Payment Terms

What are payment terms?

Payment terms are the conditions on an invoice that say when payment is due, how it can be made, and what happens if it is late. They are agreed before the sale and repeated on every invoice. The usual parts are the due date, any early-payment discount, accepted payment methods, deposits and a late fee or interest clause.

Payment terms decide when cash arrives. A short deadline and a clear late clause get invoices paid sooner than a long deadline with no consequence. Net payment terms are the deadline part, and credit terms are the same conditions seen from the side of the seller extending credit.