What does Net 30 mean on an invoice?

Net 30 means the invoice balance is due within 30 days of the invoice date, offering a short credit window for payment.

What is Due on Receipt and when should it be used?

Due on Receipt requires immediate payment when the invoice is received; it is useful for one-off services, new clients, or when fast payment is necessary to protect cash flow.

Invoice Payment Terms: Net 30, Due Upon Receipt And More

Learn standard invoice terms, what it means for your cash flow and some practical advice on when to use which invoicing term to save yourself from going bankrupt.

In addition to amounts, invoices bear expectations. Transparent invoice payment terms establish when payment must be made, if any prompt pay discounts or late fees ever apply and what to do with disputes. Freelancers, small business owners and anyone who sends invoices needs to know the lingo—common terms like Net 30 and Due on Receipt are important for steady cash flow and friendly relationships.

Common invoice payment terms explained

Net 30 (and other “Net” terms)

Net 30 is when the invoice balance must be paid within 30 days of receiving the invoice. Variances exist, such as Net 7, Net 15, Net 45 and Net 60. These are the terms under which a buyer is given an actual short-term credit window: I get stuff now, and pay for it later. Net terms is a common approach when sellers wish to offer standard credit but would like to set payment timing.

Pros: Net terms may make your offer more compelling and support larger orders. They are easy to grasp and straightforward to follow.
Cons: You incur cash flow shortfall by extending credit. If a lot of clients are Net 30 or more, you might be waiting weeks for revenue while your expenses roll on.

Due on Receipt (or Due Upon Receipt)

On Receipt indicates that payment should be made straight away upon delivery of the invoice to the buyer. It’s a frequently used tool for one-off projects, retainer invoices or clients who have an established prompt payment record.

Pros: Faster payment upon enforcement, fewer aged receivables and less administrative hassle.
Cons: Some customers may still be slow to pay; “receipt” can be confusing from their point of view, unless the invoice date and medium of delivery are specified.

Partial Payments and Milestones

For lengthier projects, milestone billing (or staged payments) divide the total amount into smaller pieces that are due at specified intervals. This minimizes exposure for the seller and takes away the temptation for clients to prolong paying the last, big check.

Pros: Minimizes cash flow risk on a project and pays for work as it’s delivered.
Cons: Needs a clear scope definition and robust change-order processes to prevent disputes.

Discounts for Early Payments and Penalties for Late Payments

If you pay quickly, many companies will give you a discount — for example, 2% if paid in 10 days (known as 2/10 Net 30). On the contrary, late fees are penalizing charges designed to reduce slow payers of outstanding invoices.

Pros: It can speed up cash receipts when discounts are offered, and late fees discourage chronic late payers.
Cons: Discounts will cause a small reduction in revenue; late fees need to be reasonable and disclosed upfront, as well as legally possible for your locale.

COD and Prepay COD (Cash on Delivery) or Prepayment

COD: Cash on delivery COD is a method of paying for goods and services at the time they are delivered. Prepayment and deposits request money in advance of work. Both methods remove credit risk but may also dampen buyer appetite for big-ticket items.

Pros: Eliminates accounts receivable risk.
Cons: Can turn away customers or make high-ticket sales difficult.

Key considerations when choosing terms

Cash flow requirements: If your company operates on thin margins or has short payment cycles with suppliers, shorter terms or deposits should be at the top of your list to ensure liquidity.
Client relationship: Established, dependable clients perhaps deserve more flexible terms. Deposits or more restrictive terms may be required from at-risk or new clients.
Industry standards: Conforming to what is standard in your field can make your terms more palatable and reduce the friction of negotiation.
Capacity to manage: You would need robust billing systems to keep track of several payment schedules. Less complex terms are more manageable for small teams.

Money saving ideas to preserve cash flow

Be specific about the terms: Include the date of the invoice, when it is due, methods of payment and any discounts or late fees. Clarity reduces disputes and excuses.
Use the same language: If you’re selecting Net 30, always specify whether from invoice date or delivery date. Consistency avoids confusion.
Demand Deposits from new clients, or large jobs: This ensures even a 20–50% payment upfront for large projects — reducing exposure and planting a flag that the client is committed.
Provide payment methods: It should be easy for clients to make a payment quickly, which is why you want to offer the most popular payment methods and provide clear instructions on the invoice.
Follow up quickly and courteously: A gentle reminder a week before payment is due, or on the day of payment due, often prevents late payments.'Automate reminders and collections: Baked-in scheduled reminders and an escalation plan for past due invoices keep the books straight while leaving your relationships intact.
Track aged receivables Keep track of unpaid invoices by age (30, 60, 90+ days) to focus collection efforts and gauge credit risk.

Negotiation and documentation

Payment terms are negotiable. At the time of contract negotiations, be prepared to articulate why you have structured your terms as you have — for example a deposit helps with reserving resources or Net 30 is crucial for volume discounting. Document agreed upon changes, and include payment terms on every invoice to avoid future misunderstanding.

Handling disputes and late payments

Resolve disputes promptly: an obvious process for resolving disputes decreases the time it takes to get paid. If a customer disputes an invoice, separate out the disputed part and collect what’s uncontested while working through on the remaining.

For chronic late payers, escalate slowly: Send reminders, apply the agreed-upon late fee, negotiate a payment plan if you need to and consider collections as a last resort. Record all communications and be professional — sometimes retaining the business relationship is worth more than pursuing immediate enforcement.

When to change your terms

Review their terms annually or even more frequently after growth or tight cash flow phases, a string of late payments, etc. Maybe it’s time to reduce the payment terms, ask for a deposit or build in the costs of longer receivables. On the other hand, if faster payments are consistently coming in the door, you might provide some small discounts to incentivize volume.

Conclusion

Invoice payment terms such as Net 30 and Due on Receipt aren't just used to specify due dates, they are also the most powerful tool you have to get cash flow when dealing with slow-paying clients. Pick terms that balance competitive advantage with risk management, document them clearly and have systems in place (such as deposits, milestone billing, periodic reminders and aging reports) to keep money moving and relationships positive. When you have transparent terms and stick to them, invoicing is a means of stability for your freelance business rather than something that keeps you awake at night.