment Terms: This can help secure better payment terms and foster long-lasting partnerships.

This guide is not legal advice and laws/rules may change; consult a qualified professional for personalized assistance. Use at your own risk.

Understanding Contract Payment Terms

Contract payment terms are vital components of a contract that determine the specifics of how payment should be carried out between the involved parties. These stipulations allow businesses to better manage their cash flow and ensure that payments are received in a timely and organized manner.

Comprehending the fundamentals of contract payment terms can help companies avoid potential financial disputes and misunderstandings. Accurate and specific payment terms offer clarity, creating a transparent environment for both parties involved in the contract.

Typically, these terms outline the amount to be paid, the mode of payment, any applicable discounts for early payment, late payment penalties, a schedule for installment payments if any, and the due date for payment. Each of these components play a significant role in establishing a trustworthy business relationship.

Key Aspects of Contract Payment Terms

The amount to be paid is one of the first and most crucial elements of contract payment terms. This should be explicitly stated in the contract to avoid any confusion or discrepancy. It normally includes the total contract value and, in some cases, the precise breakdown of how the total cost has been derived, especially in instances where the contract involves multiple deliveries or stages.

The mode of payment constitutes another key aspect of contract payment terms. This could range from electronic funds transfer, check, credit card, cash, or any other payment method agreed upon by both parties. It can also set out any specific instructions about the payment process, such as the bank and account details where the payment should be transferred.

The schedule for payment, also known as the payment plan or schedule, is the third crucial component. This lays out when the payments should be made, which could either be in one lump sum, or spread over a period of time as installments. Failure to adhere to this schedule can sometimes lead to penalties or legal action, depending on the details of the contract.

Importance of Adherence to Payment Terms

Adherence to contract payment terms is essential as it creates a financial roadmap for the involved parties to follow. This roadmap significantly reduces the chance of cash flow issues arising due to unexpected payment delays or confusion over payment dates, ensuring smooth financial transactions.

The enforcement of payment terms also creates accountability for timely payments. This can aid in building trust in a business relationship, aligning expectations in terms of financial transactions, and establishing a history of reliability with counterparts.

Furthermore, adherence to payment terms establishes a basis for legal and financial remedies in the event of breaches or non-compliance. In the event of disputes over payments, contract payment terms will provide a concrete reference, allowing for a clear resolution and, if necessary, legal enforcement.

Crafting Your Business Payment Agreement

Nailing down your business payment agreement is a process that requires both forethought and consideration. This is a strategic instrument, with elements designed not just to facilitate the transaction of services rendered for payment received, but also to nurture and solidify professional relationships. At its core, your agreement sets out the rules of engagement between your business and your clients, particularly in terms of expectations on payment.

This section provides a walkthrough on how to construct your business payment agreement effectively, touching on pivotal points such as defining the scope of work, setting price and payment timelines, designing your payment structure, and integrating mechanisms to safeguard against potential risks.

Drawing up your business payment agreement isn't merely a matter of procedure, but an opportunity to showcase your professional acumen and uphold veracity in your client interactions.

Determining the Scope of Work

The first major point to consider when crafting your business payment agreement is setting a clear and comprehensive scope of work. It forms the foundation of your contract, outlining the breadth and depth of services or products your business commits to deliver over a specific period. This, in turn, greatly influences the calculation for payment and the terms attached to it.

Providing an exhaustive scope of work minimizes ambiguity and prevents misunderstandings. It also buoys your client's confidence as they know exactly what to expect from the get-go. Remember, delivering on promised expectations is key to maintaining a strong business relationship, and it all starts with setting a well-defined scope of work.

The process of defining the scope of work demands thoroughness. It's more than about listing all items involved. It's also about understanding and agreeing to what is and isn't included, and being able to present all these clearly and succinctly.

Setting the Price and Payment Timeline

Once the scope of work has been established, the next pivotal point involves setting the price and payment timeline. This should be a joint decision arrived at fairly, ensuring that both parties can meet their obligations without undue strain.

Consider the financial capacities of your clients when setting your prices, aiming for a satisfying compromise between affordability and profitability. Also, determine the payment execution dates, ensuring the schedule is both feasible and fair. This established timeline will serve as your roadmap for billing and receiving payments.

Remember, the essence of a solid business payment agreement rests on the principle of mutual benefit. The more equitable your pricing and payment timeline, the easier it will be to foster a business relationship grounded on trust and respect.

Designing Fair and Flexible Payment Structures

When it comes to payment structures, there is no one-size-fits-all model. Depending upon the nature of your business, your capacity to fulfill orders, and your clients' capacity to pay, different payment structures might be more viable than others.

Regardless of the type of structure, the main goal is to ensure it addresses both your and your clients' needs. When drawn up well, the payment structure can offer a level of flexibility that augments the ease and speed with which transactions can be concluded. This can positively impact your cash flow and client relationships.

Take time to investigate different payment structures, looking at their advantages and downsides. Striking the sweet spot between a beneficial payment structure and what your clients find tenable contributes significantly to the success of your business payment agreement.

Mitigating Risks: Late Fees & Interest Charges

In crafting your business payment agreement, one must also factor in elements for risk mitigation, particularly late fees and interest charges for overdue payments. Such provisions act as a deterrent for payment delays, encouraging clients to meet their obligations promptly.

This careful balancing act involves protecting your business interests without unduly burdening your clients. Applying penalties for late payment makes business sense. However, it must be done under the premise of mutual respect and communication, informing your clients of these terms upfront and agreeing to them.

In a nutshell, the incorporation of late fees and interest charges in your business payment agreement can act as a safety net to mitigate risks. However, their imposition needs to be conducted fairly to maintain a positive business relationship.

Advanced Strategies for Contract Payment Terms

In a world that moves at a rapid pace, staying ahead involves innovative thinking and adopting advanced strategies. Contract payment terms are no exception to this rule. This last part of our article will walk you through some practical, advanced strategies to optimize your business payment agreement and ensure it works in your favour.

Business professionals seeking to outperform competitors must focus not only on the nuts and bolts of contract payment terms but also be able to navigate complex payment agreements and leverage them for cash flow management. Further, understanding potential legal considerations and nurturing long-standing business relationships through the effective negotiation of payment terms can help carve a path for smooth business operations and financial stability.

Leveraging Payment Terms for Cash Flow Management

Contract payment terms are a powerful tool that can significantly impact your business's cash flow. A well-structured payment term can ensure your business cycle runs smoothly, augmenting the inflow of capital and supporting your business's overall financial health. It is crucial to outline clear payment expectations on each invoice, making them highly visible to avoid misunderstanding and ensuring timely payments.

In a world where late payments can place significant strain on a company's resources, leveraging payment terms practically includes offering a variety of payment methods, encouraging timely payments, and reducing chances of disputes or misunderstandings. Consider providing alternative online payment methods or early payment discounts as incentives for prompt payment.

Strategically placing payment terms on invoices also helps. Make them bold and place them at the top of each invoice to increase compliance. In this way, your firm can maintain a steady cash flow, ensuring optimal financial management and seamless business operations.

Navigating Complex Contract Payment Terms: Milestone Payments, Retainers, and Upfront Deposits

Complex business relationships may warrant more intricate contract payment terms, such as milestone payments, retainers, and upfront deposits. Milestone payments can be beneficial for long-term projects, where payments are tied to the achievement of specific project milestones. Retainers, on the other hand, are useful when a customer engages a business for a specific period, offering financial stability.

For significant projects where considerable resources are required upfront, charging an upfront deposit can prevent potential cash flow strains. It's critical to negotiate the terms pertaining to these complex payment structures clearly to avoid misunderstandings. Each of these strategies can be advantageous and help manage the financial health of your firm in different scenarios.

Negotiating Contract Payment Terms for Long-Term Business Relationships

Negotiating contract payment terms is crucial for fostering and sustaining long-term business relationships. Implementing flexible and mutually beneficial payment terms can lead to better partnerships and, subsequently, to business growth. Establishing a fair business payment agreement is pivotal in ensuring that all parties involved are satisfied and that the business relationship prospers.

Legal Considerations When Determining Payment Terms

Paying heed to the legal aspects is equally important when determining payment terms. Jurisdictional rules, potential penalties, and the nature of the contract are some aspects that should be factored in. Legal advice can be sought to ensure all terms laid out in the contract are compliant with the existing laws and that your firm does not unknowingly breach any legal boundaries.

Case Study: Successful Business Payment Agreements

Case studies of successful business payment agreements can serve as practical examples and valuable learning tools. Understanding how other companies navigated through similar situations and successfully implemented advanced payment strategies can equip you with insights and ways to manage your own payment terms better.

Key takeaways should be the problem-solving techniques adopted, how the company managed overdue payments, and how they standardized their protocol to handle such issues. Applying these strategies can help boost your business's financial efficiency significantly.

In conclusion, shaping a strong business payment agreement involves not only basic and intermediate contract payment terms but also the deployment of advanced strategies. Leveraging payment terms for cash flow management, adeptly handling complex payment processes, and comprehensive legal considerations should be part of your strategy. Last but not least, learning from successful case studies can help you curate the best practices for your business, boosting your position in the marketplace.

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Download our Free Payment Terms guide

Payment Terms and Conditions Templates (That you can copy!)

Every business, irrespective of size or industry, understands the fundamental role that payment terms play in maintaining a healthy cash flow and fostering enduring relationships with clients. Whether you're a fledgling start-up or a seasoned corporation, mastering the art of writing effective payment terms is key to ensuring prompt payments and minimizing the risk of payment disputes.

In this guide, we will dissect the world of payment terms, providing you with definitions, examples, and templates to help you establish clear payment expectations.

Payment Terms and Conditions templates in this guide:

• 7-Day Payment Terms Template
• 14-Day Payment Terms Template
• 30-Day Payment Terms Template
• Generic Payment Terms Template
• Immediate Payment Terms Template
• Net 60 or Net 90 Payment Terms Template
• 2/10 Net 30 Payment Terms Template
• C.O.D. (Cash on Delivery) Payment Terms Template

Understanding Payment Terms: The Bedrock of Business Transactions

What are 'payment terms'.

Payment terms, at their core, are conditions that outline the timeframe in which a business expects to receive payments for goods or services rendered.

These terms are usually stipulated in the contract or invoice and play a pivotal role in defining the financial relationship between businesses and their clients.

