Payment Terms Explained: Net 30, Net 60, Due on Receipt, and More

February 13, 2026

If you've ever seen "Net 30" on an invoice and wondered what it means, you're not alone. Payment terms are the rules that govern when and how a client should pay an invoice. They're standard in business, but they're not always explained in plain English.

Here's a complete guide to the most common payment terms, what they mean, and how to choose the right ones for your business.

Common Payment Terms

Term	What It Means
Due on Receipt	Payment is expected immediately when the invoice is received
Net 15	Payment is due within 15 days of the invoice date
Net 30	Payment is due within 30 days of the invoice date
Net 60	Payment is due within 60 days of the invoice date
Net 90	Payment is due within 90 days of the invoice date
2/10 Net 30	2% discount if paid within 10 days; otherwise, full amount due in 30 days
EOM	Payment due at the End of Month when the invoice is received
COD	Cash on Delivery — payment due when goods/services are delivered
CIA	Cash in Advance — payment due before work begins
50% Upfront	Half the total paid before work starts, the rest on completion

What Does "Net" Mean?

"Net" simply means the total amount is due within the specified number of days. So "Net 30" means the full invoice amount is due within 30 calendar days of the invoice date.

The clock starts on the invoice date, not the date the client receives or opens the invoice. This is why it's important to date your invoices accurately.

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How to Choose the Right Payment Terms

For Freelancers and Solopreneurs

If you're a one-person business, cash flow is critical. You can't afford to wait months for payment. Recommended terms:

Small projects (<$1,000): Due on Receipt or Net 15
Medium projects ($1,000–$5,000): Net 15 or Net 30
Large projects ($5,000+): 50% upfront + Net 15 on completion

For Small Businesses

If you have a team and regular expenses, predictable cash flow matters even more:

Regular clients: Net 30 is the standard and keeps things simple
New clients: Net 15 or Due on Receipt until trust is established
Enterprise clients: May request Net 60 or Net 90 — consider whether you can afford the wait

For Enterprise and B2B

Larger companies often have fixed payment cycles (e.g., they process payments on the 1st and 15th). Common terms:

Net 30: The industry standard
Net 60: Common for larger enterprises with longer AP cycles
2/10 Net 30: Incentivizes early payment while allowing the standard 30-day window

Early Payment Discounts

The "2/10 Net 30" format is a way to encourage faster payment. It means: "Take a 2% discount if you pay within 10 days, otherwise the full amount is due in 30 days."

You can customize these numbers. For example:

1/10 Net 30: 1% discount for payment within 10 days
3/15 Net 45: 3% discount for payment within 15 days, otherwise due in 45

Early payment discounts work well when your margins are healthy enough to absorb a small percentage cut in exchange for faster cash.

Late Payment Fees

You can add a late fee clause to your invoices and contracts. Common approaches:

Flat fee: "$25 late fee applied after due date"
Percentage: "1.5% monthly interest on overdue balances"
Escalating: "5% surcharge after 30 days, 10% after 60 days"

Late fees need to be agreed upon in advance — you can't retroactively add them. Include them in your contract or initial agreement. In practice, the threat of a late fee is often more effective than actually charging one.

Tips for Getting Paid On Time

Invoice immediately: Don't wait days or weeks after completing work
Use clear due dates: "Due February 28, 2026" is better than "Net 30"
Make it easy to pay: Include bank details, a payment link, or accept multiple methods
Send reminders: A friendly nudge a few days before the due date works wonders
Establish terms upfront: Discuss payment timing before you start work, not after
Bill in milestones: For larger projects, don't wait until the end to invoice

The right payment terms balance your need for timely cash flow with your client's expectations. Start with shorter terms (Net 15 or Due on Receipt) when you're building a relationship, and adjust as trust is established.

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