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Payment Terms on Invoice: What They Are and How to Write Them?

If you’re a large or small business owner who operates a company and invoices customers or partners, you must know that including detailed payment terms on every invoice is essential. 

Payment terms can help reduce overdue invoices – a frequent challenge among UK businesses.

Based on research by PwC, invoices in the UK are being paid in roughly 55 days, showing a 7% increase in the time it takes for invoices to be settled compared to 2022. 

Taking this into account, payment terms on invoices become a crucial aspect to consider.

In the following sections, we provide in-depth guidance on invoice payment terms. We explain what they are, how to include them in your invoices, and more.

What are the payment terms on an invoice?

Invoices are used to formally request payment for goods or services that customers purchase from your business.

Alongside other components on the invoice, this document should include payment terms. 

Payment terms on invoices outline when the payment is due based on previously agreed-upon information. 

Generally, invoice payment terms refer to when payment is required based on the date the products or services were delivered to the customer or when the invoice was sent.

How to write payment terms on an invoice

It’s important to include payment terms on invoices to ensure that your company’s cash flow is stable and that customers pay you in a timely manner.

A standard payment terms outline includes the following:

  • Due date;
  • Payment method;
  • Account details;
  • Accepted currency;
  • Any penalties for late payments.

In the following sections, we explain each in more detail.

How to write payment terms on an invoice

Due date

Invoice payment terms must specify the payment due date (also referred to as payment date). It also can specify the date by which the payment must be received by the business that has issued the invoice. 

This section of the payment terms informs the client’s accounts payable team when they must commence the payment process. 

Keep in mind that the due date is different from the invoice date. 

For example, you can issue the invoice on September 5th but include a due date that is a month later, such as October 5th.

Payment method 

This part of the invoice should also mention the payment methods supported by your business or specifically accepted for this invoice. 

For example, some of the most popular payment methods, such as online payments, include bank transfers, card payments, and digital wallets.

If you are working with a customer who prefers Direct Debit, you must inform them about the date on which they will be charged. 

As an alternative, you could rely on a simpler process via invoicing and accounting software that offers a fully digital experience with one-click payment buttons in e-invoices.

Account details 

Don’t forget to include your business account details or provide payment information on your invoice. 

This guarantees that clients pay to the appropriate account and eliminates the need to provide this information to all your customers individually.

Accepted currency 

The best invoice payment terms offer all the necessary information for the customer to settle unpaid invoices successfully. 

Such payment terms also include information on the currency in which the business must be paid. 

This is especially important if you’re working with international clients. However, even if you’re based in the UK and have domestic transactions, it’s also essential to outline that you wish for the payment to be made in Pound Sterling.

Late payment penalties

Late payments can significantly impact your cash flow. To ensure customers pay on time, it’s recommended to include a section in your invoice payment terms dedicated to late fees.

You can also charge interest for late payments alongside overdue fees, which will increase the likelihood of clients paying the invoices on time. 

If the customer fails to make the payment on time or doesn’t abide by the payment terms on your invoice, you can take legal action to receive the funds owed to you. 

However, keep in mind that the invoice is not considered a legal document. Therefore, you’ll need a signed contract to help you establish a strong legal standing.

What are the different types of payment terms?

What are the different types of payment terms?

Large and small businesses need to set up an end-to-end invoicing process and use payment terms to achieve effective business accounting.

After you’ve added the payment terms to your invoice, you must consider the different options for accepting payments from customers

Here are some popularly accepted payment term forms listed on most invoices.


Prepayment is great for your business financially as it positively impacts your cash flow and minimises risks associated with unpaid invoices

In this case, the customer pays the owed amount before receiving the product or service from the business. 

For example, a contractor may require client prepayment to guarantee that the service won’t be cancelled or the customer won’t avoid paying the invoice. 

Immediate payment

If you agree on immediate payment, this means that it’s essential for customers to pay for the services, products, or supplies purchased once the receipt is provided. 

Additional details can enrich immediate payment terms. For example, you may choose to reclaim products that a customer has received but has not paid for immediately. 

Keep in mind that this type of payment is not always applicable to every business and depends on the types of services and products you provide, whether you sell internationally, and other factors.