The Crucial Role of Payment Terms

Payment terms are more than just dates on an invoice. They serve as the bedrock of your business's cash flow, defining when funds will enter your coffers and hence influencing your ability to cover costs and invest in growth opportunities.

Additionally, they play a key role in shaping the relationship with your clients. Clearly communicated and reasonable payment terms foster a sense of trust and professionalism, demonstrating to your clients that you value both your services and their partnership.

Crafting Effective Payment Terms: More than Just Dates

Constructing robust payment terms requires a fine balance of several critical factors. Understanding the variables that influence your choice of payment terms is the first step to crafting conditions that work for both you and your clients.

Factors Influencing Payment Terms

The choice of payment terms largely hinges on a few critical elements:

• Industry Standards : Different industries often have different norms when it comes to payment terms. While retail typically requires immediate payment, industries like construction or advertising may employ Net 30 or Net 60 terms.
• Type of Goods/Services Provided : For high-value goods or long-term services, you might consider extended payment terms or even instalment-based payments.
• Client Relationships : For new clients, you might require upfront payments, while for trusted long-term clients, more extended terms might be feasible.

Legal Considerations in Payment Terms

When drafting payment terms, be aware of any legal restrictions or requirements in your region. Some areas have laws around maximum payment durations or late payment fees, so always ensure your terms are in compliance.

The Role of Clarity and Precision

When writing your payment terms, strive for clarity and precision. Ambiguities in your terms can lead to misinterpretations, delayed payments, or disputes.

State clearly when payment is due, any early payment discounts, and late payment penalties.

Managing Expectations and Fostering Relationships

Your payment terms do more than just dictate when you get paid. They serve as a communication tool, setting the tone for your relationship with your clients.

By clearly outlining your payment expectations, you prevent misunderstandings that could strain relationships.

Standard Payment Term Templates

📃 7-day payment terms template.

A 7-day payment term, although short, can be very effective in certain contexts. Here's a closer look at its appropriateness, a sample template, and some tips for enforcing these terms.

When are 7-Day Payment Terms Suitable?

• Fast-paced industries where quick turnover is the norm.
• Small-scale transactions or low-value invoices.
• Digital services such as software services, freelance work, or online consultations.

7-Day Payment Terms Wording

‍ "Due within seven (7) days from invoice date. Late fee of [amount] applies after the due date. Refer to invoice number [number] when making payment. Any discrepancies must be communicated within three (3) days of receipt."

Enforcing 7-Day Payment Terms

• Inform clients of the 7-day terms at the start of the engagement.
• Send a professional, friendly reminder a day or two before the due date.
• Utilize an invoice reminder software to automate these reminders and even add late fees, ensuring consistent communication.

📃 14-Day Payment Terms Template

The 14-day payment terms offer a bit more flexibility than the 7-day option and can be utilized in many business contexts. Here's when they're suitable, an example wording, and advice for ensuring compliance.

When are 14-Day Payment Terms Suitable?

• Mid-scale projects or transactions where the work completion and invoice processing may take some time.
• Industries such as professional services, consultancies, and retail.
• Ongoing business relationships with known clients.

14-Day Payment Terms Wording

‍ "Payment is due within fourteen (14) days from the date of the invoice. A late fee of [amount] applies if payment is not made by the due date. When making your payment, please reference the invoice number [number]. Discrepancies should be reported within seven (7) days of receipt."

Ensuring Compliance with 14-Day Terms

• Set expectations early and notify your clients about the 14-day payment term at the outset of your business relationship.
• Consider offering prompt payment discounts to incentivize timely payments.
• Send out automated reminders using your invoice reminder software to ensure consistency and avoid human error.

📃 30-Day Payment Terms Template

The 30-day payment term is a standard in many industries, providing ample time for invoice processing. Here's when it's appropriate, a sample template, and some tips for effective communication and management.

When are 30-Day Payment Terms Suitable?

• Larger scale projects that require considerable completion time.
• Government contracts and larger corporate dealings, which often adhere to a net 30 payment cycle.
• Industries where this is standard practice, such as manufacturing and wholesale.

30-Day Payment Terms Wording

‍ "Payment is due within thirty (30) days from the date of invoice. Failure to pay within this term will result in a late fee of [amount]. Please mention the invoice number [number] when processing payment. Any discrepancies should be reported within fourteen (14) days of receipt."

Managing and Communicating 30-Day Terms

• Be clear about the 30-day terms from the get-go, ensuring clients understand and agree to them.
• Use a late fee software to automate the process of adding late fees for overdue payments.
• Maintain regular communication throughout the 30-day term, with automated reminders sent at key intervals.

📃 Generic Payment Terms Template

A generic payment term template can be adjusted to fit a range of situations. Here's a sample template and guidance on tailoring it to your needs.

Generic Payment Terms Wording

‍ "Payment is due within [number of days] from the date of the invoice. A late fee of [amount] applies after the due date. Please reference invoice number [number] during payment. Report any discrepancies within [number of days] of receipt."

Adapting the Generic Template

• The number of days for payment, reporting discrepancies, and late fee amount can all be adjusted according to the specifics of your business and client relationship.
• It's vital to keep the terms clear, precise, and consistent across your invoicing to maintain professionalism and avoid confusion.
• Regardless of the terms you set, always be proactive in communicating them to your clients, ideally at the start of your business relationship.

Advanced Payment Terms

These payment terms might not be as commonly used as their 7, 14, or 30-day counterparts, but in certain scenarios, they can be very useful.

📃 Immediate Payment Terms Template

Immediate payment terms are a bit uncommon but might be necessary in certain business contexts. Let's explore when they're appropriate, a template for these terms, and tips for ensuring compliance.

When are Immediate Payment Terms Suitable?

• For transactions where the risk of non-payment is high.
• For businesses that offer high-demand products or services and need to ensure availability.
• When dealing with new clients and you want to minimize credit risk.

Immediate Payment Terms Wording

‍ "Payment is due immediately upon receipt of this invoice. Failure to pay promptly may result in a late fee of [amount]. Please mention the invoice number [number] when making your payment. Any discrepancies should be reported immediately."

Enforcing and Communicating Immediate Payment Terms

• Be upfront about immediate payment terms before initiating any business transaction.
• Consider using an invoice reminder software to send the invoice immediately after the delivery of goods or services.
• Ensure that the penalty for late payment is communicated clearly and unambiguously.

📃 Net 60 or Net 90 Payment Terms Template

Longer payment terms such as Net 60 or Net 90 may be necessary in certain business scenarios. Here's when they're suitable, a sample template, and advice on ensuring compliance.

When are Net 60 or Net 90 Payment Terms Suitable?

• For larger projects where a longer timeframe is necessary for payment processing.
• Government or large corporations might prefer longer payment terms due to their internal processes.
• When you have a well-established business relationship with a client and trust their creditworthiness.

Net 60 or Net 90 Payment Terms Wording

‍ "Payment is due within [60/90] days from the date of the invoice. Failure to pay within this term will result in a late fee of [amount]. Please mention the invoice number [number] when processing payment. Any discrepancies should be reported within [30/45] days of receipt."

Ensuring Compliance with Net 60 or Net 90 Terms

• Clear communication of these extended payment terms at the start of the business relationship is crucial.
• Consider offering Prompt Payment Discounts as an incentive for clients to pay well before the due date.
• Make use of late fee software to automate the process of adding late fees for overdue payments.
• Regularly follow up on outstanding invoices to ensure compliance.

📃 2/10 Net 30 Payment Terms Template

The 2/10 Net 30 payment term is a short-term credit option offered by businesses to their creditworthy customers. Here's an explanation of when and how to use these terms.

When are 2/10 Net 30 Payment Terms Suitable?

• When you want to encourage customers to pay their invoices quickly.
• For customers who regularly order in large quantities or high-value items.
• When managing large clients who prefer to pay all their invoices in a single batch.

2/10 Net 30 Payment Terms Wording

‍ "Invoice is due within 30 days from the date of issue. Enjoy a 2% discount if payment is made within 10 days of receipt. Late payments may incur a fee of [amount]. Please reference invoice number [number] in your payment."

Managing and Communicating 2/10 Net 30 Terms

• Always communicate the availability of the discount and its benefits to the customer upfront.
• Ensure you have a system in place, such as an invoice reminder software, to remind customers of the upcoming discount deadline.
• Use clear language in your invoice to avoid misunderstandings.

📃 C.O.D. (Cash on Delivery) Payment Terms Template

Cash on Delivery (C.O.D.) payment terms can be an excellent choice for certain types of businesses and transactions. Here's when to use them and how to communicate them effectively.

When are C.O.D. Payment Terms Suitable?

• Ideal for businesses dealing in high-value or high-demand items where payment risk needs to be minimized.
• Suitable for first-time transactions with a new customer where there's no established trust.
• When dealing with customers who have had a history of late payments.

C.O.D. Payment Terms Wording

‍ "Payment for this invoice is due on delivery (C.O.D.) of goods/services. Failure to comply may result in withholding of the goods/services. Please be ready to provide payment upon delivery and reference invoice number [number]."

Implementing and Communicating C.O.D. Terms

• Make sure to communicate C.O.D. terms clearly before delivery.
• The delivery team should be prepared to accept payment in the format specified in the invoice (cash, card, or digital).
• If using a delivery service, ensure they're equipped to handle C.O.D transactions and have a method for remitting payments back to your business.

Crafting Clear Payment Terms and Conditions

Now that we have a solid understanding of the different types of payment terms and how to use them effectively, we'll delve into the importance of robust payment terms and conditions in contracts, and how to write them.

Why Are Payment Terms and Conditions Important?

‍ Payment terms and conditions provide a legal framework that governs transactions between businesses and their customers. These terms help protect your business's interests, prevent misunderstandings, and foster positive relationships with clients.

Steps to Create Payment Terms and Conditions

• Understand Your Needs: Define what you need from the client and what they can expect from you.
• Consult Legal Advice: Seek advice from a lawyer or a professional with experience in contract law to ensure your terms and conditions comply with legal standards.
• Use Clear Language: Keep your terms concise and simple. Avoid legal jargon that might confuse your customers.

