Payment terms: types, examples and legal limits

What payment terms are

Payment terms are the conditions a seller and a buyer agree on for paying an invoice: how much is due, by which date, how to pay, and what happens if the money arrives late. A typical example is Net 30, which means the full amount is due 30 days after the invoice date. Other terms ask for payment before delivery (cash in advance), on delivery (cash on delivery) or reward early payment with a discount (2/10 net 30).

You will also see them called credit terms, terms of payment, invoice terms or trade terms. "Payment terms" in the plural usually means the whole set of conditions. "Payment term" in the singular often refers to one of them, such as the due date.

What complete payment terms include

• The trigger date. The day the clock starts: invoice date, receipt of the invoice, delivery or acceptance of the goods.
• The due date. A number of days (Net 30) and, on the invoice, the calendar date it falls on.
• Amount and currency. Including taxes, and who pays bank or currency conversion charges.
• Payment method. Bank transfer, card, direct debit or check, with the account details.
• Early payment discount, if you offer one.
• Late payment consequences. Interest, fixed recovery compensation and when you stop supplying.
• A dispute window. How many days the buyer has to raise a problem with the invoice.

Terms belong in the contract, quote or order confirmation that the buyer accepts before delivery. The invoice repeats them. A term that first appears on the invoice is easier for a buyer to contest.

Types of payment terms: every common term explained

The table lists the payment terms you are likely to meet on invoices and in contracts, what each one means, and wording you can copy. Replace the text in brackets with your own figures.

Net terms: when does the clock start?

Net terms count calendar days, weekends and holidays included, from a trigger date. Most invoices use the invoice date. Contracts can instead use the date the buyer receives the invoice, delivery, or acceptance after an inspection. If the contract says nothing, the EU rule is 30 calendar days from the buyer's receipt of the invoice (or of the goods, if those arrive later or the invoice date is uncertain) [1]. Write both the term and the calendar due date on the invoice ("Net 30, due by 14 November") so nobody has to count.

EOM terms: two meanings

"EOM" is used in two ways. Some sellers mean payment is due at the end of the invoice month. Others write "Net 30 EOM" to mean 30 days after that month ends, which gives the buyer up to about 60 days. Spell out which one you mean. France allows a contractual alternative of 45 days end of month (45 jours fin de mois) instead of 60 days from the invoice date [11].

What 2/10 net 30 really costs

Under 2/10 net 30 a buyer who skips the discount keeps 98% of the money for 20 more days and pays 2% for it. As a yearly rate that is 2 ÷ 98 × 365 ÷ 20, or about 37% (our calculation). For a buyer with cash, taking the discount is usually good business. For a seller, it is an expensive way to get paid 20 days sooner, so offer it when early cash matters more than margin.

Retention in construction

Retention (retainage in the US) protects the buyer if work turns out to be defective. It also means part of the contractor's money waits until the end. On US federal construction contracts, retainage withheld may not exceed 10 percent of the approved estimated amount [8]. In the UK, the Commercial Payments Bill, before the House of Lords in 2026, would ban retention clauses in the construction sector [4].

How to choose the right payment terms

Shorter terms protect your cash. Longer terms win orders. The right balance depends on who the buyer is, how much is at stake and where they are.

Questions to answer before you set terms

• How long can you wait? Add the term to your own production or delivery time. That is how long you finance the sale.
• What does the buyer's track record say? A credit check before the first order is cheaper than a write-off.
• What is normal in your industry and in the buyer's country? Terms far shorter than the norm lose orders. Terms far longer cost you money.
• What does the law allow? In the EU and UK, 60 days is the usual ceiling between businesses and 30 days for public authorities. See the next section.
• What will you do if they pay late? Decide your reminder schedule and late interest before the first invoice, and write them into the terms.

Legal maximum payment terms by jurisdiction

Many countries limit how long a business can make a supplier wait. In the EU and the UK the general rule is 60 days between businesses and 30 days when a public authority pays, with a right to interest and a fixed recovery charge when payment is late. In the US there is no general cap between private businesses. Federal agencies must pay within 30 days under the Prompt Payment Act.

