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Net 30, Net 60, Due on Receipt — Payment Terms Explained

A complete guide to invoice payment terms: what each term means, when to use them, how to calculate due dates, and the late fee language that actually gets invoices paid.

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Payment terms are a business and legal matter. Consult an attorney or accountant for terms involving contracts worth significant sums.

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Formula

The math behind the result

Due date = invoice date + net days

Early-pay discount: 2/10 Net 30 = 2% off if paid within 10 days

Late fee: principal × (annual rate ÷ 12)

How it works

A clean flow from input to answer

  1. 1Choose a payment term that matches your client relationship and cash flow needs.
  2. 2Put the term clearly on every invoice — due date, late fee rate, and early-pay discount if offered.
  3. 3Follow up the day before the due date with a friendly reminder to prevent late payments.

FAQ

Common questions

What does Net 30 mean on an invoice?

Net 30 means the full invoice amount is due within 30 calendar days of the invoice date. It's the most common payment term for B2B invoices in the US.

What does '2/10 Net 30' mean?

It means the client can take a 2% discount if they pay within 10 days — otherwise the full amount is due within 30 days. It's an incentive to pay early.

What is 'Due on Receipt'?

Due on Receipt (or Due Upon Receipt) means payment is expected immediately when the invoice is received. Common for retail, quick services, and new client relationships.

Which payment terms should I use as a freelancer?

Due on Receipt or Net 7 for new clients. Net 14 or Net 30 for trusted clients. Avoid Net 60 or Net 90 unless you have strong cash reserves or are dealing with large corporations.

How much should I charge for late fees?

1.5% per month (18% APR) is the most common late fee for freelancers and small businesses. It's high enough to motivate payment but not punitive enough to destroy client relationships.

Related

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What Are Invoice Payment Terms?

Payment terms define when a client must pay an invoice. They appear on every professional invoice and determine your cash flow, your client relationships, and how quickly you can pay your own bills.

The most common formats are Net [days] (e.g., Net 30, Net 60) and Due on Receipt. Some include early-payment discounts: 2/10 Net 30 means a 2% discount if paid within 10 days, otherwise full payment due in 30.

Common Payment Terms Explained

TermDue dateBest forRisk level
Due on ReceiptImmediatelyRetail, new clients, quick servicesLowest
Net 77 daysFreelancers, small projectsLow
Net 1515 daysService businesses, regular clientsLow–Medium
Net 3030 daysStandard B2B, trusted clientsMedium
2/10 Net 3030 days (2% off if paid in 10)Encouraging early paymentMedium
Net 6060 daysLarge corporations onlyHigh
Net 9090 daysEnterprise/government (avoid)Very High

How to Calculate a Due Date

For Net 30, count 30 calendar days (not business days) from the invoice date. If you invoice on May 1, payment is due May 31. Use the Payment Terms Calculator to get the exact due date and any early-pay discount deadline.

Which Payment Terms Should You Use?

The right payment term depends on three factors:

  1. Your cash flow. If you have thin reserves, Due on Receipt or Net 7 protects you. Net 30 means waiting a month before you can pay your own bills.
  2. Your client relationship. New clients get tighter terms. Trusted long-term clients can get Net 30 as a courtesy.
  3. Industry norms. Advertising agencies expect Net 60. Restaurants expect Net 7. Match the norm or negotiate explicitly.

Late Fee Language That Actually Works

Adding a late fee clause to every invoice dramatically reduces late payments. Use this language:

"Invoices unpaid after [due date] are subject to a late fee of 1.5% per month (18% annually) on the outstanding balance."

Calculate the first month's late fee: if a $2,000 invoice goes unpaid, the late fee is $2,000 × 1.5% = $30. Small enough to not destroy the relationship, large enough to motivate payment.

Use the Late Fee Calculator to calculate the exact amount owed for any overdue invoice.

How to Get Invoices Paid Faster

  1. Send the invoice immediately. Waiting until end of month to invoice is a habit that costs you weeks of cash flow.
  2. State the due date explicitly. Write "Payment due: June 1, 2026" — not just "Net 30." Clients read the date, not the formula.
  3. Send a reminder the day before. A friendly "Just a heads up, this invoice is due tomorrow" email catches most late payments before they happen.
  4. Accept multiple payment methods. The harder it is to pay, the longer it takes. Accept ACH, card, and wire.
  5. Require a deposit on large projects. Ask for 25–50% upfront on any project over $2,000. This funds your work and filters out bad-faith clients.

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