Essential Elements in Payment Terms and Conditions

• Payment Method: Specify acceptable forms of payment (bank transfer, credit card, etc.).
• Payment Due Date: Clearly state when payment is due (upon receipt, 30 days after invoice date, etc.).
• Late Payment Penalties: Detail any interest or fees for late payments.
• Dispute Resolution: Outline how disputes about payments will be resolved.
• Billing terms and conditions template: Use a template to ensure consistency and professionalism.

‍ Frequently Asked Questions

1. how do you write payment terms and conditions.

‍ Payment terms and conditions should be clear, fair, and legally compliant. Make sure to include essential elements such as payment due date, acceptable payment methods, and provisions for late payment. Use simple, straightforward language and avoid unnecessary jargon.

2. What should I Write in my Terms and Conditions?

‍ In your terms and conditions, you should outline your expectations and obligations as well as those of your customers. Include details on payment terms, product or service delivery, refund or cancellation policies, dispute resolution, and any other aspects relevant to your business.

3. What is Invoice Reminder Software?

‍ Invoice reminder software is a tool that automates the process of sending reminders to customers about unpaid invoices. This can significantly reduce the time spent on manual follow-ups and improve cash flow by encouraging prompt payment.

4. How can I implement Prompt Payment Discounts?

‍ To implement prompt payment discounts , include details in your payment terms and conditions about the discount amount and the time frame in which payment must be made to qualify for the discount.

5. How can I manage Late Payments?

‍ Managing late payments can involve implementing late fees as outlined in your payment terms, utilizing invoice reminder software, and adopting a consistent follow-up process. Communication is key - always discuss late payment issues with your clients to understand the reason and find a mutually beneficial solution.

Leveraging Technology to Streamline Payment Terms

Automation has seeped into almost every facet of our lives, and payment terms and conditions are no exception. Invoice reminder software like Paidnice, for example, can help businesses efficiently enforce their payment terms and conditions.

How Can Technology Help Enforce Payment Terms?

‍ Implementing payment terms manually can be time-consuming and prone to human error. Software solutions automate this process, sending timely reminders to clients, helping ensure prompt payment, and reducing instances of overdue invoices.

The Power of Automation

‍ Automating your payment terms, with tools like Paidnice , carries numerous benefits:

• Time-Saving: Automation frees up time that can be used for more strategic tasks.
• Reducing Errors: Automated systems help avoid human error in calculations and due date tracking.
• Improving Compliance: Consistent and timely invoice reminders encourage clients to pay on time, improving overall compliance with your payment terms.

Wrapping Up

We've navigated the complexities of payment terms and conditions together, underscoring their importance in successful business operations. The right payment terms can foster positive business relationships, maintain healthy cash flows, and mitigate financial risks.

Technological advancements have further simplified managing payment terms and conditions. Tools like invoice reminder software not only automate the process but also save time, reduce errors, and improve overall compliance.

The key to successful payment terms lies in their clarity and the consistency of their enforcement. Reflect on your existing terms and conditions and consider how automation could further streamline your processes and boost your business's financial health.

By using our payment terms and conditions templates and embracing technological solutions, you are better equipped to create and manage your billing terms and conditions effectively.

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Why payment terms are important

Credit terms, debt collection policies.

Your business payment terms are:

• the way you let your customers pay for your goods or services
• when you expect them to pay by.

Payment terms usually include:

• what payments methods you accept
• whether you provide credit and the terms of credit
• debt collection policies.

In Australia, payment terms are part of a sales contract. This means they are under contract law.

Find out more about understanding contracts.

Payment terms affect your business:

• risk of insolvency
• cash flow – offering credit makes your cash flow less predictable.

Offering credit means giving your customers goods or services upfront without payment. If a customer buys on credit, they owe your business a debt. Standard terms of credit include:

• 7 days to pay
• 21 days to pay
• 28 days to pay.

Offering credit increases your sales. But it can be risky if your customers don’t or can’t pay their debts. You may use credit checks to reduce the risk. You may also restrict credit if you’re concerned that a customer might not be able to repay. Note that the buyer does not own the goods until they’ve paid you in full.

Your debt collection policies describe what you’ll do if a customer doesn’t pay their debt. Examples of debt collection activities include:

• phoning or emailing customers to request payment
• sending a letter of demand
• using debt collection services .

Debt collection costs you time and money. It’s a good idea not to spend too much time collecting debts – if it’s not worth it.

Learn what to do when you haven’t been paid.

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Run » business financing, guide to negotiating payment terms with your vendors.

Many business owners are shy about approaching suppliers for better payment terms. Here are some ways to approach your vendors successfully.

Maybe you’re seeking to free up a little capital for a new product launch. Or maybe you’re needing to expand your operations and need to change your payment schedule. Perhaps you’re struggling during COVID-19 and are looking to improve your cash flow in a pinch. There are many reasons why a small business may seek to negotiate better payment terms with suppliers and partners. Here are some tips for how to approach vendors about adding time to your payables schedule.

[Read more: A Quick Guide to Accounts Payable ]

Make a plan

Before you reach out to your vendors, know what it is you’re going to ask. Stephanie Sims, founder of Finance-Ability , told CO— that small business owners should begin with a simple cash flow projection to understand what payment terms will work best for you.

“For existing contracts, have an early warning system for your cash flow so you know right away if you're in the danger zone with vendors. Check the projection frequently — at least weekly, more often if you've got a high volume of transactions,” said Sims.

Have a plan in place before you approach a vendor to negotiate new payment terms. It’s important to know what you can afford to pay now. This plan will give you a starting point from which to negotiate. Additionally, take the time to review what your rights are under your contract. Be sure to check for cancellation clauses and penalties in addition to late payment fees. You may want to speak to a lawyer about the specifics of your vendor agreement before exploring a renegotiation.

[Read more: 3 Expert Strategies to Improve Your Small Business Accounting ]

If you know that you can't make payments in a timely fashion, reach out to your vendor sooner rather than later.

Stephanie Sims, founder, Finance-Ability

Coronavirus Guide for Small Businesses

CO— is working to bring you the best resources and information to help you navigate this challenging time. Read on for our complete coronavirus coverage.

Be proactive in your communication

Early communication is always more welcome than suddenly reaching out in an emergency. Try to be proactive about your need to renegotiate. Explore renegotiations and deadline extensions before you stop payment or cancel the agreement altogether. “Fair warning is always better than surprising a vendor by saying ‘I can't pay.’ If you know that you can't make payments in a timely fashion, reach out to your vendor sooner rather than later. Don't wait until you're already 30 days late to start the conversation!” advises Sims.

“Remember, the best time to negotiate better terms is when you don’t have an urgent need for them. Start investing in that process today,” recommends one expert . Build a great relationship with your vendors over time and approaching them for a payment term re-negotiation won’t feel as fraught.

A final note: in extenuating circumstances like a global pandemic, many vendors understand the challenges their clients are facing, and want to work with you. Some vendors (like landlords) already have programs designed to assist you, notes Sims. Research those, or ask your vendor if they've instituted such a program.

Find a win-win solution

“When you come to the table, suggest ways that more generous terms could benefit them as well. Explain how more cash flexibility may allow you to increase your order volume, for example, or mention that you'd like to send peers in your industry their way if you can tell them how easy this vendor is to work with,” suggests one expert in the American Express blog .

What can you offer in exchange for better payment terms? How will the improved cash flow allow you to help the vendor out in the future? Framing your ask in a way that makes the arrangement mutually beneficial will help the vendor say yes.

Ask for the most

Be reasonable in your ask, but aim to ask for the higher end of what you need. This is a negotiation, meaning there will be some back and forth as come to terms that work for both parties. For instance, if you need more time than your normal 30-day payment terms , ask for 60 days. You may end up with 45 days, but that’s still better than where you started. It can help to research other suppliers and vendors as a point of leverage and as a backup, in case your negotiation falls through.

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How to Pick the Best Payment Terms for Your Invoice

When you’re setting up a new business, it’s imperative that you figure out your invoice policies early on. Ensuring that you have the right payment terms is crucial if you want to be paid on time.

The last thing you want to be as a business is vague about your terms, which is why you have to think very carefully about the payment terms that you want for your invoices.

How Will My Business Be Impacted by Payment Terms?

The payment terms that you chose for your invoices have a big impact on your business. Larger companies—while wanting to be paid on time—can afford it when payments are late. Unfortunately, smaller and medium-sized businesses often can’t manage without being paid on time.

It should be a straightforward task: you send the invoice, the client pays the invoice, everyone is happy. And yet this is not how it always works.

Your cash flow will be affected by the payment terms that you set out, which is why complete clarity is vital to the success of your business. Your clients will look at the due date for the invoice to be paid and pay it accordingly.

For instance, if you choose thirty-day payment terms and then expect payment in two weeks, you’ll be sorely disappointed.

Also, some businesses rely on being paid on time for projects to continue to move forward. If you align your payment terms with how you move projects along, you’re more likely to keep projects moving efficiently.

There’s also a customer service aspect to choosing payment terms. Maintaining good client relationships is important and a part of that is not feeling like your relationship is tense while you wait for payment to be made.

The terms that you set on your invoices should include details like late payment fines and penalties, the specific currency that your business deals in (especially if you do international business), and the ways that you expect to be paid.

Some companies choose not to allow their customers to pay via check, for example. The most important detail that every company should include is the expected payment date.

Sometimes, you can’t set the payment terms, especially if you’re dealing with a larger corporation. Their payment terms are usually set by their finance department and they have their own invoicing policies.

Should I Offer Long or Short Payment Terms?

Payment terms vary from business to business, and while it was once the case that companies would allow people to pay within thirty days, times and payment terms are changing!

Long payment dates were the norm when sending checks in the mail was the standard, but we’ve upgraded with the times and most of the time, payments are made online.

Electronic invoices with time and date stamps have made the days of stamps and paper invoices almost completely obsolete.

Businesses require their cash flow to keep moving, so if your company is offering generous payment terms and yet people are paying later and later each month, you’re essentially running your business into the ground with a stagnant cash flow that isn’t being managed correctly.

The way that your business remains successful is going to be set in the payment terms that you offer. Communication is key with your clients, and the payment terms that you use are the way to maintain those relationships.

Below, you will find some of the most important payment terms that you could include in your invoices.

