StampBookInvoice Payment Terms Explained: Advance, Net 7, Net 30 and What to Choose
Payment terms are the rules about when and how you get paid. They decide your cash flow more than almost any other business choice. If you leave them vague, clients will pay when it suits them. This guide explains the common terms and helps you choose.
The most common terms
| Term | Meaning | Best for |
|---|---|---|
| 100% advance | Full payment before work starts | Small orders, custom products, new clients |
| 50% advance, 50% on delivery | Half to begin, half at handover | Freelance projects, design and development |
| Due on receipt | Payment expected immediately | Small invoices, retail, repeat jobs |
| Net 7 / Net 15 / Net 30 | Payment due 7, 15 or 30 days after the invoice date | Established clients and companies |
| Milestone-based | Payments tied to project stages | Long projects and contracts |
How to choose
- New client, unknown reliability: ask for an advance. A serious client will not mind.
- Long project: use milestones so you are never more than one stage ahead of the money.
- Corporate client: expect Net 30 to Net 45, but state your preference first and put it in writing.
- Small repeat work: due on receipt keeps things simple.
Write terms where the client will see them
Put your terms in the quotation, in any agreement and again on every invoice. A line like "50% advance to start work, balance within 7 days of delivery" removes ambiguity. Also state the due date as a calendar date, not just "Net 15".
Late fees: use them carefully
A late-payment clause, such as a small percentage per month on overdue amounts, must be agreed before the work starts to be fair and enforceable in practice. Many freelancers keep it as a polite deterrent rather than something they actually charge, and use it only with clients who ignore reminders.
What Indian law says for micro and small suppliers
If you are a registered micro or small enterprise (for example under Udyam registration) selling goods or services to a buyer, the MSMED Act sets limits on how long a buyer can delay payment. In general, where there is a written agreement the payment must be made within the agreed period, which cannot exceed 45 days. Delayed payments attract compound interest at a multiple of the bank rate notified by the Reserve Bank of India. There is also a facility for dispute resolution through the MSME Samadhaan portal. The details and eligibility are specific, so consult a professional before relying on this in a dispute.
Partial payments
When a client pays only part of an invoice, record the payment against that invoice and keep the balance visible. Billing software that tracks partial payments avoids the awkward "I thought I paid that" conversation.
Keep it friendly but firm
Clear terms are not rude. They show that you run a professional business. Most payment problems come from unclear expectations, not bad intent.
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