Payment Terms

Payment terms are the agreed conditions between two parties that define when an invoice must be paid, any discount available for early payment, and the consequences of late payment. They apply to both sides of a business relationship: the terms a business offers its customers and the terms its suppliers offer in return.

Getting payment terms right has a direct impact on cash flow. According to Fundbox's 2024 payment data drawn from 47,000 businesses, companies with clear payment terms on their invoices get paid 42% faster than those without. A survey published by Caine and Weiner in 2025 found that 56% of small businesses are currently owed money from unpaid invoices, with an average of $17,500 in outstanding payments.

Common Payment Term Formats

The most widely used formats in B2B trade are:

Net 30 - Payment is due in full 30 days from the invoice date. This is the most common term in U.S. B2B transactions and is appropriate for established customers with a track record of on-time payment.

Net 60 / Net 90 - Payment is due in 60 or 90 days. More typical in wholesale, large corporate procurement, and construction subcontract agreements where buyer payment cycles are slower.

Net 10 / Due on receipt - Payment is due immediately or within 10 days. Used for new customers, customers with a history of late payment, or high-risk orders.

2/10 Net 30 - Full payment is due in 30 days, but a 2% discount applies if paid within 10 days. This incentivizes early settlement and is common in product-based distribution.

Milestone or stage payments - Common in construction, AV integration, office furniture, and other project-based work where total project value is high and cost commitment is front-loaded. A typical structure is a deposit on order (20-30%), a mid-project payment, and a final payment on completion or handover.

Setting and Communicating Payment Terms Effectively

For project-based businesses, payment terms work best when they are stated explicitly in three places: the quote or proposal, the order confirmation, and the invoice. Stating them only on the invoice is the most common failure point - by that stage, the customer considers the work agreed on different terms.

In addition to the due date, effective payment terms should include the payment method accepted, a late payment clause (typically 1.5% per month), and a reference to your deposit requirements where applicable. For longer projects, the stage payment schedule - with each milestone trigger clearly defined - should be attached to the order confirmation before work begins.

Zigaflow allows payment terms to be set at the customer level so they carry through automatically to quotes and invoices. Stage invoices link to a parent job, making it straightforward to track which project milestones have been invoiced and which remain outstanding. Confirmed payment receipts sync to Xero, QuickBooks, or FreeAgent, keeping the accounting record current without manual entry.