Terms of Sale

The terms are simple: these are the very conditions that you have agreed to with your customer. These should include the:

• Cost of service
• Amount to be paid and when
• Delivery terms
• Accepted payment methods
• Due date for payment

You’ll find that these are exactly what you need to put onto any of your invoices, too. Terms of sale have to be as clear as possible on an invoice so that there are no disputes about payment.

If everything is written plainly, it’s more difficult for misunderstandings to happen. Adding the terms of sale is important, but it’s particularly important for those businesses that deal with international trade deals.

Payment In Advance

This one is a simple term to understand but can also be written as PIA. Payment in advance is a payment made ahead of schedule, similar to a deposit.

Depending on the cost of the item or service, it’s not unusual for a business to ask for a deposit in advance of receipt of goods, especially if you’re freelancing and need some security.

Up to a 50% down payment is pretty common and it can protect you as the seller from being out of pocket if your client decides to pay you too late.

Due On Receipt (Immediate Payment)

Sometimes, a business needs payment immediately without any waiting around. This is usually something that retailers ask for and if the payment isn't made immediately as per the invoice, then the seller has the right to repossess the intellectual property.

It’s a good thing for a business owner, as it means that they can try to speed up the payment process. But for a client, it could leave a bad taste as they may not have the cash to cover the bill straight away.

Learn more: What Does Due on Receipt Mean?

Net 7/10/15/20/30/60/90

Lots of numbers here, but these all refer to the payment terms and when they are due to be paid. However, this is not the same as saying ‘due in the 30 days’, which is where it can get confusing for clients.

Net 30 payment terms mean that you have the chance to incentivize repayment by offering your client a discount and money off the total if they pay earlier than the stated terms. However, if the payment isn’t made within the set timeframe, there’s usually some kind of penalty.

Net payment terms are great for long-standing customers because you’re giving them a chance to save money by paying early, which they’ll greatly appreciate.

Learn more: What does Net 30 Payment Terms Mean?

2/10 Net 60

This is similar to the previous payment terms. If you make it clear that your bill has net 60 payment terms, and you have 2/10 written before it, this implies that a 2% discount will be given within the first 10 days of payment.

You can increase this percentage and even add discounts as the days grow if you want to. Sweetening it with 10% off in the first ten days can make it much easier for you to actually get paid in a timely manner.

The way to look at it is that you deserve to be paid on time, but that doesn’t mean that larger business clients can manage it with their accounts rules. Always keep your terms simple so as not to confuse someone who is less savvy with accounting.

Line of Credit Pay

Some clients are regulars and when it comes to dealing with them, it can be much more business savvy to offer them the chance to settle their bills over a longer period of time.

Some companies like to run this on a quarterly or a monthly basis, and it’s allowing the customer a line of credit for their purchase.

This is a risk to take for a small business who may not be able to afford the loss if a customer doesn’t pay within the specified terms of the credit. Therefore, it’s not a bad idea to credit check your customers if you want to offer a line of credit, so as to ensure that they can make those repayments.

Providing a service means that you deserve to be paid, which isn’t something you can always afford to forget in the face of being polite.

Interest Invoice

Usually, this refers to the consequences that occur when an invoice isn’t meeting the payment terms. The biggest benefit of charging interest is it deters clients from paying late.

Remember, some clients miss payments simply because they forget or prioritize other bills over yours. But if they’re going to have to pay more money for being late, it’ll move your invoice to the top of their list and they’ll be more diligent about paying you.

Only ever charge interest per day after the invoice is due to be paid in the first place. It’s also a good idea to have a grace period if you’re going to charge interest on an late invoice.

For instance, you might give the client five days after the due date, then the interest will kick in. That way, you’re giving the client a heads up and only using the interest as the last option,

Clarity is Key With Payment Terms

When you choose your payment terms, you need to be as plain as possible. Keep it polite and professional, and it doesn’t hurt to incentivize your customer to pay you on time.

Clear and specific payment terms keep everyone on the same page and working toward a better relationship.

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Guide to Negotiating Payment Terms with Your Vendor

Home -> Small Business -> Guide to Negotiating Payment Terms with Your Vendor

While negotiating with a vendor can intimidate even the most confident entrepreneur, going in with confidence and a clear plan can  ensure you secure the payment terms that work best for you. Plus, remember to be reasonable as you want to encourage the working relationship. When negotiating, have evidence that supports what you’re asking for is doable such as quotes from other suppliers. Here’s what you should know about negotiating payment terms. 

What are payment terms? 

Let’s start with the basics. Payment terms are the expectations set by your vendors about when and how you will repay them. These are set at the time of the sale or service and provided from the seller to the buyer. Payment terms are usually outlined on the invoice and include things like late fees, credit card fees and instructions on how to make the payment. 

The terms can range depending on the individual business owner and the industry. For example, many businesses will use “net 30” payment terms, which means you have 30 days from the time of service or sale to pay. Others can use terms like advance payment or monthly payments for your payment terms. 

Why negotiating payment terms with your vendor is important

As a business, the more cash you can keep on hand, the better prepared you are for any unexpected costs and the stronger your business will be. Therefore, negotiating payment terms can help you better manage cash flow. Rather than paying for inventory when you order it or soon after, set up payment terms that allow you to float the money until it sells. While this is one way to stock enough inventory while maintaining cash flow, you may need to combine this method with  inventory financing . 

When negotiating payment terms, get creative. Find a proposal that benefits you and your vendor. When negotiating remember that there are plenty of vendors out there but appreciate the one you like to work with. This does not mean overpaying them but showing respect and justify what you’re asking for.   

Top Factors to consider when negotiating payment terms

There’s an art to negotiating your payment terms to get what you want. But before you head into a conversation with your manufacturer about your payment terms, make sure you understand all the aspects and complexities of your financial situation that will drive your negotiations. 

#1. Cash flow

When you get a new shipment of inventory, the clock starts ticking on how quickly you need to sell the inventory so you can make a profit and pay back your manufacturer. Ideally, your payment terms would provide you enough time to sell the inventory and increase your cash flow. 

When you start negotiating with a vendor, go into the conversation with an understanding of your cash flow and how it fluctuates based on your sales cycle. The goal is to push the payment terms out so you have the time to increase your cash flow before paying your vendor. 

#2. Vendor relationships

Running a business is all about relationships. If you have a long-term and trusted relationship with your vendors, the negotiation can go smoothly, knowing you have already proven yourself as a reliable business owner. However, keep in mind that vendors also need to get paid, and asking for unreasonable payment terms won’t benefit anyone. 

#3. Cost of capital

Make sure you consider the cost of capital your vendor will need to take on to extend or change your payment terms. If you can find a middle-ground that ensures your vendor gets paid for their services while giving you the time you need, the cost of capital can benefit both of you. 

#4. Competition

One way to negotiate payment terms is to leverage the competition against the manufacturer. If you know you can get the same product from another vendor that offers more flexible payment terms, you can use this in your negotiating tactic. Using the competition to your advantage can encourage your current vendor to meet some of your requests so they can keep your business. 

Types of payment terms

As you head into your negotiating conversations with vendors, make sure you have a specific idea in mind that you’re asking for. Some examples of payment terms you could ask for include:

• Advance payment: With this type of payment term, you’ll make a payment before you receive the goods or services. 
• Net terms: Net payment terms outline how long you have to pay the invoice and usually are established as 30, 60 or 90 days. 
• Installment payments: This allows you to establish a regular payment schedule to repay your purchase in smaller amounts over a period of time. 
• Milestone payments: When you pay a vendor when certain benchmarks are met, like halfway through the project or work.

Tips for negotiating payment terms with your vendor

While negotiating can be stressful, it doesn’t have to be. By being considerate and respectful and following some general guidelines, you can reach an agreement that works best for both parties. Here are some tips to having a positive experience negotiating terms:

• Be honest : When you’re speaking with your vendor, make sure you’re honest and transparent with them. Outline how you appreciate your relationship with them, but financially you need different payment terms to fully benefit from your partnership. Being honest will help your vendor feel confident this is something that’s important to you.
• Ask far in advance for a change: Your vendors and manufacturers are just as reliant on your business as you are on selling their inventory. If you want to change your payment terms, the more notice or flexibility you have around when those changes take effect, the more likely they are to agree. This gives both of you time to prepare and make the necessary arrangements.
• Come prepared with your research: Before you begin to negotiate payment terms, do some research to understand what is standard in your industry and among other competitors. This can help convince your supplier or vendor to adjust their terms to be more in line with the norm.
• Be willing to compromise:   As with any negotiation, it’s important to manage your expectations. If you go in asking for a net 90-day payment term, be prepared to compromise somewhere in the middle of what you’re seeking. This is why you should also go into negotiations asking for more than you actually are okay receiving. 

Closing thoughts

Successfully renegotiating your payment terms with a vendor can have drastic improvements in the cash flow of your business. While it may seem daunting, with the right preparation and knowledge, you can confidently and respectfully discuss with your vendors how to better work together and find terms that are a win-win for you both. Negotiating payment terms is important, but so is having enough cash flow on hand to pay when you need to pay. To improve cash flow consider small business inventory financing . 

