What Are Invoice Payment Terms?
Payment terms are the conditions under which you expect to be paid. They specify how long a client has to pay your invoice after it is issued. Setting clear payment terms on every invoice is one of the most effective things you can do to improve your cash flow.
Common UK Payment Terms
| Term | Meaning |
|---|---|
| Net 30 | Payment due within 30 days of invoice date |
| Net 14 | Payment due within 14 days |
| Net 7 | Payment due within 7 days |
| Due on receipt | Payment expected immediately |
| 50% upfront, 50% on completion | Deposit-based terms |
| EOM | End of month — payment due by the last day of the month the invoice was issued |
What Does UK Law Say About Payment Terms?
Under the Late Payment of Commercial Debts (Interest) Act 1998, if you do not specify payment terms, the default for business-to-business transactions is 30 days from the later of:
- The date the invoice was received, or
- The date the goods or services were delivered
For business-to-consumer (B2C) transactions, the default is also 30 days.
If your contract specifies different terms, those apply instead — but there are limits. Under the 2013 regulations, public authorities must pay within 30 days. For other commercial transactions, payment terms longer than 60 days are only valid if they are not "grossly unfair" to the supplier.
How to Set Payment Terms That Work for You
Short Terms for New Clients
For the first job with a client you don't know, use 14-day terms. Once you've established that they pay reliably, you can offer 30 days on future work.
Shorter Terms for Smaller Jobs
For jobs under £500, consider 7-day or due-on-receipt terms. The administrative overhead of chasing small invoices is disproportionate to the amount owed.
Deposit Requirements for Large Jobs
For jobs over £1,000–2,000, request a 30–50% deposit before starting. This:
- Covers material costs upfront
- Confirms the client's commitment
- Reduces your exposure if the client doesn't pay
Reward Early Payment
Consider offering a small discount (1–2%) for payment within 7 days. "2% discount if paid within 7 days" can be effective for cash-flow-conscious clients.
How to Include Payment Terms on Your Invoice
State payment terms clearly near the total amount:
"Payment due within 30 days of invoice date. Bank transfer to: [account details]. Late payment interest may be charged under the Late Payment of Commercial Debts Act 1998."
The reference to the Late Payment Act signals to clients that you know your rights and will enforce them — which reduces late payment in itself.
What Happens When Payment Terms Are Exceeded?
Statutory Interest
Once your invoice passes the due date, you are legally entitled to charge interest under the Late Payment of Commercial Debts (Interest) Act 1998. The current rate is the Bank of England base rate plus 8% — currently 12.25% per annum (as of June 2026).
Interest accrues from the day after the due date. Use our Late Payment Interest Calculator to calculate the exact amount owed.
Fixed Compensation
In addition to interest, you can claim a fixed compensation fee:
- £40 for debts under £1,000
- £70 for debts between £1,000 and £9,999
- £100 for debts of £10,000 or more
This is per unpaid invoice, not per client.
Reasonable Recovery Costs
If you incur costs chasing a late payment (e.g., solicitor's letters), you can claim these too, provided they are reasonable.
Payment Terms for CIS Subcontractors
If you work under CIS, your payment terms must be considered alongside the contractor's monthly return obligations. Contractors are required to file CIS monthly returns by the 19th of each month. In practice, many larger construction companies pay on a monthly schedule tied to this. Make sure your payment terms are compatible.
Enforcing Your Payment Terms
Step 1: Automated Reminders
Set up reminder emails at key intervals — 3 days before due, on the due date, and 3, 7, and 14 days after. Automation removes the awkwardness of manual chasing.
Step 2: Phone Call
If an invoice is more than 7 days overdue, call the client. Most delayed payments are due to internal processing issues that a quick conversation resolves.
Step 3: Formal Notice Under the Late Payment Act
After 14 days overdue, send a formal notice stating the interest accruing and your intention to pursue payment. Many clients pay immediately upon receiving this.
Step 4: Debt Recovery / Small Claims
For persistent non-payers, the small claims court process is straightforward for amounts under £10,000. The filing fee is proportional to the debt and is recoverable if you win.
FlashBill and Payment Terms
FlashBill automatically sends payment reminder emails at intervals you choose — before the due date, on the due date, and at custom intervals after. You can choose the tone: friendly, firm, or formal (Late Payment Act). The system calculates accruing interest and includes it in formal notices.