12 Common Invoice Payment Terms Every B2B Business Should Know

As a business owner, whether you manage a large company or a small enterprise, understanding how to create invoices and collect payments efficiently is key to maintaining smooth operations. Prompt payments help sustain steady cash flow, allowing you to handle expenses, invest in growth, and keep your business functioning without disruption.

Late or missed payments, on the other hand, can seriously damage your business. Studies show that 25% of small businesses experience payment delays of up to 30 days beyond the agreed terms. According to the U.S. EXIM Bank, approximately 60% of invoices are paid late across the country. These overdue payments disrupt cash flow, reduce revenue, and often force you to adjust your business strategy to make up for financial shortfalls.

Beyond financial setbacks, delayed payments can strain client and supplier relationships, leading to unnecessary tension. Persistent late payments may also indicate deeper issues within your client base, suggesting the need to reassess credit policies or tighten payment terms. Adopting strong invoicing systems and a structured follow-up process can help reduce these risks and strengthen your cash flow management.

What are invoice payment terms?

Payment terms refer to agreements that set payment options and expectations for payments. To ensure that they receive prompt payments, business owners set payment terms. The more common payment terms are net 30 and net 60.

Net 30 means that the business owner expects payment within 30 days from the invoice date. Net (number of days) is a credit term that means a business delivered a product or service first in expectation of receiving compensation at the stated date.

In short, payment terms tell your clients three things: how much they owe, when they need to pay, and how they can pay. Getting these right on every invoice is one of the simplest ways to protect your accounts receivable and keep your business running smoothly.

Example of how payment terms work

Imagine you're about to open a storefront and purchase equipment worth $4,000 on credit. You recently delivered goods worth $6,000 to a customer and submitted an invoice.

You hope that the client will make the payment by the end of the month. The payment due date arrives and elapses, but still no payment. Attempts at follow-up with the client remain futile. As a result of the unpaid invoices, you're paying utility bills and wages for a store that isn't generating enough money, and you have to clear the accounts payable. Instead of making money, you wind up losing it.

This shows the importance of payment terms. Since not every customer can make an immediate payment, create a professional invoice highlighting the payment terms of the sale.

Make a concise and easy-to-understand invoice with stage payments options and discounts to incentivize early payments. Also, include late payment penalties to discourage overdue payments. That will increase your chances of receiving payments on the invoice due date and reduce the amount of accounts receivable.

Quick reference: Payment terms comparison table

Before diving into each term, here's a side-by-side comparison to help you quickly identify which payment terms are right for your business:

The 12 most common invoice payment terms

1. Cash account

This term refers to invoices that clients must pay in cash. In this case, credit is not applicable.

Cash account terms are most common in retail environments and small transactions where goods are exchanged directly. Since no credit is extended, there's virtually no risk of non-payment. However, this approach limits your customer base to those who can pay immediately, which may not be practical for larger B2B orders.

Example: A local print shop requires cash payment when a customer picks up a batch of custom business cards.

2. Cash before shipment (CBS)

This term is common among businesses that make custom work for clients, such as designers, artists, and furniture makers. They typically require a down payment before shipping the goods to protect them from loss should the client fail to clear the rest of the invoice.

CBS protects sellers who invest time and materials into creating custom products. The down payment typically ranges from 25% to 50% of the total invoice value, covering material costs at a minimum. This term is especially important when the finished product has little resale value to anyone other than the original buyer.

Example: A custom furniture maker requires 50% payment before shipping a $3,000 handcrafted dining table to a new client.

3. Cash in advance (CIA)

This term is similar to CBS. However, this one indicates a requirement for full payment before work begins. Also known as Payment in Advance (PIA).

CIA terms give the seller maximum protection and are often used for high-value projects or when working with first-time clients. While this is the safest option for the seller, requiring full payment upfront can deter potential customers—especially in competitive markets. To build business credit and trust, many businesses start with CIA terms for new clients and then transition to net terms as the relationship matures.

Example: A web development agency requires full payment of $8,000 before beginning a website redesign project for a first-time client.

4. Cash next delivery (CND)

This term is for businesses with repeat clients. This means that you must pay an order in full before the next scheduled delivery. Other invoice terms that mean the same are recurring invoicing or recurring invoices.

CND works well for subscription-based or repeat-order businesses because it creates a predictable payment rhythm. The client always knows what's expected, and you always have payment secured before the next shipment goes out. This term is common among food and beverage suppliers, office supply distributors, and cleaning product companies that deliver on a set schedule.