How Kickfurther can help

Favorable payment terms are important, as is maintaining cash flow and accounts. Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

• No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
• Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
• Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
• Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.
• Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. And by funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

Interested in getting funded at Kickfurther? Here are 3 easy steps to get started:

#1. Create a free business account

#2. Complete the online application 

#3. Review a potential deal with one of our account reps & get funded in minutes

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	Aug 11, 2024   2024-2025 Graduate Catalog     2024-2025 Graduate Catalog Tuition, Fees and Living Expenses The Financial Information Bulletin     is issued each academic year. It provides the general authority and reference for SMU financial regulations and obligations, as well as detailed information concerning tuition, fees and living expenses. Prior to enrolling each semester, students are required to review and agree to the Student Rights and Responsibilities that is comprised of three parts: Financial Rights and Responsibilities, Honor Code and Student Code of Conduct, and Appeals and Complaints. The Student Rights and Responsibilities will appear as a task on your dashboard and will be available approximately one month before enrollment opens for the term. A printable PDF version of the statement may be found at the Student Rights and Responsibilities website. Students must ensure that payment for the full amount of charges is posted to their account by the payment due date. The due dates are also published on the Student Financial Services website. Billing notifications are sent to the student’s SMU email address and to the designated authorized payer(s) email address when a bill is generated. The billing notification will provide instructions on how to view the bill online through SMUpay. If notification is not received two weeks prior to the due date, the student and/or designated authorized payer(s) should contwebsiteact Student Financial Services, Office of Student Accounts. Payments made in person or mailed must be received by Student Financial Services, Office of Student Accounts, located on the first floor of the Laura Lee Blanton Student Services Building, no later than 4 p.m. Central Time on the payment due date. Payments made online via electronic check or credit card must be posted no later than 11:59 p.m. Central Time on the payment due date. Students and/or those paying on behalf of students who pay online automatically receive an electronic confirmation of payment; students and/or designated authorized payer(s) paying through other methods can also verify receipt of payment online. Students enrolling after the payment due date must pay at the time of enrollment. Students whose accounts are not cleared by the payment due date will become delinquent and financial holds placed, preventing registration for future terms, obtaining official transcripts or receiving a diploma. Also, after the monthly payment due date has passed, a 1.5 percent past due fee will be assessed on the unpaid student and/or miscellaneous account each month until the balance is paid. The enrollment of students whose accounts remain unpaid after the payment due date may be canceled at the discretion of the University. Students are individually responsible for their financial obligations to the University. All refunds except federal parent PLUS loans, prepayment accounts, the SMU Monthly Payment Plan and international wires will be made payable to the student. A credit card payment will only be refunded to the student if the other refundable credits or loans have already been applied to the account. International wires will be refunded by wire to the originating wire account less a $35 wire-processing fee. The parent PLUS loan borrower can request the refund to be processed to the student by submitting a UG Parent PLUS Loan Refund Release form, located on the Bursar website. If the refund is issued by check, the student may request, in writing, that the refund be sent to another party. Any outstanding debts to the University that include Title IV funds must have an Authorization to Credit Account (ACA) form and/or an Authorization to Credit Account Parent (ACAP) form on file in order to transfer funds to cover current award year debts. Students need to sign the ACA form electronically; both the federal parent PLUS borrower and the student need to sign the ACAP form electronically. Any outstanding debts to the University that do not include Title IV funds will be deducted from the credit balance prior to issuing a refund. All other debts should be paid directly by the student. A student whose University account is overdue or who in any other manner has an unpaid financial obligation to the University may be denied the recording and certification services of the Office of the Registrar, including the issuance of a transcript or diploma, and may be denied readmission until all obligations are fulfilled. The Division of Enrollment Services may stop the registration, or may cancel the completed registration, of a student who has a delinquent account or debt. The University will charge a $50 collection processing fee (identified as “Recovery Select Fee” on the account), in addition to any other past due fees, to the account at the end of the term for unpaid balances. The unpaid account may be sent to a third party, collection company or an attorney, for collection. The student will be responsible for any costs (including but not limited to collection fees) associated with attempting to collect the monies due and owing. If a lawsuit is filed to recover an outstanding balance, student will be responsible for any costs associated with the lawsuit such as attorney fees, court costs or other applicable costs. A collection fee will be assessed and will be due and owing in full at the time of the referral to the third party. The collection fee may be calculated at the maximum amount permitted by applicable law but not to exceed 30 percent of the amount outstanding. The delinquent account may be reported to one or more of the national credit bureaus. Matriculation in the University constitutes an agreement by the student to comply with all University rules, regulations and policies. Applications for financial assistance should be submitted well in advance of registration in accordance with recommended filing dates set forth by the Division of Enrollment Services, Student Financial Services. Applications received after the recommended deadline can expect a delay in application processing time due to the increased volume. This will ultimately delay disbursement of financial aid to the student account. Students and families are expected to clear all billed charged by the published billing due dates regardless of the status of their financial aid application. Any funds that disburse to the student account after the payment due date has passed, will be applied to any outstanding charges first. Remaining financial aid funds will be refunded to the student.  Students who elect to register for courses outside of their school of record will pay the tuition rate of their school of record. Tuition Refunds for Withdrawal from the University No refunds of tuition or fees will be considered without an official withdrawal. Policies for official withdrawal, including medical and mandatory administrative withdrawal, are found under Withdrawal from the University    in the Enrollment and Academic Records section of this catalog. Medical withdrawals and mandatory administrative withdrawals allow a prorated refund of tuition and fees and must be initiated through the Office of Student Success and Retention for undergraduate students; graduate students go through the academic adviser or academic Dean’s office. Reduction of tuition and fees, when applicable, is determined by the effective date of the withdrawal and is based on the schedule listed in the  Financial Information Bulletin     and the Student Finanical Services website. Financial aid implications of withdrawing from the University Federal regulations require schools to adjust financial aid when a student officially withdraws from the University before completing 60% of the term. Financial aid is reduced to a pro-rated amount based on the amount of time the student was enrolled in classes in that specific term, thus “earning” financial aid proportionate to the amount of time enrolled. The “unearned” portion of aid will be returned to the funding source. Students completing 60% or more of a term are considered to have earned 100% of their financial aid for that term. This federally mandated calculation is completely independent of university’s refund policies for withdrawals and may require a reduction in financial aid even if there is no reduction in tuition charges. The end result could create a substantial student account balance after the withdrawal is processed. For this reason, students are strongly encouraged to contact their financial aid adviser, before initiating a withdrawal, to discuss the financial implications of withdrawing. For additional information on the University’s tuition refund policies, see the SMU  Financial Information Bulletin     or the Student Financial Services  website. Information on the implications of withdrawing on your financial aid can be found on the Student Financial Services  website. Due to the assessment of student accounts by multiple offices, cancellations and withdrawals can take up to 45 days to be processed. Payment Plan Options Smu monthly payment plan. SMU offers several payment plan options to assist students and families. Refer to the Student Financial Services  website for detailed payment plan information. Fall and Spring Term payment plans are available in six or five monthly installments. The summer payment plan is three months. Payment plan options are not available for short terms including JanTerm, May Term and August Term. Payment plans cannot be applied to Miscellaneous account charges and an open balance from a previous term cannot be added to a current payment plan. SMU Prepayment Plan The SMU Prepayment Plan (a single payment up front for all terms) allows families to avoid the effects of tuition and fee increases by paying for two, three or four years in one single payment at the current rate of tuition and fees for an undergraduate full-time (12-18 credit hours) student. It covers Fall and Spring terms only. Questions should be addressed to the Mane Desk at 214-768-5555 or [email protected] . Merit-based Scholarships and Financial Aid Information about merit-based scholarships and financial aid at the Cox School is found under Cox Graduate Programs Policies and Procedures    in the Enrollment and Academic Records section of this catalog. An official website of the United States government Here’s how you know Official websites use .gov A .gov website belongs to an official government organization in the United States. Secure .gov websites use HTTPS A lock ( Lock A locked padlock ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites. U.S. Department of the Treasury U.s. department of the treasury announces up to $83 million in american rescue plan small business support to drive economic growth for 125 alaska tribes. Unprecedented collaboration between Tribes has generated the largest small business financing consortium in the country. WASHINGTON – Today, the U.S. Department of the Treasury announced the approval of up to $83 million in State Small Business Credit Initiative (SSBCI) funds for a consortium of 125 Alaska Tribes. Funded by the Biden-Harris Administration’s American Rescue Plan (ARP), this investment supports the nation’s largest Tribal SSBCI consortium and is part of the most expansive investment in small business financing for Tribal governments in history. The launch of intertribal SSBCI consortia has been critical to enabling small, remote, and capacity-constrained Tribes to access federal funding. Through the consortium, 125 Tribes will access critical economic development resources for Alaska’s Tribal economy. The funds are anticipated to catalyze as much as $830 million in additional private sector investment across the state and in Native-owned businesses. The funding will be administered on behalf of the Tribal consortium by the Alaska Small Business Development Center (Alaska SBDC) within the University of Alaska Anchorage (UAA) Business Enterprise Institute (BEI). For the first time ever, the ARP included dedicated SSBCI funding for Tribal governments. With today's announcement, Treasury has now approved SSBCI applications for up to $415 million to support more than 220 Tribes through the SSBCI Capital Program for small businesses and Tribal enterprises.  “Today’s announcement reflects success that is only possible when federal agencies listen to Tribal Nations to understand their unique needs and incorporate their feedback in developing program policy and guidance. Through the flexibility of the consortium model, these Tribes will benefit from the historic opportunity that these resources for small businesses presents to Indian Country. These funds will serve some of the most rural populations in the United States, creating jobs and expanding capital access for Tribes across Alaska. We look forward to following this announcement with Treasury’s first official visit to an Alaska Native Village at Chickaloon Village,” said U.S. Treasurer Chief Lynn Malerba. “Our Tribe is looking forward to the transformational impact this funding can have on the Tribal economy of Alaska. Rural Alaska is entrepreneurial. Our SSBCI consortium will address capital access barriers and unlock private financing for all of our small businesses that are ready to grow,” said Rena Greene, Deputy Director and Acting Executive Director of Nome Eskimo Community, one of the 125 consortium member Tribes. “Alaska’s tribes are the backbone of our rural economies. The Alaska SBDC is proud to have worked with the Alaska Federation of Natives to bring 125 Alaskan tribes together in the largest tribal consortium in the nation. This collaborative effort over the last two years will result in hundreds of millions of dollars in private sector loans and equity investments flowing into rural and Alaska Native-owned businesses, drastically changing the economic landscape of some of the most remote communities in the nation,” says Alaska SBDC State Director Jon Bittner. “When the American Rescue Plan Act was signed by President Biden, AFN set out to make sure that Alaska Tribes accessed as much of the funding as possible. Our Navigators worked closely with UAA to help over 100 Tribes access SSBCI, an unprecedented program for Tribal nations. We are proud of that work and proud of the over $80 million in small business funding that we are bringing to Native Alaska,” said Executive Vice President and General Counsel for the Alaska Federation of Natives Nicole Borromeo. "Our local and Alaska-Native centric economies thrive and rely on homegrown small businesses—from coffee shops to electricians. This funding invests in what’s already working here in our state and helps us grow our economies the Alaska way, not the Lower 48 way,” said Congresswoman Mary Sattler Peltola. Reauthorized and expanded as part of the ARP, SSBCI is a nearly $10 billion program to support small businesses and entrepreneurship in communities across the United States by providing capital and technical assistance to promote small business stability, growth, and success. SSBCI represents a transformational investment in American small businesses and is expected to catalyze at least $10 of private investment for every $1 of SSBCI Capital Program funding to increase access to capital to small businesses and entrepreneurs, including those in underserved communities. The Alaska SSBCI Tribal Consortium offers four programs, approved for up to $83.1 million. The programs include a Loan Participation Program, a Loan Guarantee Program, a Collateral Support Program, and an Equity/Venture Capital Funds Program. The Loan Participation and Loan Guarantee Programs, allocated $10.3 and $37.9 million respectively, are designed to reduce interest rates or risks associated with critical small business investments in Alaska and Native-owned businesses. The Collateral Support program, allocated $12.0 million, will provide collateral for small business lending. The program will incentivize loans to underserved borrowers across Alaska. Rural Tribal communities in Alaska depend on small businesses like fishing operations and tourism enterprises, and collateral support is expected to incentivize lenders to support those businesses. The equity/venture capital program, allocated $22.9 million, provides equity capital support to small businesses through a new venture capital program implementing a fund investment strategy, targeting Tribal member-owned businesses, mostly located in rural areas of Alaska. The Treasury Department has worked across the Biden-Harris Administration to deploy historic support from the American Rescue Plan to Indian Country, including over $500 million in Tribal SSBCI funding and $20 billion allocated through the State and Local Fiscal Recovery Fund program to nearly 600 Tribal governments, the largest-ever single infusion of federal funding into Indian Country. The Biden-Harris Administration has also delivered the largest-ever infusion of federal capital to Native-serving CDFIs through the Emergency Capital Investment Program, Rapid Response Program and Equitable Recovery Program. Treasury invested $234 million in Native-owned and Native-majority shareholder depository institutions through the Emergency Capital Investment Program (ECIP), and Treasury projects that the investments across the ECIP portfolio could increase lending in Native communities by up to nearly $7 billion over the next decade based on preliminary analysis. Lenders and small businesses who are interested in receiving more information about the consortium’s SSBCI programs can contact: [email protected] or [email protected] . You might be using an unsupported or outdated browser. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. Life Insurance Best Term Life Insurance Companies Best Term Life Insurance Companies: Expert-Rated In 2024 Updated: Jul 1, 2024, 10:27am We evaluated costs and policy features for 20 large life insurers and found that Corebridge Financial, Pacific Life, Protective and Symetra are the best term life insurance companies. Term life insurance is a simple, cost-efficient way to get insurance for a specific period of time. Your rates are locked in for the level term period, such as 20 years, and you likely have several competitively priced options to choose from. Best Life Insurance Best Cheap Life Insurance Best Whole Life Insurance Best No-Exam Life Insurance Best Senior Life Insurance Compare Life Insurance Quotes Summary: Best Term Life Insurance The best term life insurance companies. Featured Partner Offer How Much Does a Term Life Insurance Policy Cost? Factors affecting term life insurance rates, methodology, other term life insurance companies we rated, best term life insurance frequently asked questions (faqs). How We Chose the Best Term Life Insurance We evaluated each company based on cost, conversion options and renewability. Our editors are committed to bringing you unbiased ratings and information. Our editorial content is not influenced by advertisers. We use data-driven methodologies to evaluate insurance companies. You can read more about our editorial guidelines and methodology below. 280 coverage details analyzed 1,633 term life insurance rates compared 102 years combined insurance experience on the editorial team GREAT FOR CHOICES OF TERM LENGTHS Corebridge financial (formerly aig life & retirement). Policy name Select-a-Term Minimum face amount Level term lengths available 10, 15, 20, 25, 30 or 35 years Corebridge’s Select-a-Term policy generally has very competitive rates that we think will appeal to any term life insurance buyer. We also like its large number of term options, with choices from 10 to 35 years. Very low term life insurance rates. High maximum issue age of 80. Term life insurance buyers can customize a level term length between 10 and 35 years, such as 18 years. To use the accelerated death benefit rider, you must have a life expectancy of 24 months or less—many competitors require 12 months or less. More: Corebridge Financial Life Insurance Review Corebridge is solid, especially if you’re looking for longer term lengths. It can be tough sometimes to find good 30-year terms at competitive prices, but Corebridge often delivers. – Samuel Green, CEO of Blue Insurance High customer complaint ratio for things like claim handling delays, billing issues and surrender problems. Accidental death benefit rider Child life insurance rider Waiver of premium rider BEST COST FOR $1 MILLION TERM LIFE Pacific life. PL Promise Term 10, 15, 20, 25 or 30 years We picked Pacific Life because of its low rates and top-notch coverage features. If you’re seeking $1 million in term coverage, Pacific Life offers especially low rates. Low average term life insurance cost among the companies we analyzed. Offers especially low rates for $1 million term life insurance. The policy is guaranteed renewable until age 95. High maximum coverage amount of over $10 million. More: Pacific Life Insurance Review I like Pacific Life for its flexibility. The products have a good range of riders and options, so you can really customize the coverage. Might not be the cheapest, but worth checking out. If you choose to convert the term life policy, you’re limited to a universal life policy. Children’s life insurance rider Disability waiver of premium Terminal illness accelerated death benefit rider GREAT FOR LONG LEVEL TERM LENGTHS Classic Choice Term 10, 15, 20, 25, 30, 35 or 40 years We like Protective’s Classic Choice policy for its low rates and superior choices of level term lengths during which you lock in the rate, including a hard-to-find 40-year option. Level term lengths include 35- and 40-year choices. Many competitors have 30 years as their longest level term period. The policy can be renewed until age 95 (at higher rates every year after the level term period ends). Choice of up to 8 permanent life insurance policies from Protective if you choose to convert the term life. More: Protective Life Insurance Review Protective is a financially strong U.S.-based life insurer with a Japanese (Dai-ichi Life Holdings, Inc.) parent company. Why does that matter? Japan has suffered low interest rates for more than two decades, which has prompted Japanese insurance companies to look to the U.S. and other markets to find and invest in profitable businesses where they can achieve rates of return substantially higher than those found in Japan while remaining fiscally conservative—a tenant of all good insurance companies. This conservative approach allows Protective to stay the course during economically turbulent periods and draw additional capital from Dai-Ichi to invest in new technologies, develop new products and make process improvement and acquisitions when needed. They offer term, universal life (UL), indexed universal life (IUL) and variable universal life (VUL). – Ryan Pinney , advisory board member Protective puts tighter restrictions than many competitors on using the accelerated death benefit: You can access only 60% or $1 million (whichever is less) of the death benefit. And you must have a life expectancy of no more than six months, while many competitors use 12 months. Accidental death rider Income provider option for endorsement rider BEST FOR TERM LIFE RATES 10, 15, 20 or 30 years We were impressed by Symetra’s consistently low rates—it had the lowest average term life insurance rates in our analysis, making it a top option term life buyers should consider. Lowest term life rates in our analysis Symetra SwiftTerm can be purchased online and with instant approval if you’re young and healthy. The policy can be renewed until age 95 (at a higher cost each year after the level term period). More: Symetra Life Insurance Review Now, here’s a good one for younger, healthy clients. They can be super affordable, but their underwriting is stricter. It’s a trade-off to be aware of. Maximum issue age of 60 for a 10-year term life is lower than many competitors. Maximum face amount of $3 million is also lower than many competitors. As a relatively young company (founded in 1957), Symetra lacks a long track record of demonstrating its ability to pay claims. The accelerated death benefit money available if you’re terminally ill is only up to $500,000 (or 75% of your death benefit, whichever is lower). Accelerated death benefit rider Additional term insurance Charitable giving benefit Overloan lapse protection Supplemental protection Surrender value enhancement BEST FOR HIGHEST COVERAGE AMOUNT Banner life/legal & general america. We like Banner Life because it is one of only a couple of life insurers that offer long level term lengths of 35 or 40 years. (Protective is the other.) It also offers coverage amounts up to $65 million. Maximum coverage amount of $65 million. Very competitive term life rates. Superior choice of level term lengths. You can convert the policy to permanent life until age 70. The U.S. operations of Legal & General Group Plc are one of the world’s leading multinational financial services companies, founded in 1836 and headquartered in London. Legal & General America has become a leader in term life insurance through aggressive pricing, cutting-edge application and underwriting technology and creative product design. Other highlights include: One of just a few carriers to offer 35- and 40-year term options, the ability to offer younger, healthy clients fully underwritten coverage in days vs. weeks through their Horizon eApplication process, and the ability to adjust pricing to remain the market leader daily when needed. They offer term and universal life. This policy is not renewable after the level term period ends. The maximum accelerated death benefit available is only $500,000 or 75% of your death benefits, whichever is less. Additional term insurance rider Children’s life insurance rider Disability waiver of premium rider BEST FOR BUYERS IN THEIR 50s Transamerica. Trendsetter Super We like Transamerica’s Trendsetter Super policy for its top-notch policy features that are available for older ages and excellent rates. Life insurance buyers interested in living benefits should take a look at Transamerica’s Trendsetter LB term life policy. With this policy you’ll be able to access money from your own death