Invoice Payment Terms Explained: Net 30, 2/10 and EOM

What are invoice payment terms?

Invoice payment terms state when and how a customer must pay. “Net 30” means the full amount is due 30 calendar days after the invoice date. “Due on receipt” means pay now. “2/10 net 30” offers a 2% discount for paying within 10 days, otherwise the full amount is due at day 30.

That is the short version. The longer version matters because a term is only useful if both sides read it the same way. “Net 30 EOM”, “15 MFI” and “30 days from receipt” can produce due dates weeks apart for the same invoice, and an early-payment discount that looks small is often one of the most expensive forms of finance a business can offer.

Common payment terms and the due date each one gives

The table below takes one hypothetical invoice dated Tuesday 20 October 2026 and applies each term to it. Seeing the dates side by side is the quickest way to spot how much the wording matters. Day counts are calendar days, starting the day after the invoice date.

Three of those dates land on a weekend. Neither a Net term nor an EOM term says what happens then, so it is worth deciding in advance. Some businesses treat a weekend due date as the next working day; others expect payment on the last working day before it. Whichever you choose, putting the actual calendar date on the invoice removes the question.

What does Net 30 mean, exactly?

“Net” is the full invoice amount after any discounts already shown on the invoice. “30” is the number of calendar days the customer has to pay it. Weekends and bank holidays count. Day 1 is the day after the invoice date, so an invoice dated 20 October on Net 30 is due on 19 November.

The most common argument about Net 30 is where the 30 days start. Most invoices mean the invoice date. Some customers’ purchasing terms say the clock starts when they receive the invoice, or when they accept the goods. If our invoice dated 20 October arrives on 23 October and the customer counts from receipt, their due date is Sunday 22 November, three days later than yours.

Three days is small on one invoice. Across a year of monthly invoices it becomes a permanent three-day lag in your cash, and if the customer also runs a fortnightly payment cycle it can quietly become two weeks. If a customer sends you their own supplier terms, read the definition of “due date” before you accept the account.

Net 30 vs due on receipt

“Due on receipt” gets you paid fastest on paper, but it has a weakness: it has no fixed date. A customer who pays on the fourth day and one who pays on the twentieth can both argue they paid promptly, and there is no specific day on which the invoice becomes overdue. That makes follow-up awkward.

Net 7 or Net 14 is often a better choice for small businesses and freelancers who want fast payment. It still asks for quick payment, but it gives a hard date that you can quote in a reminder. Net 30 is the norm for many business customers because it fits a monthly payment run, and many accounts departments will simply not pay faster without a reason.

EOM, MFI and other month-based terms

Month-based terms exist because many customers pay suppliers in one batch per month. Instead of a due date that floats with each invoice, EOM (end of month) and MFI (month following invoice) terms line every invoice from the same month up to the same payment day.

• EOM or net EOM: due on the last day of the month in which the invoice is dated. An invoice dated 20 October is due 31 October.
• 10 EOM: due 10 days after the end of the invoice month, which is the 10th of the following month. For our invoice, 10 November.
• 15 MFI: due on the 15th of the month following the invoice. For our invoice, 15 November. In practice 10 EOM and 10 MFI give the same date, and people use both labels.
• Net 30 EOM: due 30 days after the end of the invoice month. For our invoice, 30 November.
• End of month following: due on the last day of the month after the invoice month. For our invoice, also 30 November.

The last two look identical in the October example, but they are not the same term. Take an invoice dated 31 January 2027. Net 30 EOM is 30 days after 31 January, which is Tuesday 2 March 2027. End of month following is the last day of February, Sunday 28 February 2027. Whenever the following month is not 30 days long, the two drift apart.

EOM terms reward the supplier who invoices early in the month. On Net 30 EOM, an invoice dated 1 October waits until 30 November, 60 days. One dated 31 October waits 30 days. If a large customer insists on EOM terms, invoicing the moment work is done rather than at the end of the month is worth up to a month of cash.

What does 2/10 net 30 mean, and what does it really cost?

“2/10 net 30” means the customer can deduct 2% if they pay within 10 days; otherwise the full amount is due within 30 days. On a $20,000 invoice, the customer pays $19,600 by day 10 or $20,000 by day 30. The same pattern works for any numbers: “1/15 net 45” is 1% off within 15 days, full amount within 45.

Two percent sounds modest. The catch is the time period. The customer is being paid 2% for handing over money 20 days early, and 20 days is a small fraction of a year. Annualise it and the rate becomes large.

Worked example: 2/10 net 30

• Return for the 20-day period: 0.02 ÷ 0.98 = 0.020408, or 2.0408%.
• Simple annual rate on a 365-day year: 2.0408% × 18.25 = 37.24%.
• Simple annual rate on a 360-day year: 2.0408% × 18 = 36.73%. This is the figure most textbooks quote.
• Compounded annual rate on a 365-day year: 1.020408^18.25 − 1 = 44.59%.