Example: A coffee roaster delivers 20 pounds of beans monthly to a café. Payment for the January delivery is due before the February shipment goes out.

5. Cash on delivery (COD)

This term indicates that cash, or an equivalent, is due when the client receives the invoice.

COD is widely used in wholesale distribution and local delivery services. It's a practical middle ground—buyers get to inspect goods before paying, while sellers receive immediate payment on delivery. The main challenge with COD is logistical: your delivery driver or courier needs a system for collecting and securing payments in the field.

Example: A plumbing parts distributor delivers $1,200 worth of supplies to a contractor's job site and collects a check upon delivery.

6. Cash with order (CWO)

This is similar to CBS. However, this requires upfront payment before order fulfillment and goods creation.

CWO differs from CBS in that the full payment must be received before production even begins—not just before shipping. This is common in manufacturing and for businesses that source materials specifically for each order. It eliminates the risk of being stuck with finished goods that the buyer doesn't want to pay for.

Example: A promotional products company requires full payment when a client orders 500 custom-branded mugs, before production begins.

7. Contra payment

This happens when a business issuing an invoice also owes money to the company receiving the invoice. There is an allowance for payments in services or products instead of cash.

Contra payments simplify transactions between businesses that have a mutual trading relationship. Instead of both parties sending payments back and forth, they offset what they owe each other and only the difference (if any) is paid. This reduces transaction costs and simplifies bookkeeping. However, it requires careful record-keeping and clear documentation to avoid disputes.

Example: A marketing agency owes a printing company $2,000 for brochures, while the printing company owes the agency $3,000 for a social media campaign. They offset the amounts, and the printing company pays the remaining $1,000.

8. End of month (EOM)

This indicates that payment is due on the last day of the month of the invoice date.

EOM terms are popular in ongoing B2B relationships because they align payment schedules with most businesses' monthly accounting cycles. This makes it easier for accounts payable teams to batch-process invoices. Some businesses combine EOM with other terms—for example, "EOM + 30" means payment is due 30 days after the end of the month in which the invoice was issued.

Example: An invoice dated March 12 with EOM terms means payment is due by March 31.

9. Interest invoice

This is a special invoice issued for late fees and interests accrued on previous unpaid invoices.

Interest invoices are a critical tool for discouraging chronic late payments. When a client misses their payment deadline, you issue a separate interest invoice detailing the overdue amount, the applicable interest rate, and the total late fee charged. Typical late fees range from 1% to 1.5% per month (12%–18% annually). Before implementing late fees, make sure to check local regulations, as some states have caps on interest rates for commercial invoices.

Example: A client was 30 days late on a $5,000 invoice. At 1.5% monthly interest, you issue an interest invoice for $75.

10. Terms of sale

These are the details of the order invoice. These can include a due date, total amount of the order, quantity and quality of goods, invoice number, delivery date, and acceptable payment methods.

Terms of sale are essentially the "fine print" that accompanies every transaction. They go beyond just payment timing and cover the complete scope of the agreement. Well-written terms of sale prevent misunderstandings and give you legal recourse if a dispute arises. Always include your preferred B2B payment methods, any applicable taxes, and return or cancellation policies.

Example: An invoice for $10,000 worth of electronics specifies: Net 30 payment terms, 2% early payment discount, accepted payment methods (ACH, credit card, wire transfer), and a 15% restocking fee for returns.

11. Net 7/10/30/60/90

This implies that a payment is due in 7, 10, 30, 60, or 90 days past the invoice date. To ensure you always have sufficient cash flow, keep the number of days for credit payments short, preferably net 7, 10, or 30.

Net terms are the backbone of B2B commerce. Net 30 is the standard across most industries, used in a significant share of all B2B transactions. The right net terms for your business depend on several factors:

• Industry norms: Construction often uses Net 60–90 terms, while retail suppliers typically use Net 30.
• Customer relationship: Longer terms can be a sign of trust and a competitive advantage. Many businesses offer net terms online to attract new buyers.
• Order size: Larger orders may warrant longer terms, but only with proper credit assessment.
• Cash flow needs: Shorter terms mean faster cash in, but may limit your customer base.

Example: You send an invoice dated April 1 with Net 30 terms. The client must pay by May 1. If they don't, you can issue an interest invoice or begin collections.

