Payment terms are the conditions a seller sets for being paid. They say when payment is due, how much is due up front, whether the balance can be paid in installments, which payment methods are accepted, any discount for paying early and any fee for paying late. Common terms include due on receipt, net 30, 2/10 net 30 and a deposit with the balance on a schedule. Put them in writing before the work starts, on the quote or contract, and repeat them on every invoice.
What are payment terms?
Payment terms are the part of a sale that covers the money: when, how much and how. They live on the quote, the contract and the invoice. Clear terms prevent the most common collection problem, which is a customer who didn't know what was due or when.
What should payment terms include?
- When payment is due. A date, or a rule like net 30.
- How much is due up front. A deposit, as a dollar amount or a percent.
- How the rest is paid. In full, in stages of the work, or in installments on a schedule.
- Accepted payment methods. Card, bank transfer (ACH), check, wire.
- Card fees. Whether a surcharge applies to card payments, where your state allows it.
- Early-payment discount. If you offer one.
- Late fees. The amount and when it applies, if you charge one.
- What happens on a missed payment. Who contacts the customer, and how the shortfall gets paid.
What are the common payment terms?
| Term | What it means |
|---|---|
| Due on receipt | Pay when the invoice arrives |
| Net 15 / 30 / 60 | Pay the full amount within 15, 30 or 60 days of the invoice date |
| 2/10 net 30 | Take 2% off if paid within 10 days, otherwise the full amount in 30 |
| Net 30 EOM | Pay within 30 days of the end of the invoice's month |
| CIA (cash in advance) | Pay before the work starts or the goods ship |
| Deposit and balance | Part up front, the rest at a set point |
| Progress billing | Billed in stages as the work is done |
| Installments | The total split into scheduled payments |
A worked example: deposit plus installments
A business sells a $14,800 program on these terms:
- $1,500 deposit due at signing
- 12 monthly payments starting the 1st of next month: 11 of $1,108.33 and a last one of $1,108.37
- Card or bank transfer accepted, with a card surcharge where the state allows it
- Payments charged automatically on the due date
Check the math: $1,500 + 11 × $1,108.33 + $1,108.37 = $1,500 + $12,191.63 + $1,108.37 = $14,800.00.
A worked example: 2/10 net 30
A $10,000 invoice on 2/10 net 30 can be paid as $9,800 within 10 days ($10,000 minus 2%), or as $10,000 by day 30. See net 30 for what that discount costs the seller.
How do you choose payment terms?
Start from your cash. The longer the terms, the longer you carry the cost of the sale before you are paid. Then look at the customer. Businesses expect net terms. Individuals buying a large service usually need a deposit and a schedule they can afford. Whatever you choose, keep these habits:
- State the terms before the customer commits, not on the first invoice.
- Print an actual due date on every invoice, not just "net 30."
- Apply the terms the same way to every customer, and write down any exception.
Plain-language definitions. The amounts are worked examples, not rules.
Every figure on this page was checked against these sources on Oct 6, 2026. General information, not legal or tax advice.