Whichever version you use, the answer is somewhere between 37% and 45% a year. From the customer’s side, that is an excellent return on spare cash, better than almost any savings account, and worth borrowing to take. From the seller’s side, it is the cost of getting paid 20 days early, and that is expensive money.

Two patterns stand out. The rate depends far more on the gap between the discount day and the net day than on the discount itself: 2/10 net 60 costs less than half as much per year as 2/10 net 30. And the rate rises faster than the discount: going from 2% to 3% on the same days raises the compounded cost from 44.59% to 74.35%.

If you want to check a discount you are being offered, or one you are about to offer, the discount calculator gives the cash amounts and the simple interest calculator lets you compare them with what a loan or overdraft would cost for the same number of days.

Is an early-payment discount worth offering?

For the seller, a prompt-payment discount is a way of buying cash. The question is whether it is the cheapest way. Here is a hypothetical comparison.

Say a manufacturer invoices a customer $20,000 on 2/10 net 30 and the customer takes the discount. The manufacturer receives $19,600 on day 10 instead of $20,000 on day 30. The discount costs $400. Now suppose the manufacturer has an overdraft at 12% a year. Borrowing $19,600 for the same 20 days would cost $19,600 × 12% × 20 ÷ 365 = $128.88.

On pure finance cost, the overdraft wins by $271.12. There is a second way to look at it too. If the manufacturer’s gross margin on the sale is 25%, the gross profit is $5,000, and the $400 discount gives away 8% of it. A seller who offers 2/10 net 30 across all customers needs to price that in, which is covered in the guides to profit margins and markup and overheads.

When the discount can still make sense

• When you cannot borrow at all. A new business without an overdraft or credit line may have no cheaper source of cash, and running out of cash is more expensive than any discount.
• When the customer would otherwise pay late. If a customer habitually pays on day 50 rather than day 30, the discount buys 40 days, not 20. The compounded annual rate on 2/10 falls to 20.24% (18.62% simple). Still expensive, but closer to other finance.
• When the risk of non-payment is real. Money in the bank on day 10 cannot go bad. For a customer whose finances worry you, a small discount can be cheaper than a bad debt.

Compare the discount with factoring as well. Selling the invoice to a factor also brings the cash forward, at a fee plus interest. The invoice factoring cost calculator turns a factor’s quote into an annual rate you can set against the discount figures in the table above.

How payment terms change your cash flow and DSO

Every day of credit you give is money you have earned but cannot spend. Days sales outstanding (DSO) measures how many days of sales are sitting unpaid on average, and your payment terms set the floor for it: a business on Net 60 cannot have a DSO much below 60 unless customers pay early.

Worked example: moving from Net 60 to Net 30

Say a small wholesaler makes $1,095,000 of credit sales a year, which is $3,000 per day. It offers Net 60, and customers pay on average eight days late, so its DSO is 68 days. It moves new accounts to Net 30 and keeps the same eight-day lateness, so DSO falls to 38.

Shortening terms by 30 days releases $90,000 of cash once, because that money is no longer waiting in customers’ bank accounts. If the business had been borrowing to cover the gap at 9%, it also saves $8,100 a year in interest. Sales did not change at all.

The same arithmetic runs in reverse. Agreeing Net 90 with one large customer who buys $1,000 a day, instead of Net 30, adds $60,000 to your receivables. Before you accept longer terms for a big order, work out where that $60,000 will come from. The days sales outstanding calculator gives your current DSO, the working capital calculator shows how much slack you have, and the cash flow forecast template shows the week the gap would bite.

Deposits, upfront payment and stage payments

Not every job suits payment after the fact. When you have to buy materials, block out weeks of time, or work for a customer you do not yet know, payment before or during the work shifts the risk back to where it belongs. The terms for this are older than Net 30. Agree them at the quote stage, not on the invoice: the estimate and quote generator prints the deposit due on acceptance under the total, and how much deposit to ask for on a quote works through the amount and the wording.

• Payment in advance (PIA) or cash in advance (CIA): the full amount before work starts or goods ship. Common for first orders, custom goods and export customers you cannot easily pursue.
• Cash with order (CWO): payment accompanies the order itself, typical for catalogue and trade-counter sales.
• Cash on delivery (COD): payment when the goods arrive. The risk is a customer who is not there, or not able to pay, when the van is.
• Cash next delivery (CND): each delivery is paid for when the next one arrives, a rolling form of short credit for regular orders.
• Deposit: a percentage upfront, the balance on completion. Common in trades, events, design and building work.
• Stage or milestone payments: the price split across defined points in the project, each invoiced when that point is reached.