Partial payment

If the agreed payment terms listed on your invoice are partial, you’ll only require the customer to pay for a part of the total amount at a given time. 

In most cases, this is a popular option for businesses that require working capital to start a project. While partial payments offer many advantages to businesses, they’re also helpful for customers as they end up paying the invoice total in smaller portions. 


Instalments are payments made regularly at agreed-upon time intervals, for example, every three months or every six months.

The payment can also be requested once certain milestones have been completed as part of a long-term project or once the client receives a part of the purchase of products. 


You can also offer your customers a monthly credit payment or lines of credit. 

This payment term provides financing for products or services, enabling the client to repay the owed amount on a previously agreed-upon payment schedule

While this form of payment is usually very convenient for customers, it holds some risks for businesses. For example, customers could default, leaving the business with a disrupted cash flow. 

Recurring payments

Recurring payments, also known as subscriptions or retainers, oblige clients to make regular payments in exchange for receiving regular services or products.

In this case, there is an ongoing billing process where the business issues invoices on a recurring basis.

Net days

Net days refer to terms that are agreed upon on certain days in which the payment must be completed. 

For example, some of the most common payment terms include Net 7, Net 10, Net 15, Net 30, Net 60, and Net 90

For example, Net 90 translates into the buyer being required to make the payment within 90 days of the date listed on the invoice. 

With these payment terms in mind, certain words and acronyms might appear on your invoices.

Some abbreviations associated with the standard payment terms include:

  • PIA – Payment in advance, representing an agreed early payment;
  • CBS – Cash before shipment;
  • CND – Cash next delivery;
  • COD – Cash on delivery;
  • CWO – Cash with order;
  • EOM – Also referred to as invoice date EOM. This is the payment must be made at the end of the month in which the invoice was issued;
  • 21 MFI – Payment must be made on the 21st of the month following the invoice date;
  • Net 7 – Payment must be made 7 days after the invoice date;
  • Net 10 – Payment must be made 10 days after the invoice date;
  • Net 30 – Payment must be made 30 days after the invoice date;
  • Net 60 – Payment must be made 30 days after the invoice date;
  • Net 90 – Payment is required 30 days after the invoice date.

You can list one of the acronyms outlined above in your invoice based on the payment terms you’ve agreed with your customers. 

Are payment terms mandatory on an invoice?

Are payment terms mandatory on an invoice?

As noted above, invoices are not considered official legal documents. However, every invoice you issue must have payment terms, which can ensure that you receive payments on time and minimise the chances of negative impacts on your cash flow. 

Invoice payment terms are also key to settling customer disputes or taking legal action due to unpaid invoices. 

Note that the HMRC can also benefit from the information provided in your invoice payment terms. This is especially important for ensuring that your business is on the right side of the law. 

For example, UK law states that late payments for business-to-business transactions can be fined up to 8% of the total amount due on the invoice, in addition to the Bank of England’s base rate for B2B sales.

What are the legal requirements relating to payment terms on the invoice?

In the previous section, we offered one example of a legal requirement associated with invoice payment terms. 

Another legal requirement is that the statutory payment term in the UK is 30 days. This means that invoices must be paid within this time frame, with the only exception being if the invoice explicitly states otherwise. 

Other legal requirements apply to large companies with more than 250 employees and an annual turnover of £36 million. In this case, the maximum payment term is 60 days unless the involved parties agree otherwise.


If you’re running a small or large business, it’s essential to establish a reliable invoicing system and plan in advance to reduce risks. 

We highly recommend adding payment terms to the invoices you issue. This will ensure compliance with legal requirements, minimise the chances of disrupted cash flows, and avoid customer disputes.

Frequently Asked Questions

Some of the most popular invoice payment terms in the UK include Net 30, cash on delivery, payment in advance, and due on receipt.

Yes, it’s highly recommended that the payment terms included in the invoice be previously discussed and negotiated with the client. It’s important to establish clear communication and ensure that the invoice outlines the agreed terms accurately and in detail.

Yes, if you’ve included a section describing the late payment penalties in your invoice or contract, you can charge customers a fee or interest for overdue payments.

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