15 Essential Payment Terms to Include on Your Business Invoices

Every business owner has, at least once, experienced the awkward moment of waiting for payment after sending an invoice. Will it take minutes, hours, or days? Should I send a follow-up reminder?

It can be stressful, messy, and often put unnecessary strain on the relationship. This is where the concept of well-defined payment terms comes into play. The use of the right invoice payment terms defines invoice due dates, governs payment responsibilities, and sets expectations for remittances. 

15 Essential Payment Terms to Include in Business Invoices

Let us help you understand 15 essential payment terms you should include in every invoice. We will break down what each payment term means, its significance, and how to effectively utilize it in your billing. 

1. Invoice Date

The invoice date serves as the official timestamp to tell your client when the invoice was issued and when the payment is due. When you clearly state this date in the invoice, you minimize confusion, reduce payment delays, and create a reliable official document for your records. 

With the help of Venn’s invoicing tool, you can automatically generate and timestamp the invoice. You can also send branded invoices, accept payments via bank transfer or credit card, and stay on track with the help of Xero or QuickBooks. 

Ready to streamline your invoicing? Try Venn's free invoice generator now.

2. Payment Due Date

The payment due date is the calendar day by which your client is expected to pay to avoid penalties or late fees. It is your assurance of on-time payment. 

Some of the common terms include Net 7, Net 10, Net 30, Net 60, and Net 90. These terms simply mean that the payment is due 7, 10, 30, 60, and 90 days post the invoice date. You can also use “2/10 Net 30” to offer a 2% discount if the payment is made within 10 days, with full payment due in 30 days. 

3. Accepted Payment Methods

It is essential to clearly outline the payment options available to clients, including ACH transfers, bank transfers, debit/credit cards, and modern digital payments. This helps clients choose what is preferable without wasting time. 

The benefit is simple: fewer payment delays, less time spent chasing invoices, and faster processing. When clients know exactly how you prefer to get paid, you require fewer follow-ups. This mechanism also supports timely collections and communicates supplier expectations. 

4. Late Payment Penalties

When invoices are not paid on time, adding an interest charge or a late fee can help. For example, you can impose a percentage-based fee on the outstanding balance. This form of penalty applies to vendor agreements and encourages clients to prioritize timely payments.

More importantly, when you clearly list a late-payment penalty on the invoice, it serves as a reminder to make prompt payments and helps structure customer billing cycles. 

5. Early Payment Discounts

When you clarify cash discount policies, such as 1-2%, it offers a clear incentive to pay early. For example, “2% off if paid within 10 days, otherwise Net 30,” can meaningfully communicate supplier expectations to help your business effectively manage expenses.  

Moreover, this gesture also boosts client goodwill and shows you value flexibility and timeliness. 

6. Currency of Payment

Always specify the currency you expect, especially when making international payments. For example, “Please remit in CAD unless otherwise arranged” or “All payments to be made in USD.” 

When you state the currency upfront, you make it clear whether the invoice is in CAD, USD, or another currency. This ensures that your international clients pay on time by understanding the foreign exchange implications. 

7. Advance Payment or Deposit Terms

Deposit terms or advance payments ask customers to pay a portion, or even the full amount, before work starts. This shows commitment and supports timely collections.

When deposit terms are specified, it helps you cover initial costs and minimizes the risk of unpaid work or project cancellations. At the same time, advance payments ensure that your business is compensated upfront, maintaining a healthy cash flow throughout.  

8. Invoice Number / Reference

The invoice number or reference is a unique code that facilitates easier tracking of billing in accounting systems. You can use either “INV-2025-007” or “Client-X Aug” to keep everything organized, especially when dealing with multiple transactions. 

When you assign a distinct number to each invoice, you can reduce mix-ups and maximize clear communication between clients & teams. 

9. Client Purchase Order (PO) Number

A Client PO Number is a powerful reference tool. It connects your invoice to the customer’s purchase order, making it easier for the finance team to confirm that the bill matches what was approved. 

This additional proof minimizes back-and-forth questions and supports timely collections. PO numbers are quite beneficial in large organizations where purchase orders are used to control budgets across multiple departments and projects. 

10. Bank Details

Ensure that the invoice includes all relevant bank information, including the account number, transit/routing number, and any additional details necessary for a smooth bank transfer. 

With this clarity, your clients will pay on time and accurately. Well-defined banking details make sure that your money is in the right place safely. 

11. Dispute Resolution Terms

You can include dispute resolution terms in the invoice to communicate supplier expectations related to how payment issues will be handled. This approach benefits both parties by keeping resolutions more predictable and faster.