benefit if you develop a chronic or critical condition that qualifies. Best average term life insurance rates for healthy buyers in their 50s, among the companies in our analysis. Term life insurance buyers who are young and healthy won’t need a medical exam for up to $2 million in coverage. Maximum issue age of 80 is higher than many competitors. You can convert the policy to permanent life insurance until age 75, which is older than many other insurers offer. More: Transamerica Life Insurance Review A leader in the U.S. life Insurance industry for decades, Transamerica continues to innovate and grow. Today they offer a broad portfolio of life, annuity and retirement products. Their life insurance portfolio includes individual term, universal life (UL), indexed universal life (IUL), variable universal life (VUL), whole life (WL) and final expense (FE). They also offer survivor policies (covering two lives, typically spouses for estate planning purposes), including survivor UL, survivor IUL, survivor VUL and survivor WL. Rates are good but not the lowest among the companies we analyzed (except for buyers in their 50s). Higher than average level of customer complaints for issues such as claim handling delays, lack of response, denial of claims and billing issues. Income protection option rider Children’s term life insurance rider GREAT FOR OLDER BUYERS OF 30-YEAR TERM LIFE Penn mutual. Penn Mutual stood out in our analysis for its great term life insurance rates across a variety of term lengths and coverage amounts. This makes it especially appealing for older buyers seeking a 30-year term. There are generally excellent rates for Penn Mutual’s basic term life policy, even for older buyers, but it can’t be converted to permanent life insurance in the future. If you have the convertible term, you can convert any time up to age 70. If you convert, you can choose from any Penn Mutual permanent life insurance policy available. Some other insurers limit your options or only have one choice of policy for conversion. Online application available. Some life insurance buyers may not be required to do a life insurance medical exam. More: Penn Mutual Life Insurance Review One of the original (7th mutual insurer founded in the U.S. in 1847) mutual life insurance companies, Penn Mutual offers ultra-competitive, limited (accelerated) underwriting options to healthy individuals ages 0-65 with up to $10 million of coverage—as much as 10x higher limits compared to its peers. As a mutual company, Penn Mutual also offers participating whole life with strong dividends (a return of annual profits to their owners—the policyholders). Individual products offered include term, universal life (UL), indexed universal life (IUL), variable universal life (VUL) and whole life (WL). They also offer survivor policies (covers two lives, typically spouses for estate planning purposes), including survivor UL, survivor IUL, survivor VUL and survivor WL. You’ll have to pay for the convertible term policy if you want that feature. The convertible term policy is much less price competitive. No accelerated death benefit available. Accidental death Children’s term insurance Disability waiver of premium with automatic conversion rider GREAT FOR LIVING BENEFITS Midland national. Premier Term We found that Midland National’s Premier Term policy deserves serious consideration because of the ample living benefits. Policyholders can get an accelerated death benefit after a diagnosis of a terminal illness, chronic illness or critical illness. And Midland National delivers these living benefits at very competitive rates that are often lower than some competitors’ policies without these features. Ability to take money from your own death benefit in cases of terminal illness, chronic illness or critical illness. Competitive term life rates that include these living benefits. 30-year term life is available for buyers up to age 55 (50 for tobacco users). A member of Sammons Financial Group, Midland National and its sister company, North American Co. for Life and Health Insurance, are known for strong indexed universal life (IUL) and indexed annuity products. Midland also boasts a strong portfolio of term, whole life (WL) and universal life (UL) products. Midland National primarily provides life insurance products specifically for banks, credit unions, business corporations and government entities. Its sister company North American offers similar products for the middle and affluent markets. <em >- Ryan Pinney , advisory board member Limited choice of additional riders, but likely offset by the living benefits included. Children’s insurance Waiver of premium for disability GREAT FOR LOW LEVEL OF CONSUMER COMPLAINTS SBLI Term Life SBLI has a very low level of complaints compared to competitors. We also like SBLI because it offers a 25-year term option that is not typically offered by competitors. Superior AM Best financial strength rating (A+) means buyers can be confident in the company’s ability to pay claims. Low customer complaint ratio compared to others in our analysis. More term options than some competitors due to its 25-year term option. Savings Bank Mutual Life Insurance Co. of Massachusetts offers competitive term and whole life products. As a mutual company, it returns profits to its owners—the policyholders—in the form of dividends and unique services like a free subscription to LegacyShield—a digital vault where policyholders can store important documents, final wishes, family photos and videos and provide digital access to their family and loved ones. In addition to creative “extras” like LegacyShield, SBLI also offers a fast and easy application and underwriting process that saves time and often eliminates many of the headaches—paramed exams, medical records retrieval and long telephone interviews—associated with applying for life insurance. This provides a better experience for the consumer and allows SBLI products to be more competitively priced than many of its peers. Term life rates are OK, but not among the best in our analysis. GREAT FOR UNLIMITED COVERAGE AMOUNT YourLife GLT We like Nationwide’s YourLife GLT because it has no maximum death benefit, as long as the company considers the death benefit reasonable for your age, income and life stage. Superior AM Best financial strength rating (A+) means buyers can be confident that approved claims will be paid. Great term rates for 50-year-olds. More: Nationwide Life Insurance Review Nationwide is reliable and known for good customer service, which is important with life insurance. Maybe not the absolute flashiest, but they’ve got a long track record. Term rates for 30-year-olds are higher than most others in our analysis. Children’s term insurance rider Chronic illness rider Critical illness rider Premium waiver rider Terminal illness rider Median time for no-exam application approval Maximum no-exam coverage amount Term lengths available 10, 15, 20, 30 years The average monthly cost for a $500,000 term life insurance policy for a buyer age 40 is $19 for a 10-year term, $28 for a 20-year term and $48 for a 30-year term. That’s $228 to $576 per year, depending on the term length. Average Monthly Term Life Insurance Cost for a 20-Year $500,000 Policy Our expert take Company Company - Logo Forbes Advisor Rating Forbes Advisor Rating Policy name Learn More AM Best financial strength rating 5.0 Select-a-Term A (Excellent) 5.0 PL Promise Term A+ (Superior) 5.0 Classic Choice Term A+ (Superior) 5.0 SwiftTerm A (Excellent) Banner/Legal & General 4.5 OPTerm A+ (Superior) 4.5 Trendsetter Super A- (Excellent) 4.3 Non-convertible Term A+ (Superior) Midland National 4.2 Premier Term A+ (Superior) SBLI 4.0 SBLI Term Life A (Excellent) 4.0 YourLife GLT A+ (Superior)   Age 30 Age 40 Age 50 Cost Comparison: Best Term Life Insurance Companies Here’s a look at annual rates from the best term life insurance companies in our analysis. Company Policy name Cost per year: Female buyer age 30, $250,000 for 10 years Cost per year: Male buyer age 30, $250,000 for 10 years EXPERT TIPS How Do I Find the Best Term Life Insurance? Daniel Adams Advisory board member Ashlee Valentine Insurance Editor Insurance Managing Editor Penny Gusner Insurance Senior Writer Michelle Megna Insurance Lead Editor Get Life Insurance Pre-approval If you have any health or risk concerns, ask your insurance agent to provide you with a preliminary approval from a company underwriter before going through the entire application process. This can give you a stronger assurance that you will get the offer you were quoted and help you avoid any unwelcome surprises when the official offer comes back. Look Into Living Benefits I recommend looking at whether any of the policies you’re considering have living benefits . This feature lets you take money from your own death benefit if you develop a chronic or critical illness that qualifies. It’s a great way to access a pool of money later that you can use for unexpected medical bills or other expenses. I recommend comparing life insurance quotes from multiple companies. Find a good insurance agent or financial advisor who can gather quotes from multiple insurers. An experienced advisor will know which insurers are most likely to have competitive prices for your age and health. Look For Term Life Conversion If I’m looking for the best term life insurance, I’m going to shop mainly on price, but I’m also going to make sure the policy will let me convert to a cash value policy later on. This term life conversion option is a good way to hedge your bets. You may find you want a permanent life policy many years later, when buying a new policy could be cost-prohibitive. Consider Temporary Life Insurance You can usually attach a check to your term life application and get temporary life insurance while your application is being processed. If this option is available, why not take it and get peace of mind right away. Check Into a Waiver Of Premium Rider Consider adding a waiver of premium rider, depending on the cost. This rider will waive your life insurance payments if you become disabled and cannot work. Make sure to check the rules for what qualifies to use the rider. Compare Life Insurance Companies Compare Policies With 8 Leading Insurers Life insurance companies usually look at these factors that affect term life insurance rates . Ask an expert We Answer Your Questions I have a term life policy that expires in four years, but i have the option to convert to another policy. can i convert to another term policy. – Nick T., Long Beach, CA No, a term life conversion feature allows you to convert to a permanent life policy but not into another term policy. The insurance company determines which permanent policy or policies you can convert to. If you choose not to convert term life but you still need life insurance, you can  renew the existing policy (if it’s renewable) at a much higher premium or apply for a new term policy. If I give the insurance company all the personal and medical information they ask for, how do I know my privacy is protected? – Barbara W., San Jose, California I encourage you to review the privacy policy of any insurance company you consider. Most major life insurance companies publish a privacy policy that addresses what information is collected, why, how it’s protected and with whom they may share it. Is the longest term length always the best choice? – Jason R., St. Petersburg, Florida Life insurance quotes go up as we age. Generally speaking, it’s better to buy the longest-term option now because you can lock in the lower rate for longer. There may be situations when buying a longer term isn’t the best option, like if you know the financial obligation you want to cover will only be for a short time and you’re sure that other obligations won’t pop up. To find the best term life insurance, we used our own research and data provided by AccuQuote , a national online life insurance agency. AccuQuote has been in business for over 30 years and works only with insurance companies that have top financial strength ratings. We evaluated 20 companies on these measurements: Cost (80% of score): Because price is the primary concern of many term life insurance shoppers, we gave weight to this category. We scored costs based on each company’s rates for 30- and 40-year-old men and women for 10, 20 and 30 terms and for coverage amounts of $250,000, $500,000, $1 million and $2 million. Guaranteed renewability (10% of score): Companies earned points if their term life policies can be renewed at the end of the level term period. Term life conversion (10% of score): Companies earned points if their term life policies can be converted to permanent life insurance. Read more: How Forbes Advisor rates life insurance companies Looking For Term Life Insurance? Via Policy Genius' Secure Site   These basics help life insurance companies to determine your risk level.   Your health, including height, weight, prescriptions, medical conditions, smoking status, substance abuse history and the health history of your parents and siblings help insurers predict your life expectancy. Your results (if required) will also be assessed.   Life insurers consider infractions on your driving record, such as DUIs and reckless driving, when determining your risk level.   Major felonies and multiple felonies will often result in a decline   Risky hobbies like aviation and scuba diving can lead to higher rates or even a decline.   