ToolbeltDocsCommon payment terms and what they mean
These are the payment terms you'll see most often on invoices. The last column shows the due date for an invoice dated November 3, 2026, as an example.
| Term | What it means | Due date (invoice dated Nov 3, 2026) |
|---|---|---|
| Due on receipt | Pay as soon as the invoice arrives | Nov 3, 2026 |
| Net 7 | Pay within 7 days of the invoice date | Nov 10, 2026 |
| Net 15 | Pay within 15 days of the invoice date | Nov 18, 2026 |
| Net 30 | Pay within 30 days of the invoice date | Dec 3, 2026 |
| Net 60 | Pay within 60 days of the invoice date | Jan 2, 2027 |
| 2/10 Net 30 | Take 2% off if paid within 10 days; otherwise pay the full amount within 30 days | Nov 13 (with discount) or Dec 3, 2026 |
| COD | Cash (or payment) on delivery: pay when the goods or work are handed over | On delivery |
| Prepaid / CIA | Payment before the work starts or the goods ship ("cash in advance") | Before work starts |
How to work out the due date
Add the number of days in the term to the invoice date, counting calendar days, weekends included. Net 30 on an invoice dated November 3 is due December 3. Net 15 on the same invoice is due November 18.
Always print the actual due date on the invoice as well as the term. The customer, or their bookkeeper, shouldn't have to count days, and a printed date leaves nothing to argue about.
Deposits: how they work on an estimate and invoice
A deposit (also called a down payment) is part of the price the customer pays before work begins, often to cover materials and hold a place in your schedule. It is not an extra charge: it comes off the final bill.
Example only On a $4,800 job with a 25% deposit, the customer pays $1,200 up front. The final invoice shows the $4,800 total, subtracts the $1,200 deposit paid, and shows a balance due of $3,600.
Put the deposit on the estimate so the customer agrees to it before work starts. The job estimate template calculates the deposit and balance, and its "Convert to invoice" button carries the deposit over to the invoice. Some states limit how large a deposit a home improvement contractor can take, so check your state contractor licensing board before choosing a percentage.
Progress payments and retainage
Progress payments split a large job into stages, with an invoice for each stage as it is completed. They keep cash coming in on long jobs and show the customer exactly what each payment is for.
Example only A $20,000 job might be billed as $6,000 when work starts, $8,000 when rough-in is complete and $6,000 at final completion. The stages and amounts are whatever you and the customer agree in the contract.
Retainage (or retention) is a percentage of each progress payment that the customer holds back until the whole project is finished, as agreed in the contract. If your contract has retainage, show the amount retained and the net amount due on each progress invoice.
Early payment discounts: what 2/10 Net 30 means
"2/10 Net 30" means the customer can take 2% off if they pay within 10 days; otherwise the full amount is due in 30 days. Other numbers work the same way: "1/10 Net 30" is a 1% discount for paying within 10 days.
Example only On a $1,000 invoice dated November 3 with 2/10 Net 30 terms, the customer can pay $980 by November 13, or $1,000 by December 3.
Early payment discounts are more common between businesses, for example on supplier invoices for materials, than on bills to homeowners.
How to choose and show your payment terms
Choose terms your customers will accept and your cash flow can carry, agree them before the work starts, and use the same terms on the estimate and the invoice.
- Agree terms up front. Put the deposit and payment terms on the estimate or contract the customer signs.
- Match them on the invoice. Use the same term, and print the due date next to it.
- Say how to pay. List every payment method you accept, so there's no reason to wait.
- Put any late fee in writing first. Late fees should be in your agreed terms and allowed by your state's law.
- Follow up on the due date, not weeks later.
Freelancers and self-employed contractors can set terms the same way in the independent contractor invoice template. For everything else an invoice should show, see what to include on a contractor invoice.
Frequently asked questions
What does Net 30 mean?
Net 30 means the full invoice amount is due 30 days after the invoice date. An invoice dated November 3, 2026 with Net 30 terms is due on December 3, 2026.
Does Net 30 mean 30 business days?
No. Unless your agreement says otherwise, Net 30 is counted in calendar days from the invoice date, weekends included. Printing the actual due date on the invoice avoids any confusion.
Is "due on receipt" the same as "due immediately"?
In practice, yes: both mean the customer should pay as soon as they receive the invoice. Because some customers read it loosely, many contractors also print a specific due date, such as the same day or seven days later.
How much deposit can a contractor ask for?
It depends on your agreement and, for some work, your state. Some states limit the down payment a home improvement contractor can take before work starts. Check your state contractor licensing board before setting a deposit percentage.
Can I charge a late fee?
Only if the customer agreed to it in advance, for example in the estimate, contract or your written terms, and within the limits of your state law. Put the fee and when it applies in your terms before the job, not for the first time on an overdue invoice.
What is the best payment term for a small contractor?
There is no single best term. Many residential contractors ask for a deposit and payment on completion, while commercial customers often expect Net 30. Pick terms your customers will accept and your cash flow can handle, write them on the estimate, and use the same terms on the invoice.