Two points matter in practice. First, a contract term that excludes late payment interest is treated as grossly unfair under the EU directive, and one that excludes the fixed recovery charge is presumed grossly unfair [1]. Second, member states may keep rules that are stricter than the directive, which is why Spain and France differ from the EU baseline [1].

Changes on the way

• EU. In 2023 the European Commission proposed replacing the directive with a regulation that would cap payment periods at 30 calendar days in both B2B and public sector transactions [2]. Until a new law is adopted, the 2011 directive and national laws apply.
• UK. The Commercial Payments Bill [HL] would set new rules on payment terms in commercial contracts and on late payment interest, ban retention clauses in construction and give the Small Business Commissioner more powers. It was before the House of Lords in September 2026 [4].

This table is a summary, not legal advice. Sector rules (for example transport and food) can be shorter. Check the law that governs your contract, and see our overview of debt collection laws.

Average payment terms by country

What do businesses actually offer? The Atradius Payment Practices Barometer 2026 asked 2,945 businesses in Western Europe, surveyed between the end of the first quarter and the start of the second quarter of 2026, about their average payment terms and their days sales outstanding (DSO, the average number of days it takes to collect an invoice) [13]. The table shows the share of businesses in each band.

*Atradius labels the first band "<30 days" and starts the next band at 31 days. Source: Atradius Payment Practices Barometer, Western Europe 2026, statistical appendix [13].

What the numbers say

• Short terms are the norm. Across the region, 65% of businesses keep average terms in the shortest band. Only 6% go beyond 60 days [13].
• Italy is the outlier. Only 40% of Italian businesses are in the shortest band and 15% offer 61 to 90 days, the highest share in the survey [13].
• Agreed is not the same as paid. In Sweden, 68% of businesses set terms in the shortest band but only 44% report a DSO under 30 days. Atradius reports that DSO has edged above agreed payment terms across the region [13][14].
• Credit is widespread and late payment is common. Around 52% of B2B sales in Western Europe are made on credit, about one quarter of invoices are paid after the due date, and credit losses average 1.6% of B2B invoiced turnover [14].

For country-by-country collection data, see the Global Collection Report, for example the pages on Germany and the United Kingdom.

Payment terms examples: wording for invoices and contracts

Copy the block that fits and replace the brackets. Keep the same wording in your contract, your order confirmation and your invoice.

Standard Net 30 on an invoice

Payment terms: Net 30. Please pay [amount and currency] by [due date], 30 days from the invoice date, by bank transfer to [account details]. Please quote invoice number [number] as the payment reference.

Early payment discount (2/10 net 30)

Terms: 2/10 net 30. You may deduct 2% ([amount]) if payment reaches us by [date, 10 days after the invoice date]. Otherwise the full amount of [amount] is due by [date, 30 days after the invoice date].

Due on receipt

Payment is due on receipt of this invoice. Please pay [amount] to [account details] and quote invoice number [number].

Deposit and stage payments for projects

A deposit of [x]% ([amount]) is due before work starts. The balance is invoiced in [number] stages as set out in the schedule. Each stage invoice is payable within 14 days of the invoice date. Work on the next stage starts when the previous stage is paid.

B2B invoice to a customer in the EU

Payment is due within 30 days of the invoice date. If payment is late, we are entitled to statutory interest for late payment and to a fixed compensation of EUR 40 for recovery costs under Directive 2011/7/EU as implemented in [country], without further notice.

B2B invoice to a customer in the UK

Payment is due within 30 days of the invoice date. If payment is late, we may claim interest and fixed compensation for debt recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998.

B2B invoice to a customer in the US

Payment due within 30 days of the invoice date (Net 30). Balances unpaid after the due date accrue interest at [rate]% per month or the highest rate permitted by law, whichever is lower.

