Setting Payment Terms: Net 15, Net 30, or Due Upon Receipt?

When setting payment terms, choosing between Net 15, Net 30, or Due Upon Receipt can have a massive impact on your cash flow. One of the smallest fields on your invoice can have the biggest impact on your bank account balance: the Payment Terms.

Many freelancers and small business owners default to whatever term they saw on a template, or worse, leave it blank. Understanding and strategically choosing your payment terms is a superpower for managing cash flow. In this guide, we will decode the jargon and help you decide which terms are right for your business. First, make sure you know how to write a professional invoice to begin with.

What Does "Net" Mean?

In invoicing language, "Net" simply refers to the net amount of the invoice being due within a certain number of days after the invoice date.

• Net 10: Payment is due 10 days after the invoice date.
• Net 30: Payment is due 30 days after the invoice date.
• Net 60: Payment is due 60 days after the invoice date.

If you issue an invoice on January 1st with "Net 30" terms, the payment is legally due on January 31st.

1. Net 30: The Corporate Standard

The Breakdown: The client has 30 calendar days to pay.

Who uses it? This is the gold standard for B2B (Business to Business) transactions, especially when working with larger corporations or government agencies. Large companies often have complex approval processes—the invoice goes from your project manager to their boss, then to the finance department, then to a scheduled "payment run." This process takes time.

Pros:

• Client Friendly: It aligns with most corporate accounting cycles, making it easier for them to hire you.
• Professional: It signals that you are an established business with enough cash reserves to handle a 30-day wait.

Cons:

• Cash Flow Gap: You do the work, send the invoice, and then wait a full month (or more) for the cash. This can be tough if you have rent or bills to pay in the meantime.

2. Net 15 or Net 7: The Freelancer's Favorite

The Breakdown: The client has 15 (or 7) days to pay.

Who uses it? Freelancers, consultants, and small agencies who need tighter cash flow. It is becoming increasingly common in the digital age where payments can be made instantly online.

Pros:

• Faster Payment: You get paid twice as fast as Net 30.
• Urgency: The shorter deadline keeps your invoice near the top of the client's "to-do" pile, rather than getting buried for a month.

Cons:

• Friction: Some large legacy companies literally cannot pay in 15 days because their systems are too slow. You might need to negotiate.

3. Due Upon Receipt: The Cash Flow King

The Breakdown: The payment is due the moment the client receives the invoice.

Who uses it? Service providers with immediate deliverables (e.g., plumbers, technicians) or freelancers working with small businesses/individuals.

Pros:

• Zero Wait Time: It sets the expectation that the work is finished and payment is the immediate next step.
• Best for Cash Flow: Ideal for project-based work where you have incurred expenses and need to recoup them immediately.

Cons:

• Can Feel Aggressive: To some corporate clients, this can seem pushy or unrealistic. "I can't just cut a check today, I need approval!"
• Often Ignored: Without a specific date, some clients interpret "Due Upon Receipt" as "whenever I get to it next week."

Strategic Variations

2/10 Net 30 (The Early Bird Discount)

This is a clever financial incentive. It means: "The full amount is due in 30 days, BUT if you pay within 10 days, you can take a 2% discount."

Why use it? If you are desperate for cash flow, giving up 2% of your revenue might be worth getting the money 20 days early.

End of Month (EOM)

This groups all invoices to be paid at the end of the current month. This is helpful for clients who want to do all their bookkeeping on one specific day.

How to Choose?

The right term depends on your relationship with the client and your own financial runway.

1. For Large Corps: Accept that Net 30 is likely non-negotiable, but try asking for Net 15.
2. For Small Biz/Startups: Go for Net 7 or Due Upon Receipt. They usually have a corporate card and can pay instantly.
3. For New Clients: Consider asking for a 50% Deposit upfront (Due Upon Receipt) and the remainder Net 15 upon completion. This protects you from non-payment.

Conclusion

Your payment terms are part of your contract. Don't be afraid to discuss them before you start work. Clear expectations usually lead to happy relationships. And remember, when you use FreeInvoices, you can easily toggle between these terms to see what works best for each client.