Payment terms: Net 30, due on receipt, and late fees

“Payment terms” is the polite name for the least polite question in business: when do I get my money? The phrases are standardized — Net 30, due on receipt, 2/10 Net 30 — but choosing between them, and enforcing them, is where freelancers and small businesses quietly lose weeks of cash flow. Here’s what the terms mean and how they behave in the real world.

The vocabulary

Net N means the full amount is due N days after the invoice date — not after the client first reads it, and not after the end of the month. Net 30 is the corporate default; Net 15 and Net 7 are common for smaller engagements; Net 45, 60, and even 90 appear at enterprise scale, where your invoice enters a scheduled payment run rather than being paid by a human deciding to pay it.

Due on receipt means what it says: pay when the invoice arrives. In practice it means “pay within a few days without being rude”, and it’s the right default for one-off consumer work — a repair, a session, a delivery — where there is no ongoing relationship to schedule around. For business clients it can read slightly abrupt; Net 7 buys the same speed with better manners.

Discount terms like 2/10 Net 30 offer a trade: 2% off if paid within 10 days, otherwise the full amount in 30. Big customers’ AP systems genuinely do chase early-payment discounts, so it can work — but do the arithmetic before offering it. 2% for 20 days of acceleration is roughly a 36% annualized rate; that’s expensive money if you didn’t need it.

EOM terms (“Net 30 EOM”) start the clock at the end of the invoice month. Some industries run on them; unless yours does, plain Net N with an explicit due date printed on the invoice is harder to misread. The generator computes and prints the actual date for you.

Choosing terms like it matters (it does)

The pattern that serves most independent businesses:

• New client, first project: part of the fee up front — a third to a half is normal in creative and trade work — with the balance due on delivery or Net 7. The deposit isn’t really about the money; it screens for clients who pay at all.
• Established relationship: Net 14 or Net 30, whatever you agreed, invoiced immediately on delivery. The clock starts at the invoice date, so every day you delay sending is a day of float you donated. Send the invoice the day the work ships.
• Corporate clients: they will mostly pay on their cycle regardless of your terms. Your leverage is procedural, not rhetorical: get the PO number before starting, invoice the correct entity at the correct AP address, and match the engagement letter exactly. A consulting-style invoice that fits their machine gets paid by the machine.
• Ongoing retainers: invoice on the same day each month, in advance for reserved capacity or in arrears for metered work. Predictability, not pressure, is what keeps retainers renewing.

Late fees: the honest picture

The convention in the US is 1% to 1.5% per month on overdue balances (some businesses charge 2%); the enforceable ceiling is set by state usury and late-fee law, which varies — staying at or under 1.5% monthly keeps you inside most states’ comfort zone, but check yours if you plan to lean on the fee. Two rules make a late fee real rather than decorative:

1. It must be agreed in advance. A fee that first appears on an overdue notice is a request, not an obligation. Put it in the contract or engagement email, then restate it in the invoice notes — “Overdue balances accrue 1.5% monthly, per our agreement.”
2. You must be willing to apply it. A fee threatened and never charged trains clients that your due date is soft. Many freelancers use it asymmetrically: charge it to chronically late payers, waive it (visibly, once) for good clients having a bad month.

The UK goes further than convention: the Late Payment of Commercial Debts (Interest) Act gives businesses a statutory right to interest and fixed compensation on late commercial payments — no contract clause needed, though stating it on the invoice helps. Several other jurisdictions have similar regimes. If your clients are abroad, it’s worth ten minutes learning what your law gives you for free.

But the honest picture is this: fees are the third-best tool. Deposits and early invoicing prevent lateness; fees only price it. A client who won’t pay the invoice was never going to pay the invoice plus 1.5%.

What the invoice itself should say

Whatever terms you choose, the invoice should carry three things: the terms by name (“Net 30”), the computed due date (“Due August 17, 2026”), and the payment method spelled out completely. Ambiguity is the enemy — every question a finance person has to ask you is a payment-run they might miss. The field-by-field guide covers the rest of the document, and if the money still doesn’t arrive, here’s the escalation path — polite, then firm, then formal.