top of page

A guide to draft invoice payment terms to get paid faster

There is always a struggle for an entrepreneur to manage the cash flow of his business. It depends on several factors such as business generation, financial planning, expenditure and so on. One of the crucial yet ignorant factors that affect the cash flow is your invoice payment terms.

These payment terms outline the manner and mode of payments for your customers. As I mentioned earlier, this factor is so important but yet ignorant one. You can create a positive impact on your cash flow by incorporating small but judicious details in your invoice to minimize your bad debts and streamline your cash flow. Here’s a close look at a guide to draft invoice payment terms to get paid faster:

What are invoice payment terms:

Invoice payment terms are mutually agreed upon terms between your business and your customers. It includes the following:

  • Due date of payment

  • Late payment charges/penal interest charges

  • Discounts (if any)

  • Other business conditions such as warranty, guarantee, refund and replacement etc.

Most commonly used invoice payment terms:


Payment in Advance


Cash in Advance

Net 7,30, 45 or 60 days

It means payment is expected within 7,30,45 or 60 days from the date of invoice.


Cash on Delivery


End of Month


Cash Next Delivery. It means current order must be paid in full before the next delivery is initiated.

2/10 Net 30

It is a form of credit where the business grants 2% discount to their customers if they pay the full invoice amount within the first 10 days from the invoice date otherwise they should pay the full invoice amount in 30 days without any discount.


Cash Before Shipment

50% Upfront

An advance of 50% is to be paid before the project starts

Forward Dating

Where invoice is dated forward to give the customer additional time to pay or in instances where the delivery has been delayed.

How to choose invoice payment terms for your business:

While choosing the best invoice term for your business, one must emphasise industry expectations and the customer’s credit history.

One must study the industry to get a sense of what your customers will be familiar with. For example, the average payment term in the construction industry is 60 days or more. In the perishable industries, the credit period would be less than 2-3 days or immediate. In the textile industry, the credit period would be of 120 days. While setting up your payment terms, one should ensure that your invoice payment terms align with your industry standard to avoid chaotic situations.
While on the other hand, one may consider cash flow needs while raising invoices. One must consider what payment terms wouldn’t affect your working capital if any of your customers failed to pay on time.

Ways to improve invoice payment terms:

Below are some of the ways to improve invoice payment terms:

  1. One can offer discounts to encourage early payments.

  2. Online or software-based invoicing to send email invoices to your customers quickly.

  3. One should always have a practice to review its customer base to identify its creditworthiness.

  4. The use of latest payment gateway technology can also enable the customers to pay easily and mostly in a single click. Also, giving multiple modes of payment acceptance such as cash transfer, bank transfer, wallet, card payments etc shall also help accelerate the payment completion process.

In conclusion, effectively managing invoice payment terms is essential for entrepreneurs to maintain a healthy cash flow. By clearly defining terms such as due dates, late payment charges, and discounts, businesses can minimize bad debts and streamline their financial operations. It's crucial to align payment terms with industry standards while considering cash flow needs. Offering discounts for early payments, utilizing online invoicing tools, assessing customer creditworthiness, and leveraging modern payment technologies are key strategies to expedite payments. By implementing these practices, businesses can improve cash flow management and ensure timely payments, ultimately fostering financial stability and growth.


bottom of page