Invoice payment terms

By Annapoorna


Updated on: Jan 10th, 2022


3 min read

social iconssocial iconssocial iconssocial icons

Getting paid on time against your sales invoices is a crucial factor for the success of any business organisation. So, setting the right invoice payment terms is essential for the healthy growth of a business.

What are invoice payment terms?

Invoice payment terms are agreed terms of payment between a customer and a business entity. Small businesses mention payment terms on the bill itself. Payment terms outline when the payment is due, invoice amount due, the period within which the customer shall make the payment, etc. Transparent payment terms ensure that you get paid on time. It also helps to chase late payments. 

What are the popular invoice payment terms used by businesses?

Here are a few popular business terms used by businesses while generating invoices:

  • PIA- Payment in advance
  • Net 7, 10, 30, 45 or 60 days- It means payment is expected within 7, 10, 30, 45 or 60 days from the invoice date.
  • CIA- Cash in advance
  • COD- Cash on delivery
  • EOM- End of month
  • CBS- Cash before shipment
  • Contra- Payment from customers, is offset by the cost of goods sold.
  • 50% upfront- It means the customer should pay 50% of the total invoice value before the project starts.
  • 3/10 Net 30- It means the payment is due within 30 days of the invoice date, but the company provides an additional discount of 3% if payment is received within 30 days.  

Invoice payment term challenges among small businesses

Setting up invoice payment terms is crucial in protecting your business financially. Here are a few of the challenges which arise with invoice payment terms and how to avoid them:

  • Payment security: Online payments have become a norm in modern days. All payment platforms are not trustworthy, and there are a lot of frauds happening. So, it is important to make sure that the transactions are secure to earn client trust. 
  • Tracking of invoices: Businesses find it difficult to manage funds and allocate them to the appropriate divisions within your business organisation. Try to build a clear invoicing system and state clear payment terms to streamline its cash flows.
  • Unpaid invoices: Unpaid invoice is a common problem for small businesses. By setting clear payment terms, one can ensure that your guidelines are clear. 

Ways to improve invoice payment terms

Below are some of the ways to improve invoice payment terms:

  • Offer discounts to encourage early payment: Businesses can offer discounts to early payers. This enables them to make early payments.
  • Online invoicing: Cloud accounting software enables you to send email invoices to your customers quickly, thus speeding the payment process.
  • Use technology: Use cloud forecasting tools to predict the likely customers time of payment. The finance team can prioritise the right customers keeping this data in mind.
  • Review the client base: Every business should review its customer base on a timely basis to identify customers making late payments consistently. Such customers are more of a threat than an asset. One can offboard such customers in the long run.
  • Make payments easy: Use the latest payment gateways, providing the customers with easy and multiple ways to settle the bill. Also, specify how you accept payments such as bank transfers, card payments, digital wallets, etc. Use accounting software that provides one-click payment links in the e-invoice itself, such as ClearOne.
About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more


Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use


ISO 27001

Data Center


SSL Certified Site

128-bit encryption