When both parties agree upfront on how disputes will be resolved, clients gain better peace of mind, and you can protect cash flow from unwanted delays. 

12. Delivery Terms

It is important to clearly specify how and when your products will be delivered. You should also specify whether or not delivery costs are included. For example, “Services start on December 1 without any travel fee,” or “Delivery within 5 business days, shipping included.”

With this information, you can reduce any guesswork related to timing, handoff details, or extra charges. 

13. Tax Information

Your business invoice should clearly display any applicable taxes, such as local sales tax and HST/GST. This useful tax information should be presented right next to the relevant line items, along with the exact rate (e.g., “VAT 20%” or “GST 5%”). 

When you provide exact tax details in the invoice, it helps your client stay compliant with existing tax regulations, especially during audits or filings. To top it all, well-defined tax info means effective bookkeeping and faster claims. 

Learn how GAAP principles apply to invoicing and tax reporting.

14. Legal Jurisdiction

This information on the invoice indicates which legal system or court will handle any form of dispute. When you specify a clear jurisdiction, both sides know exactly where they should go if things go wrong.

When you name your jurisdiction upfront, it ensures that both parties remain on the same legal footing, making disputes easier to manage. 

15. Contact Information for Payment Queries

Regardless of how your business invoice appears, clients may still have certain questions, especially regarding line items, accepted payment methods, or due dates. This is why you should include direct contact information for payment queries.

• A phone number or extension for accounts receivable
• A dedicated email address
• The name of the contact person
• An in-app chat option 

Difference Between Payment Terms and Credit Terms

The primary difference between payment terms and credit terms lies in their purpose. Payment terms define how & when a customer is expected to settle the invoice. For example, specify “Net 30” to indicate that the invoice should be paid within 30 days. 

On the other hand, credit terms set specific conditions under which a business extends credit to the respective customers. They should outline the “amount of credit available” and the decided repayment period. 

Typically, payment terms guide invoice timelines, and credit terms govern access to credit. Both are important to keep cash flow predictable. 

How to Communicate Payment Terms to Clients Effectively

When both parties agree on the terms before any work starts, you can set expectations and help clients understand what is expected & when. When you embed these payment terms directly into the contract or business invoice, you eliminate all possible guesswork.

Think concise phrasing or bold due dates like “Payment due within 30 days of invoice date.” Support this information with verbal communications during follow-ups or onboarding, along with a friendly handwritten reminder before payment is due. 

Optimize Your Business Finances with Venn

When you have to manage FX transfers, global payments, and expense reporting, all of these tasks across multiple platforms can consume ample time and increase the risk of expensive errors. Venn aims to bring everything into a single place. This helps you improve operations and focus on overall growth.

Automation remains at the core of Venn. Error detection, real-time reconciliation, and two-way syncing with Xero & QuickBooks reduce manual bookkeeping chores. Venn’s customizable dashboards provide businesses with complete visibility into information such as vendor payments, FX fees, and balances in real-time.

Want to cut manual work, improve cross-border planning, and avoid reconciliation surprises? Understand how Venn can optimize your business finances now! Even small errors, such as digit swaps, can create significant reconciliation issues. Learn more here.

Key Takeaways

• Clear payment terms protect your cash flow. They set expectations upfront and minimize delays or disputes.
• Details matter: including invoice dates, due dates, accepted payment methods, and penalties creates smoother client relationships.
• Tools like Venn simplify invoicing by automating due dates, syncing with QuickBooks/Xero, and supporting multi-currency payments.

Frequently Asked Questions (FAQs)

Are Payment Terms Legally Binding?

Yes, payment terms are legally binding. Both parties should agree, and these terms should be documented to become a part of contractual obligations. It is always preferable to encourage early communication and resolution with the help of clarification calls, friendly reminders, and structured follow-ups. 

Can You Offer Multiple Payment Methods?

Yes. When you offer multiple payment options, such as checks, bank transfers, debit/credit cards, and others, your customers enjoy ample convenience and flexibility. Venn’s invoicing supports major credit cards and bank transfers to help your clients choose what’s best for them. 

Is it Okay to Customize Payment Terms Per Client?

Yes. When you customize payment terms, especially for high-value or long-term clients, it supports stronger relationships and offers clients a sense of special services. Always make sure that all custom terms are transparent and documented in writing. 

Do Payment Terms Affect Cash Flow?

Yes. Payment terms directly affect cash flow. Shorter payment terms (like Net 15) or early-payment discounts can boost incoming funds and improve liquidity. On the other hand, longer payment terms (like Net 60 or Net 90) will slow the process down.