Payment Terms Explained: Net 30, Due on Receipt, and More

Decoding Invoicing Jargon

When you look at professional invoices, you often see terms like "Net 30" or "Due on Receipt" at the bottom. These are Payment Terms. They explicitly define the timeframe in which the client is legally expected to pay the invoice.

"Due Upon Receipt"

The client is expected to pay immediately as soon as they receive the invoice.

• Pros: Fastest possible cash flow. Great for smaller projects or one-time gigs.
• Cons: Most medium-to-large companies cannot process a payment "immediately" due to internal accounting processes.

"Net 15" and "Net 30"

Payment is due exactly 15 or 30 days after the invoice issue date.

• Pros: Industry standard. Gives Accounts Payable enough time to process the payment.
• Cons: You have to wait 2 to 4 weeks to see your money.

"2/10 Net 30"

The total is due in 30 days, however, if the client pays within 10 days, they receive a 2% discount.

• Pros: Heavily incentivizes early payment.
• Cons: You sacrifice 2% of your revenue for faster cash flow.

EOM (End of Month)

Payment is due at the end of the month in which the invoice was issued. If you send an invoice on March 5th, it is due March 31st.

Which Should You Choose?

For freelancers working with individuals or very small businesses, Net 15 is widely considered the sweet spot. It is fast enough to keep your cash flow healthy while giving the client enough time to process the payment.