12. 2/10 Net 30

This means that a client needs to pay 30 days after the invoice date. However, if they manage to pay within 10 days, they get a 2% discount on the invoice. These early payment discounts work as incentives to encourage clients to pay invoiced amounts early.

Early payment discounts are one of the most effective ways to speed up collections without straining client relationships. Research shows that early-pay discounts can significantly improve supplier loyalty while reducing your Days Sales Outstanding (DSO). Common variations include:

• 2/10 Net 30: 2% discount if paid within 10 days; full amount due in 30 days
• 3/15 Net 60: 3% discount if paid within 15 days; full amount due in 60 days
• 5/10 Net 30: 5% discount if paid within 10 days; full amount due in 30 days

Example: You send a $10,000 invoice with 2/10 Net 30 terms. If the client pays within 10 days, they only owe $9,800—a $200 savings. If they pay on day 11 or later (up to day 30), they owe the full $10,000.

Other payment terms you should know

While the 12 terms above cover the most common scenarios, here are a few additional terms you may encounter in B2B transactions:

• Due Upon Receipt: Payment is expected immediately when the customer receives the invoice. Common for smaller jobs, repairs, and service calls.
• MFI (Month Following Invoice): Payment is due on a specific date in the month following the invoice. For example, "15 MFI" means payment is due on the 15th of the following month.
• Stage Payments: Recurring partial payments that occur over a set period. Common in construction and large-scale projects where work is completed in phases.
• Forward Dating: The invoice date is pushed back—often to after the delivery date—to give the buyer more time before payment terms take effect.
• 1MD (One Month's Debit): A credit payment covering an entire month's supply, typically settled in a single payment at the end of the billing cycle.

How to choose the right payment terms

Not every payment term works for every situation. Here's how to choose the right terms for your business:

Consider your industry. Payment norms vary significantly. Construction and manufacturing often operate on Net 60–90, while professional services and SaaS companies typically expect upfront payment or Net 15–30. Staying close to your industry average keeps you competitive without unnecessarily stretching your cash flow.

Assess the customer relationship. For new clients, start with shorter terms or require partial payment upfront. As trust builds and payment history is established, you can extend more generous terms. Running a business credit check before extending net terms protects you from taking on unnecessary risk.

Factor in invoice size. Smaller invoices (under $1,000) often work best with shorter terms like Net 15 or due upon receipt. Larger invoices may need longer payment windows to give clients time to process the amount—but should always come with a credit evaluation first.

Evaluate your cash flow. If your business has thin margins or high overhead, shorter payment terms keep cash circulating. If you have strong reserves, offering longer terms can be a competitive advantage that wins larger accounts.

Payment terms by industry

Control payment methods with payment terms

In addition to determining when clients pay, you also have to control how they pay. Always include your preferred payment methods in the invoice terms. Selecting how you want to get paid ensures clients process payments quickly and helps avoid confusion and payment delays.

The best way to ensure prompt payments is to make the process as seamless and convenient as possible for clients. If you are used to receiving checks or cash payments, consider adding different payment methods that clients frequently use. The best two payment methods are:

a) Smart invoices

Invoicing software makes it convenient for clients to make payments using pay-enabled smart invoices. Smart invoices let customers use payment methods such as debit cards, credit cards, and automated clearing house (ACH) bank transfers.

Smart invoices also allow you to set up recurring and automatic payments, which helps reduce any guesswork associated with invoicing. If you'd rather not have recurring payments, there is still the option of sending an email invoice with the payment link. Automating your AR invoice processing reduces errors and speeds up collections significantly.

These features come in handy for ongoing contracts, so choose an invoicing software that comes with free ACH payment features.

b) Credit card payments

Credit card payments are a popular and convenient way to make payments. Ask clients to provide you with a credit card number that you can charge. Remember that there are fees associated with using credit cards, and you will need to factor in those fees.

You can choose to pay the fees or pass on the costs to customers. If you want the clients to pay the fees, indicate this in the contract. This stops clients from feeling duped or blind-sided.

Why you need net terms management

You cannot always have control over when clients make payments. Anything can happen on their end that will disrupt your business. Use a net terms management company to prevent that.

Take Resolve, for instance–they take on the risk of late payments, enabling you to have a continuous cash flow for the business. For approved customers, Resolve lets them pay in 30–90 days while you get paid up to 90% of the invoice face value after one day. They conduct credit checks on clients to determine who qualifies for net terms.

