Payment Terms That Get You Paid Faster: Wording and Options

Payment terms are the quietest decision in your business. You make them once, often without thinking, and they then decide how much cash you carry for the next five years. A trader who gives sixty days to everyone is, in effect, lending to his customers without charging interest.

Here's an opinionated look at the options, with the wording we'd actually use.

The common options

• Advance payment: full or part payment before work or dispatch. Safest for you, hardest to get from big customers.
• Cash or payment on delivery: you hand over goods, you get paid. Ideal for retail and new customers.
• Net 7, Net 15, Net 30: payment due that many days after the invoice date. Common between businesses.
• Milestone payments: common for projects, tied to stages such as design approved or goods dispatched.
• End of month: everything delivered in a month is paid by a fixed day of the next. Easy to track for repeat orders.

There is no right answer. There is only the right answer for your cash position. If you pay your suppliers in 15 days, giving customers 60 means you fund the gap from your own pocket every single month.

Your industry matters too. Wholesale and distribution usually run on credit, with a short list of customers who always pay late. Services often run on advance or milestones. Retail runs on cash. Copy the norm of your trade as a starting point, then tighten it where your own numbers say you must.

Match your terms to your own payables

A useful sanity check: your receivable days should not be much longer than your payable days. If your supplier wants money in 15 days and your customers take 45, you will always be short. Put both lists side by side. Software that shows receivables and payables together makes this obvious; see receivables and payables explained for what to look at.

Try a simple exercise. List your ten biggest customers and write beside each the number of days they actually take to pay, not the days you agreed. The gap between agreed and actual is your real credit period, and it is often longer than you think.

Write terms people cannot misread

Compare two lines. Payment within 30 days. And: Payment due by 20 December 2026. The first leaves room for arguments about when the 30 days started. The second can't be misread. Put the actual date on every invoice.

Also say how to pay, to whom, and what reference to quote. If you add a late fee or interest, state the rate or amount plainly and make sure the customer agreed in the quotation or contract. A fee that appears for the first time on an overdue invoice leads to a fight, not a payment.

Carrots and sticks

Some businesses offer a small discount for early payment, for instance a percentage off if settled within ten days. Work out the cost before you offer it. A discount that costs you more than borrowing from the bank is just a gift. On the other side, a late fee is only useful if you're willing to apply it. An unenforced penalty teaches customers that your terms are suggestions.

Part payments are a middle way. Taking a portion up front on large orders reduces your risk, and customers generally accept it when it's explained as covering materials. State the split clearly in the quotation so it isn't a surprise at invoice time.

Different customers, different terms

Treating every customer the same sounds fair but is expensive. A large company with a formal payment cycle may insist on 45 days, and you may decide to accept it for the volume. A walk-in contractor buying cement should pay on the spot. Keep a default for new customers and set exceptions deliberately, on the customer's record, so that whoever bills them uses the agreed terms.

Make the terms visible

Terms only work if they appear in three places: the quotation, the confirmation of order, and the invoice. Repeat them every time. Our guide to a professional invoice shows where they sit on the page. And when someone does run past the date, follow the routine in following up on unpaid invoices.

Billy shows overdue payments per customer, so you can see who is stretching your terms and adjust. If you'd like help setting up customer-specific terms in your billing process, get in touch.