Invoice Payment Terms Decoded: Net 30, Net 15, and More

Establishing clear invoice payment terms is vital for maintaining a healthy business. These terms specify how quickly a customer must pay and the penalties for missing that window. Let's decode the most common billing terms and help you decide which is right for your operation.

What Do the Codes Mean?

Here is a breakdown of the standard shorthand terms used on commercial invoices:

• Due on Receipt: The client is expected to pay immediately upon receiving the invoice. Best for retail, first-time clients, or digital delivery.
• Net 15 / Net 30 / Net 60: The number represents how many calendar days the client has to pay from the invoice date. "Net 30" is the standard in corporate billing.
• COD (Cash on Delivery): Payment must be made at the exact time goods or services are delivered. If payment isn't made, the delivery is withheld.
• EOM (End of Month): The invoice payment is due at the end of the calendar month in which the invoice was issued.

How to Choose the Best Terms

Shorter payment terms (like Net 15 or Due on Receipt) keep your bank account filled but might put strain on your clients. Longer terms (Net 60 or Net 90) are common with massive enterprise clients but can cause cash flow droughts for small businesses. We recommend starting with Net 15 or Net 30 for most standard services.