Suppose you don't know how to invoice customers effectively and make payment claims. In that case, Resolve offers an accounting software solution to run payment processing for business owners who can't run their own net terms processing teams.

With Resolve, you won't ever have to worry about chasing after late payments. Instead, this company takes on that responsibility and collects the payments. Think of Resolve as having your own personal credit team. Their AR management tools give you full visibility into your receivables while they handle the heavy lifting.

Common payment terms challenges small businesses encounter

Having payment terms is critical to the success of your business. However, these are some of the challenges you may encounter along the way:

Payment insecurity. Even though online payments are convenient for you and the client, not all payment platforms are trustworthy. You need to provide secure payment methods to protect their sensitive information.

Managing and tracking payments and invoices. Depending on how large the business is, you may find it challenging to keep track of invoices and payments. Utilize a credit management solution like Resolve to help with this. An efficient AR process flow can make all the difference.

Unpaid invoices. Unfortunately, unpaid or late invoices are a common feature for small businesses. To prevent this, have detailed payment policies and effective payment methods. An invoice factoring company can take on the risk of potential non-payments while advancing you the cash instantly, even when the invoice is on a net terms basis.

Choosing the wrong terms for your industry. Offering Net 90 when your industry standard is Net 30 essentially gives clients free financing they don't expect. On the other hand, requiring cash upfront when competitors offer Net 30 can cost you valuable accounts. Research what's standard in your space and adjust accordingly.

Inconsistent enforcement. If you state late fees in your terms but never actually charge them, clients learn that your deadlines are flexible. Apply your payment policies consistently across all customers to maintain credibility.

Frequently asked questions

What is the most common payment term on invoices?

Net 30 is the most widely used payment term in B2B transactions. It gives clients 30 calendar days from the invoice date to submit payment. This term balances giving buyers adequate time to process payments while keeping the cash flow cycle relatively short for sellers.

What does Net 30 mean on an invoice?

Net 30 means the full invoice amount is due within 30 calendar days of the invoice date. The word "net" refers to the total amount owed. If you see variations like "2/10 Net 30," it means you'll receive a 2% discount for paying within 10 days—otherwise, the full amount is due in 30 days.

How do I choose the right payment terms for my business?

Start by researching your industry standards, then consider your cash flow needs, the size of typical orders, and the creditworthiness of your customers. New businesses often start with shorter terms or advance payments and gradually extend credit as client relationships develop. Running a business credit check on new customers helps you make informed decisions about which terms to offer.

Can I change payment terms after sending an invoice?

Technically, yes—but it's not ideal. Payment terms are part of your agreement with the client, so changing them after the fact can create confusion or disputes. If you need to adjust terms, communicate the change clearly in writing before the next invoice cycle and update your contract accordingly.

What happens if a customer doesn't follow payment terms?

Start with a polite payment reminder shortly after the due date. If the invoice remains unpaid, follow up with a firmer notice that references your late fee policy. For chronically late payers, consider shortening their payment terms, requiring advance payment, or using a net terms management partner like Resolve that handles collections on your behalf.

What is the difference between COD and CIA?

Cash on Delivery (COD) means payment is collected when the goods are delivered to the buyer. Cash in Advance (CIA) means full payment is required before any work begins or goods are produced. CIA carries less risk for the seller since payment is secured before any resources are committed, while COD requires the seller to produce and ship goods before receiving payment.

Are late payment fees legal?

In most jurisdictions, yes—but the specifics vary. Many states and countries set maximum interest rates for commercial transactions. Before adding late fees to your invoices, review local laws or consult with a legal professional to ensure your rates are compliant and enforceable.

Final word – why you need payment terms on invoice

Managing invoices and payments can be a headache for small business owners, often pulling them away from their core activities. To avoid this, make sure to specify clear payment terms on each invoice, like cash on delivery, cash next delivery, and net terms, so your clients know exactly when to settle.

However, some payments may still get missed. That's where an independent firm like Resolve comes in. They'll pay you up to 90% of the invoice's value within a day of sending it out, offer your customers net terms of up to 90 days, and take care of the payment follow-up themselves. Request a demo to find out how they can help you.

This post is to be used for informational purposes only and does not constitute formal legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Resolve assumes no liability for actions taken in reliance upon the information contained herein.