Payment clause for a contract

The Customer shall pay each invoice within 30 days of the invoice date. The Customer shall notify the Supplier in writing of any disputed amount, with reasons, within [10] days of receiving the invoice. Undisputed amounts remain payable on the due date. If any amount is not paid when due, the Supplier may charge interest at [rate or the statutory rate] and suspend further deliveries until payment is received. This Agreement is governed by the laws of [country].

US states set their own limits on interest and late fees, so check the rate before you use it. These examples are a starting point, not legal advice.

How to set and enforce payment terms in 7 steps

1. Pick terms per customer group. For example: prepayment for new customers, Net 30 for established ones, stage payments for projects.
2. Get the terms accepted before delivery. Put them in the contract, quote or order confirmation and keep proof the buyer accepted them.
3. Invoice right away and completely. Show the invoice date, the term, the calendar due date, the amount, the currency, bank details and the order reference. Add the buyer's purchase order number if they use one, so their accounts payable team can match and approve the invoice.
4. State the late payment consequences. Interest, fixed compensation where the law gives it, and when deliveries stop.
5. Remind on a schedule. A friendly note before the due date, a reminder on the day after, and a firmer one a week or two later.
6. Send a final demand. A formal letter with a last date and the next step. Use our demand letter templates.
7. Escalate while the claim is fresh. Hand an undisputed overdue invoice to a collector before it gets old. Read how debt collection works.

For the full process from invoice to cash, see our accounts receivable guide.

How payment terms affect collecting from customers abroad

When a foreign customer does not pay, your payment terms decide how strong your position is. Four things matter most.

1. Clear terms keep a claim undisputed

Collection before court works best on claims the debtor cannot reasonably dispute. That means terms the buyer accepted in writing, an invoice that matches the order, proof of delivery and a record of your reminders. Vague terms invite a dispute, and a disputed claim usually needs a lawyer and more time.

2. Which country's law applies

Within the EU, the Rome I Regulation (Regulation 593/2008) lets the parties choose the law that governs their contract. If they do not choose, a sale of goods is governed by the law of the country where the seller has its habitual residence, and a service contract by the law of the service provider's country [15]. Write a governing law clause into your terms. Collection itself still happens in the debtor's country, under local procedure, which is why a local agency or law firm is usually needed.

3. Interest and recovery costs come with the invoice in the EU

Every EU country must give a business creditor statutory interest of at least the reference rate plus 8 percentage points and a fixed EUR 40 for recovery costs, without the need for a reminder [1]. Some countries go further, such as Germany at 9 points above the base rate [10] and France at the ECB rate plus 10 points [11]. Put these rights in your terms so the debtor sees them before the due date. Each EU country must also make it possible to get an enforceable title for an undisputed claim, normally within 90 calendar days of filing [1].

4. Local payment culture and the age of the claim

Expect slower payment where terms are longer, such as Italy [13], and plan your reminders around it. Do not let claims age: the older an invoice, the harder it is to collect, and limitation periods differ by country. Debitura prices claims over 12 months higher than newer ones, and shows the extra cost before you submit. See our accounts receivable guide and the list of countries we cover.

When a customer does not pay on time

Good terms reduce late payment. They do not end it. When an undisputed invoice is still unpaid after your reminders and final demand, Debitura can take it from there.

Debitura is a debt collection platform. Each claim is matched to a licensed local collection agency or law firm in the debtor's country, which collects under local law. You sign one Standard Debt Collection Agreement once, and it applies to every country. Every case, message and payment sits on one platform, and you can chat with the collector on the case directly.

• Coverage: 180 countries, for business and consumer debtors.
• Price: No Cure, No Pay. $0 upfront, and you pay a success fee only when money is recovered. Fees start from 6% in Europe and 7.5% elsewhere, depending on claim size and the debtor's country, and you see the fee before you submit. See pricing.
• Speed: median 33 days to first payment on European cases.
• Legal action is optional, quoted separately, and starts only if you accept.

See how it works.

Deeper reads on payment terms

• Net 14 payment terms
• Demand letter templates and the accounts receivable guide
• Small claims court guide