What are payment terms?
Written by Arnon Shimoni
✓ Expert
Last updated on:
Payment terms state when an invoice is due and what happens if it is paid late. They are written on the invoice and in the contract, and they fix the due date, the accepted payment methods, any discount for paying early and any fee or interest for paying late. "Net 30" means the full amount is due 30 days after the invoice date.
Example: an invoice dated 1 March for €4,000 with terms "Net 30, 2% discount if paid within 10 days" is due on 31 March. A payment of €3,920 received on 9 March settles it. A payment received on 15 April is 15 days late and, if the terms say so, attracts a late fee.
At a glance | |
|---|---|
Fixes | Due date, payment method, late fee, early-payment discount, currency |
Where stated | Contract, quote and on every invoice |
EU B2B default | 30 days if nothing is agreed; 60 days maximum unless expressly agreed (Directive 2011/7/EU, as of October 2026) |
Enforced by | Dunning and, in the EU, statutory late-payment interest |
Common payment terms
Term | Meaning | Typical use |
|---|---|---|
Due on receipt | Payable as soon as the invoice is received | Small businesses, one-off services, card-on-file subscriptions |
Net 7 | Due 7 days after the invoice date | Contractors, agencies with weekly cycles |
Net 14 | Due 14 days after the invoice date | SMB SaaS, usage-based invoices |
Net 30 | Due 30 days after the invoice date | The B2B standard in most of Europe and the US |
Net 60 | Due 60 days after the invoice date | Enterprise and public-sector buyers; the EU maximum without express agreement |
EOM | End of month: due at the end of the month in which the invoice was issued, sometimes plus a number of days (EOM + 30) | Retail and wholesale, France and southern Europe |
2/10 net 30 | 2% discount if paid within 10 days, otherwise the full amount in 30 days | Distributors and suppliers that want cash early |
Terms of payment on an invoice: what to include
Due date as a calendar date, not only "Net 30". The invoice date and the due date both printed.
Payment method and the details for each: bank account with IBAN and BIC, a payment link, direct debit reference if a mandate exists.
Late fee or interest, stated as a rate and a basis ("statutory interest under Directive 2011/7/EU" or "1.5% per month on the overdue amount").
Early-payment discount, if offered, with the deadline and the discounted amount.
Currency of the invoice and, if different, the currency the payment must arrive in.
Reference the payer must quote so the payment can be matched to the invoice.
Payment terms in the EU
Directive 2011/7/EU on combating late payment in commercial transactions sets the floor for B2B terms across the EU (as of October 2026). If the contract does not fix a payment period, the invoice is due 30 calendar days after receipt of the invoice or of the goods or services. The contractual period may not exceed 60 calendar days unless the parties expressly agree otherwise and the longer term is not grossly unfair to the creditor. Public authorities must pay within 30 days, extendable to 60 only in exceptional cases. Once an invoice is overdue the creditor is entitled, without a reminder, to statutory interest at the reference rate plus at least 8 percentage points, and to a fixed €40 for recovery costs. Member states transpose this into national law with their own detail, so check the rules in the country of the debtor. See late payment fee for the mechanics.
Payment terms and dunning
Payment terms set the due date; dunning is what happens after it. A dunning sequence is built from the terms: a reminder a few days before the due date, a notice on the day after, further reminders at fixed intervals, interest or a late fee applied at the point the terms allow, and a service pause or collections hand-off at the end. If terms differ per customer, the sequence has to read the due date from each invoice rather than from a global setting.
Payment terms for usage-based invoices
A usage-based invoice covers a period that has already ended. The due date runs from the invoice date, not from the usage period. An invoice for March usage issued on 3 April with Net 30 is due on 3 May. Customers sometimes argue that the clock should start at the start of March; it does not, because the amount was not known until the period closed. Two practical points follow. Issue the usage invoice as soon as the period closes, because every day of delay extends the customer's effective credit. And if the contract has a monthly minimum invoiced in advance and usage invoiced in arrears, the two invoices have different due dates and the terms should say so.
Where Solvimon fits
Payment terms are set per customer and per billing entity in Solvimon, printed on every invoice with the calendar due date, and drive the dunning sequence and the accounts receivable ageing automatically.
Frequently asked questions
What are payment terms?
The conditions on an invoice and in the contract that state when payment is due, how it can be paid, and what happens if it is early or late.
What does Net 30 mean?
The full invoice amount is due 30 days after the invoice date. Net 30 on an invoice dated 1 March is due 31 March.
What are standard B2B payment terms in Europe?
Net 30 is the common standard. Under Directive 2011/7/EU the default is 30 days if nothing is agreed and the maximum is 60 days unless both parties expressly agree to longer, as of October 2026. Larger buyers often push for Net 60.
Can payment terms differ per customer?
Yes. Terms are a contract item and are commonly negotiated. The billing system should store terms per customer, or per billing entity for a group, and compute each invoice's due date from them.
What is the difference between payment terms and a billing cycle?
The billing cycle sets how often an invoice is issued, for example monthly. Payment terms set how long after each invoice the customer has to pay.
Related
Late payment fee. What can be charged once the due date has passed.
Dunning. The reminder and recovery sequence after the due date.
Accounts receivable. Tracking what is outstanding and overdue.
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