Life insurers sometimes use risk scores that consider credit and public records such as bankruptcies. Company Policy name Forbes Advisor rating Will taking a medical exam get me better term life insurance rates? Taking a medical exam can potentially lead to better term life insurance quotes. Traditional life insurance policies with medical exams are considered lower risk for the insurer and may result in better rates if you are in good health, especially when compared to more expensive options like guaranteed issue life insurance . But there are an increasing number of options for no-exam life insurance that have pricing that’s competitive with, or even lower than, policies that require a medical exam. What is the maximum age for term life insurance? The maximum issue age for term life insurance averages age 74, for a 10-year term life policy, according to a Forbes Advisor analysis of term life insurance companies. We found maximum issue ages ranging from 60 to 80. Do you lose money with term life insurance? If you outlive a term life insurance policy, you will “lose” all premiums paid during the term of the policy unless you purchased return of premium term life insurance . If you outlive a term policy, there is no death benefit payout. However, your money did pay for coverage during the policy term. What happens if you live beyond your life insurance term period? If you outlive your life insurance term period, you can often renew the policy at a much higher premium (if that option is available). Or you can shop for a new life insurance policy. If you don’t renew a term life insurance policy, your beneficiaries will not receive a death benefit payout if you die after the term expires. Learn More About Term Life Insurance What Is Term Life Insurance? Term Life Vs. Whole Life Insurance How Much Does Life Insurance Cost? Get Forbes Advisor’s ratings of the best insurance companies and helpful information on how to find the best travel, auto, home, health, life, pet, and small business coverage for your needs. Ashlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. When Ashlee isn't spreading insurance knowledge or solving television murder mysteries, she enjoys spending time with her family (including the furry and feathery ones) on their farm in Kentucky. Daniel Adams is the Founder and President of CEG Life Insurance Services. He has been an insurance agent for over 15 years. He works with more than 30 top life insurance companies to help people all over the country with comprehensive financial security solutions using insurance products. He also supports and assists other financial professionals with insurance advice and products for their clients.   He has been an expert contributor at Forbes, CBS News, CNBC, USA Today and other media organizations. 354 IMAGES 27+ Payment Terms Templates With Agreement Conditions Sample 16+ Payment Plan Agreement Templates 22+ Payment Plan Templates Payment Plan Agreement Template Free Payment Plan Agreement Template Free Printable Payment Agreement COMMENTS Payment Terms: How to Use Them for Small Business Net payment: Typically appears as Net 7, 10, 15, 30, 60, 90 or N/7, etc. The number refers to the number of days the client has to pay the total amount; "net" refers to the total after any ... Payment Terms: Examples and How to Use Them on Invoices 2/10 Net 30. If you want to offer clients a discount as an incentive for paying an invoice early, you can add those details to your net terms. In this case, 2/10 Net 30 means a client will receive a 2% discount if they pay by the 10th day from the invoice date. Otherwise, payment is due by the 30th day. What are Invoice & Payment Terms? Payment terms are an agreement that outlines how, when, and by what method your customers or clients provide payment to your business. When you're running a business, it's critical that payments owed to you are paid in a timely manner to keep your own bills paid and the lights on. Business owners, self-employed workers, and individuals tasked ... 15 Accounting Payment Terms and How to Work With Them EOM: EOM means payment is due at the end of the month the invoice was received. 15 MFI: If you see 15 MFI, payment is due on the 15th of the month following the invoice date. 2/10 Net 30: This ... What are payment terms? Invoice and payment terms for small businesses Common payment terms. Let's review some of the most common words and acronyms that small business owners should be aware of when generating invoices: PIA: Payment in advance. Net 7, 10, 15, 30, 60, or 90: Payment expected within 7, 10, 15, 30, 60, or 90 days after the invoice date. EOM: End of month. Payment Terms: The Ultimate Guide to Boost Cash Flow Payment terms are essential in any business transaction as they define the cash flow cycle. ... Payment plan details; Accepted payment methods; The payment terms on the invoice must match those in the contract. B2C and eCommerce businesses have a "Terms and Conditions" page instead of a contract. Payment Terms: Definition, Examples, Types Payment terms are crucial in streamlining business-to-business (B2B) sales interactions. Unlike consumer transactions, in which payments often occur upfront and with an immediate exchange for goods, B2B deals typically involve a delay between the delivery of the product and the actual payment. ... Payment plan details; Accepted payment methods ... Invoice payment terms: tips and examples Here are types of payment terms for businesses: Net 7, 10, 15, 30, 60, or 90: With this payment term, payment is expected within 7, 10, 15, 30, 60, or 90 calendar days from the invoice date. 2/10 Net 30: When you give customers a 2/10 Net 30 payment term, you're telling your customer that although the invoice is due in 30 days, you'll give them ... Invoice Payment Terms: A Guide to Get Paid Faster Typically, the payment is due on the 15th or the 30th of the month. 11. Net 7/10/30/60/90. Net Payment terms outline the amount of time a client has to make a payment—for example, 7, 10, 30, 60, or 90 days. Clients are welcome to pay sooner, but the net payment day is the latest allowable payment day. What are payment terms? Before we dive deeper into payment terms, let's review some of the most common payment terms that small business owners should keep in mind when generating invoices. PIA: Payment in advance. Net 7, 10, 15, 30, 60, or 90: Payment expected within 7, 10, 15, 30, 60, or 90 days after the invoice date. EOM: End of month. How to State Invoice Payment Terms (with Example/Template) If you require faster payment, swap "net 30" for "net 15" or even "net 10.". To incentivize faster payments net terms are combined with a discount. For example: Terms: 5% 10 net 30. If you pay within 10 days, we'll discount this invoice 5%, or you can pay the full amount due within 30 days. Line of credit. Invoice Payment Terms: What are They and How do They Work? 1MD, 2MD: Monthly credit payment of a complete month or two months. 21 MFI: 21st day of the month following the date of invoice. Net 7, Net 10, Net 15, Net 30, Net 60, or Net 90: Payment expected within a week, 10 days, 15 days, 30 days, 60, or 90 days post the invoice date. Stage payments are pre-determined by the buyer and the seller and ... 15 Common Invoice Payment Terms and Conditions Explained Your invoice payment terms and conditions act as a basic contract between your company and the customer. In the B2C sector, these are often intuitively enforced by your store's or e-shop's set-up (i.e., payment gates, registers, etc.) and common sense. Some outliers apply, like return policies, but that's about the extent of it. 21 Payment Terms for Small Businesses 4. 50/50 Payment Term. A 50% upfront payment means you require customers to pay half of the total cost as a deposit before you start working on the task. This payment term is common for longer-term projects and minimizes your risk as a small business owner. 5. Deposit Required. Payment Terms: Definition, Examples and Best Practices 30 days payment terms are often referred to as net 30 on invoices. This means that customers are granted a payment period of 30 calendar days (not working days). The shortest form on a bill looks like this: "Payment terms: net 30". Instead of 30 days, you can also give your customers a shorter or longer payment term, for example net 14 or net 60. Mastering Contract Payment Terms for Business Success Key facts. Definition of Contract Payment Terms: These are the agreed-upon terms of payment between a business and its customers. Importance of Clear Payment Terms: Clear payment terms reduce the likelihood of late payments and foster trust in business relationships. Common Types of Payment Terms: Examples include net 10, net 15, net 30, net 60 ... How to Decide the Payment Terms for Your Small Business The industry standard for payment is NET 30 which means the customer pays their bill within 30 days after receiving an invoice. To speed up payment, some small business owners choose payment terms of NET 15, NET 7, or cash on delivery or COD (which means getting paid immediately). #DidYouKnow If the payment is required immediately or if the ... Payment Terms and Conditions Templates (That you can copy!) The right payment terms can foster positive business relationships, maintain healthy cash flows, and mitigate financial risks. Technological advancements have further simplified managing payment terms and conditions. Tools like invoice reminder software not only automate the process but also save time, reduce errors, and improve overall ... Payment terms Offering credit means giving your customers goods or services upfront without payment. If a customer buys on credit, they owe your business a debt. Standard terms of credit include: no credit. 7 days to pay. 21 days to pay. 28 days to pay. Offering credit increases your sales. But it can be risky if your customers don't or can't pay their ... Guide to Negotiating Payment Terms With Your Vendors From creating a plan to knowing exactly what to ask for, there are several ways to effectively go about negotiating payment terms when your business is struggling. — Getty Images/jeffbergen Maybe you're seeking to free up a little capital for a new product launch. Or maybe you're needing to expand your operations and need to change your ... How to Pick the Best Payment Terms for Your Invoice 2/10 Net 60. This is similar to the previous payment terms. If you make it clear that your bill has net 60 payment terms, and you have 2/10 written before it, this implies that a 2% discount will be given within the first 10 days of payment. You can increase this percentage and even add discounts as the days grow if you want to. Guide to Negotiating Payment Terms with Your Vendor There's an art to negotiating your payment terms to get what you want. But before you head into a conversation with your manufacturer about your payment terms, make sure you understand all the aspects and complexities of your financial situation that will drive your negotiations. #1. Cash flow. When you get a new shipment of inventory, the ... Cox School of Business: Tuition, Fees and Financial Aid The SMU Prepayment Plan (a single payment up front for all terms) allows families to avoid the effects of tuition and fee increases by paying for two, three or four years in one single payment at the current rate of tuition and fees for an undergraduate full-time (12-18 credit hours) student. Motorola Explore Motorola - razr+ 2024 business features, specs, models, and pricing. Call us at 1-877-590-4728 to learn more about T-Mobile for Business plans and services! Our Best Unlimited Data Cell Phone Plans: Compare Go5G Plan Deals It's easy to get unlimited talk, text, and data with any Go5G phone plan. Compare low pricing & benefits. Find the best plan for you & your family today. ... which you can use online or in-store via accepted mobile payment apps, typically within 15 days. ... Use of this card constitutes acceptance of the terms and conditions stated in the ... U.S. Department of the Treasury Announces Up to $83 Million in American Unprecedented collaboration between Tribes has generated the largest small business financing consortium in the country.WASHINGTON - Today, the U.S. Department of the Treasury announced the approval of up to $83 million in State Small Business Credit Initiative (SSBCI) funds for a consortium of 125 Alaska Tribes. Funded by the Biden-Harris Administration's American Rescue Plan (ARP), this ... What are Payment terms? Types of payment terms. Setting up an invoicing process with detailed payment terms is an essential part of business accounting. Payment terms make your payments a priority and set expectations for your customers, making client relationships feel more professional and productive. Once you have the payment terms nailed down, the next step is to think about how you could accept these different ... Forbearance Guidance: Servicing Guide D2-3.2-02: Repayment Plan; Payment deferral: Resuming the regular monthly payment and repaying the entire deferred balance all at once at the end of the loan (or when the home is sold, or the loan is refinanced or otherwise paid off). Guidance: Servicing Guide D2-3.2-05 Payment Deferral Best Term Life Insurance Companies: Expert-Rated In 2024 The average monthly cost for a $500,000 term life insurance policy for a buyer age 40 is $19 for a 10-year term, $28 for a 20-year term and $48 for a 30-year term. That's $228 to $576 per year ... 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