What payment terms actually do
Payment terms set the deadline. They also set the floor for how aggressively you can chase late payments and whether you can charge statutory interest. Vague or missing terms weaken every step that comes after.
Always state the terms explicitly on every invoice — even when both sides 'know' them. Memory is a poor substitute for a written deadline.
The terms most small businesses should use
There is no universally correct answer, but the patterns below cover the majority of small business situations.
- New customers, small invoice: Due on receipt or Net 7. You do not know if they pay yet — find out fast.
- New customers, larger invoice: Deposit up front (25–50 percent), balance Net 14 or Net 30 on completion.
- Established customers with a payment track record: Net 14 or Net 30 — match what their accounts team can actually process.
- Enterprise customers: Net 30 or Net 60 — usually mandated by their procurement system, rarely negotiable.
- Subscription or retainer: Monthly in advance, due on the first of the period.
How to negotiate when the buyer wants longer terms
Large buyers often request Net 60 or Net 90 as a default. Pushing back costs you the deal in some cases and saves you cashflow in others. The middle ground is usually a discount for early payment — for example, '2/10 Net 60' (a 2 percent discount if paid within 10 days, otherwise the full amount in 60).
Some buyers will take the discount; others will pay at day 60. Either way you are no worse off than agreeing to Net 60 with no early-payment lever.
Evolving terms as the business grows
Most small businesses start with shorter terms (Net 7 or Net 14) and lengthen them as they win larger customers. That is fine, but the change should be deliberate. Every shift from Net 14 to Net 30 doubles the working capital you need to fund the gap between doing the work and getting paid.
When you change terms, change them for new customers first. Existing customers can stay on their current terms until a natural break (renewal, contract change, year end).
Common mistakes
Three mistakes show up over and over. First, agreeing to terms verbally and not putting them on the invoice. Second, defaulting to Net 30 because it 'sounds professional' when Net 7 would be fine for a small consumer invoice. Third, forgetting to charge interest or apply late fees that were in the terms — which trains the buyer to ignore the terms next time.