What Are Payment Terms?
Payment terms are the conditions under which you expect to be paid. They specify the deadline for payment, any early payment discounts, and late payment penalties. Clear payment terms reduce disputes, accelerate payment, and protect you legally.
Common Payment Term Abbreviations
The term "Net" followed by a number means the payment is due within that many days from the invoice date:
- •Net 7 — payment due within 7 days (aggressive, used for small jobs or new clients)
- •Net 14 — payment due within 14 days (standard for freelancers)
- •Net 30 — payment due within 30 days (standard for corporate clients)
- •Net 60 — payment due within 60 days (large enterprise standard)
- •Due on Receipt — payment expected immediately
- •EOM — End of Month (payment due at the end of the month the invoice is issued)
- •2/10 Net 30 — 2% discount if paid within 10 days, otherwise full amount due in 30 days
Which Payment Terms Should Freelancers Use?
Net 14 is the sweet spot for most freelancers. It gives clients enough time to process payment without giving them a month to forget. For new clients, use Net 7 or require payment upfront. For long-term clients with reliable payment history, Net 30 is acceptable. Avoid Net 60 unless working with large enterprises that contractually require it.
How to Encourage Early Payment
Early payment discounts work well with corporate clients who have accounting departments. Offer "2/10 Net 30" — a 2% discount if paid within 10 days. On a $10,000 invoice, that's $200 to get paid 20 days early. The discount cost is worth it for your cash flow.
Late Payment Fees: How to Handle Overdue Invoices
Always include a late payment fee policy on your invoices. A common clause: "Invoices unpaid after the due date are subject to a 1.5% monthly interest charge on the outstanding balance." Many freelancers never enforce this, but having it on the invoice signals professionalism and discourages late payment.
Requiring Deposits Before Starting Work
For new clients or large projects, requiring a 25-50% deposit is standard practice. Invoice for the deposit immediately upon signing — before you start any work. This protects you from clients who disappear, demonstrates commitment from both sides, and improves your cash flow significantly.
How to State Payment Terms on Your Invoice
Be explicit. Don't just write "Net 30" — write "Payment due by [specific date, 30 days from today]." Specific dates remove ambiguity about when "Net 30" starts — from invoice date, delivery date, or receipt date. Magic Invoice automatically calculates your due date based on your preferred terms.
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Create Free Invoice →Frequently Asked Questions
What does Net 30 mean on an invoice?
Net 30 means the full invoice amount is due within 30 calendar days from the invoice date. So an invoice dated January 1 with Net 30 terms is due January 31.
What payment terms are best for freelancers?
Net 14 is most popular among freelancers — it's fast enough to maintain cash flow while giving clients reasonable processing time. For new clients, require 50% upfront. For established clients, Net 30 is acceptable.
Can I charge interest on late invoices?
Yes — most jurisdictions allow you to charge late payment interest if you state it clearly on your invoice. The typical rate is 1.5-2% per month on the outstanding balance. Include your late fee policy on every invoice.