Invoice Payment Terms Explained
Guide • Canada • last updated October 2026
What Net 30, Net 15 and due on receipt mean, how to choose the right terms, and how clear terms get you paid faster.
Payment terms tell a client when and how to pay. The right terms are one of the simplest ways to get paid faster. This guide explains the common terms, how to choose, and how discounts and late fees change behaviour. Set the exact due date with the due date calculator.
Common terms (Net 30, Net 15, due on receipt)
Net 30 means payment is due 30 days after the invoice date. Net 15 halves that. Due on receipt means pay now. Shorter terms get money in sooner but can feel aggressive to large clients with set payment cycles, so match the term to the relationship.
- Due on receipt: best for small jobs and new clients.
- Net 15: a good default for freelancers and small business.
- Net 30: standard for larger clients and B2B.
How to choose your terms
Think about your cash flow and the client's. If you need predictable income, shorter terms and deposits help. For bigger clients, Net 30 may be required to win the work, so price that delay in. Whatever you choose, state it clearly on the invoice.
Early-payment discounts
A small discount for paying early, such as 2% off if paid within 10 days, can pull payments forward. It costs a little margin but improves cash flow and reduces chasing. Model it with the discount calculator.
Late fees for missed terms
A stated late fee, a flat amount or a percentage per month, gives clients a reason to pay on time. Keep it reasonable and disclose it on the invoice and in your agreement. Work out the amount with the late fee calculator or the interest calculator.
A worked example
You invoice $1,500 on Net 15 with a 2% monthly late fee and a 2% discount for payment within 5 days. A client who pays in 4 days pays $1,470. One who pays 30 days late owes about $1,530.
How terms affect your cash flow
Terms are not just etiquette; they decide when money hits your account. Moving a client from Net 30 to Net 15 can cut your average collection time in half, which for a small business is the difference between making payroll comfortably and scrambling. Think of each term as a short, interest-free loan you are extending to the client, and price longer terms accordingly.
Deposits and milestone terms
For larger engagements, combine terms with a deposit and milestones. A 30% deposit due on acceptance, 40% at the midpoint, and the balance on completion keeps cash flowing and limits your exposure if a client goes quiet. State each milestone and its trigger clearly so there is no debate about when each invoice is due.
Making your terms enforceable
Terms carry more weight when they appear in two places: your written agreement or engagement letter, and the invoice itself. Identical wording in both, including any late fee or interest, makes them far easier to enforce if a payment is disputed. Agree them before the work starts, not after the first late invoice.
Common terms and what they signal
- Due on receipt: you expect prompt payment; good for new or small clients.
- Net 7 / Net 15: brisk but reasonable for freelancers and small business.
- Net 30: standard for corporate clients with set payment runs.
- 2/10 Net 30: a 2% discount if paid within 10 days, otherwise due in 30.
A worked example with a discount and a fee
You invoice $4,000 on 2/10 Net 30 with a 1.5% monthly late fee. A client who pays within 10 days pays $3,920. One who pays 30 days past due owes about $4,060. The structure quietly rewards speed and discourages drift, without you having to chase.
Terms for different kinds of clients
One size does not fit all. New clients and small jobs suit due-on-receipt or short terms that limit your risk. Established, reliable clients can have Net 30 as a courtesy. Large organizations often impose their own payment cycles, so build that delay into your pricing rather than fighting it. Set the term to the relationship and the risk, not out of habit.
Communicating terms up front
Terms land best when they are no surprise. State them in your proposal or engagement letter, confirm them before the work starts, and repeat them on the invoice. A client who agreed to Net 15 in writing rarely argues about it later, and you have a clear record if they do.
When to tighten or loosen terms
Review your terms as your cash position and client mix change. If late payments are hurting cash flow, shorten terms, add deposits, or enforce the late fee you already disclosed. If you are chasing a large, dependable client, a slightly longer term can be a reasonable concession, as long as the price reflects it.
Frequently asked questions
What does Net 30 mean on an invoice?
Net 30 means the full payment is due 30 days after the invoice date. Net 15 means 15 days, and due on receipt means pay immediately. Shorter terms get you paid sooner, so match the term to the client and your cash-flow needs.
What are the best payment terms for a small business?
For freelancers and small businesses, Net 15 or due on receipt usually work well because they bring money in faster without seeming unreasonable. Larger corporate clients often require Net 30 to fit their payment cycles, so build that delay into your pricing.
Can I charge interest or a late fee on overdue invoices?
Yes, if you disclosed it in your terms before the work and it is reasonable. A flat fee or monthly interest, stated on the invoice and in your agreement, encourages on-time payment. Keep it fair and apply it consistently.