Payment Terms
Payment terms define when invoices are due, how clients pay, and what happens when payment is late. Clear terms protect contractor cash flow.
Quick definition
Payment Terms means Payment terms define when invoices are due, how clients pay, and what happens when payment is late. Clear terms protect contractor cash flow.
What are payment terms?
Payment terms spell out when and how a client must pay for work or materials. They belong in every contract, estimate, and invoice.
Without clear terms, "Net 30" becomes "whenever they feel like it."
Common payment terms
| Term | Meaning |
|---|---|
| Due on receipt | Pay immediately when invoiced |
| Net 15 / Net 30 | Pay within 15 or 30 days of invoice date |
| 50% deposit / 50% completion | Split payment by milestone |
| Progress billing | Pay per schedule of values draw |
| Retainage | Holdback until closeout |
Match terms to job size, client type, and your cash flow needs.
What to specify beyond due date
- Accepted methods (check, ACH, card, etc.)
- Late fees or interest where allowed
- Dispute notice process
- Lien or stop-work rights for non-payment
- Taxes and who pays permits
Put terms in writing before mobilization.
Payment terms vs progress payments
Payment terms are the rulebook. Progress payments are individual bills under those rules. A draw schedule without defined due dates still leaves collection vague.
Best practices
Shorter terms on small residential jobs. Long Net 60 on a bathroom remodel strains cash.
Tie deposits to real costs. Material deposits should not fund unrelated overhead.
Invoice the day work is approved. The clock starts on invoice date for Net terms.
Follow up before due date. A reminder beats a collections call.
Payment terms turn handshake deals into enforceable expectations. Boring paperwork keeps the lights on.
Related glossary terms
Related resources and tools
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