By The AR Agent team · · 9 min read
Invoice terms and conditions are the short block of text on an invoice that tells the customer when to pay, how to pay and what to do if something is wrong. At a minimum they state the payment terms, the actual due date, the payment details, any reference the customer needs, such as a PO number, and who to contact with a query. Agreed late payment terms go here too.
They work best as a reminder of what the customer already accepted in your quote or contract, not as new terms.
On a business invoice, "terms and conditions" usually means a few lines near the total or at the foot of the page. They cover payment: the deadline, the method, the reference to quote, and what to do with a query.
They are not your full terms of business. Scope, liability, cancellation and the rest belong in the contract, statement of work or quote, which the customer accepts before you start.
A customer can reasonably say they never agreed to a condition that first appeared on an invoice after the work was done. The invoice repeats what was agreed, with the dates and amounts filled in. This is general information, not legal advice, and the rules differ by country and, in the US, by state.
These are the lines that help an invoice get paid. Most invoices need all of the first five.
State both. "Terms: Net 30. Due date: June 13." The terms tell the customer what was agreed. The date removes any argument about when the clock started.
If you use end of month terms, a deposit or stage payments, say so in plain words next to the date.
Give every detail the customer needs to pay without writing back: bank name, account name, account and routing numbers (or sort code in the UK), a payment link if you offer one, and the reference you want them to use. If you accept more than one method, list them.
Many customers cannot pay an invoice without a purchase order number, a project code or a named approver. Put it on the invoice. An invoice without the right PO often sits in an accounts payable inbox until someone notices, and nobody tells you. Our guide to purchase orders and invoices explains how the two fit together.
Name a person and an email address for billing questions. Then ask the customer to raise any query early, for example within 7 days of receiving the invoice. That gives problems a chance to surface while there is still time before the due date, rather than the week after it.
A query window does not stop a customer disputing an invoice later. It just makes the early conversation more likely. When a query does come in, our guide to handling an invoice dispute covers what to do next.
An invoice missing these gets held up: your business details, the customer's legal name and billing address, a unique invoice number, the invoice date, a description of the work, and the total with any tax shown separately.
If your contract includes a late fee or interest, the invoice should repeat it in one line. In the US, whether you can charge one, and how much, depends on the state and on what the customer agreed; our guide to late fees on invoices in the US sets out the general position. In the UK, businesses have a statutory right to claim interest and compensation on late commercial payments, explained in our guide to late payment interest in the UK.
Only include it if you would actually apply it. A fee you never charge teaches the customer that your terms are optional.
State the discount, the date it expires and the amount payable before then. Our guide to early payment discounts covers when one is worth offering.
The payment terms are the part customers read most closely. The common ones:
| Term | What it means on the invoice |
|---|---|
| Due on receipt | Pay as soon as the invoice arrives |
| Net 15 | Full amount due within 15 days of the invoice date |
| Net 30 | Full amount due within 30 days of the invoice date |
| Net 30 EOM | Full amount due 30 days after the end of the month the invoice is dated |
| Deposit, then balance | Part paid before work starts, the rest on the agreed date |
Our guide to Net 30 payment terms covers how to count the days and how to hold customers to them.
Due on receipt means the customer should pay as soon as they receive the invoice. There is no grace period built in.
Most business customers cannot pay that fast. Invoices go through approval and wait for the next payment run, so "due on receipt" often becomes "due whenever we next pay suppliers", with no clear date to follow up from.
It works best when:
If you use it, still write a date. "Due on receipt (by June 3 at the latest)" gives you a day to follow up from. For larger invoices to established customers, a short net term with a real date, like Net 7 or Net 15, is often clearer for both sides.
Copy the one that fits and fill in the brackets. Keep the wording consistent with your quote or contract.
A standard terms block for net terms:
Payment terms: [Net 30] from the invoice date, as agreed in
[Quote or contract reference].
Due date: [Due date]
Please pay by bank transfer to:
[Account name], [Bank name]
Account: [Account number] Routing / sort code: [Routing or sort code]
Reference: [Invoice number]
PO number: [PO number]
Questions about this invoice? Contact [Your name] at [Billing email]
within 7 days of receipt so we can resolve them before the due date.
[Late payment line, only if agreed: Overdue balances may be charged
[Rate or fee], as set out in [Contract reference].]
A due on receipt version for a deposit:
Deposit invoice for [Project name]
Payment terms: Due on receipt. Work begins on [Start date] once
this deposit is received.
Please pay by [Payment date] to:
[Payment details]
Reference: [Invoice number]
The balance of [Amount] will be invoiced on [Milestone or date]
on [Payment terms].
For stage payments on longer projects, our guide to progress billing has wording for each stage invoice.
Say a design agency invoices $9,500 for a website project, dated May 14, on Net 30. The first version of the invoice reads "Payment due within 30 days. Thank you for your business." No due date, no PO, no bank details.
The customer needs a PO before they can pay, so the invoice sits, and nobody tells the agency. On day 35 the agency follows up, learns about the PO and reissues the invoice. The customer counts 30 days from the reissue.
The better version says "Terms: Net 30. Due date: June 13. PO: [PO number]. Pay by bank transfer to [details], reference [Invoice number]. Questions to [Billing email] within 7 days." The PO is settled before the invoice goes out, not five weeks later.
If a customer's purchase order carries its own terms, such as a longer payment period, settle which apply before you accept the order.
At a minimum: the payment terms, the actual due date, how to pay, any reference the customer needs such as a PO number, and who to contact with a query. Add late payment terms only if you agreed them with the customer and intend to apply them. Keep the full terms of business, such as scope and liability, in the contract or quote rather than on the invoice.
It depends on the country, the state and what was agreed before the invoice was sent. In general, terms the customer accepted in a quote or contract carry far more weight than terms that first appear on an invoice after the work is done. Put your terms in the agreement, repeat them on the invoice, and take advice for anything that matters.
Due on receipt means the customer should pay as soon as the invoice arrives, with no grace period. Many business customers still pay on their next payment run, so add a specific date, such as "due on receipt, by June 3 at the latest", to give yourself a clear point to follow up from.
Payment terms are one part of your terms and conditions: when the invoice must be paid, such as Net 30 or due on receipt. Terms and conditions on an invoice usually also cover how to pay, the reference to quote, who to contact with a query, and any agreed late payment terms or early payment discount.
Clear invoice terms give you a date to work from. The AR Agent works from it. It reads due dates from QuickBooks or Xero and follows up overdue invoices by email, at the right time for each customer. It reads the replies. If the customer says the invoice needs a PO or went to the wrong contact, it identifies that blocker instead of sending another reminder. If they promise to pay on a date, it tracks that promise and follows up if it is missed. When a customer disputes the invoice, normal chasing pauses and the right person is brought in. Every email and promise stays on the customer's record.
Talk to us: our AI agent chases your invoices until you are paid.
None. This guide uses invented examples and contains no statistics. Legal points are general information only; the linked US and UK guides cite their official sources.
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