Worked example: a £12,000 project in three stages

Say a small agency quotes £12,000 for a three-month website build. Invoicing the whole amount at the end on Net 30 means the agency is carrying up to £12,000 of work for four months. Split into stages, the picture changes.

With this schedule the agency is never more than about one stage of work, roughly £4,800, ahead of the customer’s money, instead of the full £12,000. If the client walks away after the designs, the agency has been paid for what it delivered.

Two practical points. First, define each milestone by something observable, such as “designs approved in writing”, not “design phase complete”, so there is no argument about whether a stage invoice is due. Second, show deposits clearly on the final invoice. In the invoice generator you can enter the deposit in “Amount already paid”, and the PDF shows the total, the amount paid and the balance due. Some businesses issue a pro forma invoice to request a deposit before the job starts; how that differs from a final invoice is covered in invoice vs receipt vs quote.

How to structure deposits, retainers and milestones for freelance work in particular is covered in how to invoice as a freelancer.

How to choose payment terms for each type of client

There is no single right term. The right one balances how quickly you need cash, how much you trust the customer, and what the customer’s payment process will actually tolerate. A term the customer cannot meet just produces late payment on paper.

Whatever you pick, agree it before the work starts, in the quote or contract, not for the first time on the invoice. A term that first appears on the invoice is easy for a customer to dispute, especially one whose own purchasing terms were accepted at the order stage.

Legal limits on payment terms in the UK, EU and US

In most places you and your customer are free to agree payment terms, but the law sets a default when you have not agreed any, and in some places a ceiling on how long terms can be. What follows is general information for business-to-business sales, summarised from official guidance. Rules vary by country and change, so check the current guidance where you trade and take advice for a specific dispute.

United Kingdom

• If no payment date has been agreed, gov.uk says the customer must pay within 30 days of getting your invoice or the goods or service (https://www.gov.uk/invoicing-and-taking-payment-from-customers/payment-obligations).
• An agreed payment period must usually be within 60 days for business transactions and 30 days for public authorities. A longer period than 60 days can be agreed between businesses, but it must be fair to both (https://www.gov.uk/late-commercial-payments-interest-debt-recovery).
• You can set your own terms, including discounts for early payment and payment upfront.
• If a business customer pays late, you can claim statutory interest of 8% plus the Bank of England base rate, unless your contract sets a different interest rate (https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt).

European Union

• Under the Late Payment Directive (2011/7/EU), the European Commission summarises the rules as: public authorities pay within 30 days, or 60 days in very exceptional circumstances, and businesses pay within 60 days unless they expressly agree otherwise and it is not grossly unfair to the supplier (https://single-market-economy.ec.europa.eu/smes/challenges-and-resilience/late-payment_en).
• The same page lists an automatic entitlement to interest of at least 8 percentage points above the European Central Bank reference rate, and a minimum of €40 compensation for recovery costs.
• Where no payment period is fixed in the contract, the EU’s Your Europe guidance says interest becomes payable 30 calendar days after the client receives the invoice, and the €40 flat fee applies to each invoice paid late, with higher amounts in some countries (https://europa.eu/youreurope/business/finance-and-tax/making-receiving-payments/late-payment/index_en.htm).
• The Directive is implemented through each country’s own law, and the Commission is working on a revision, so check the national rules and the current EU position before relying on a specific figure.

United States

For sales to US federal agencies, the Prompt Payment Act rules apply. The Treasury’s Bureau of the Fiscal Service explains that an agency may take a discount a vendor offers if it is economically justified and the goods or services have been accepted, and that if the agency does not take the discount, payment is due within 30 days of receipt of a proper invoice (https://fiscal.treasury.gov/payments-from-government/prompt-payment/discounts). Those rules cover federal purchasing; terms between private businesses are set by your contract and state law, so check the rules in your state.

Late-payment interest and the fixed compensation amounts are where these rules become money. How to calculate them on a real overdue invoice, and when to use them, is covered in overdue invoice follow-up and late fees.

How to word payment terms on an invoice

Good payment terms wording answers four questions in the fewest words: how much, by when, how, and what happens if not. Put the due date near the total, where it is seen, and the fuller terms in a short block at the bottom.

Example wording you can adapt

• Standard Net 30: “Payment terms: Net 30. Please pay £2,400.00 by Thursday 19 November 2026.”
• Due on receipt: “Payment is due on receipt of this invoice. Please pay within 7 days, by 27 October 2026.”
• Early-payment discount: “Terms 2/10 net 30. Pay $19,600.00 by 30 October 2026 (2% early-payment discount), otherwise $20,000.00 is due by 19 November 2026.”
• Month-based: “Payment due 30 days end of month: 30 November 2026.”
• Deposit: “Deposit of 30% (£3,600.00) due on receipt. Work begins once the deposit is received. The balance of £8,400.00 will be invoiced on completion.”
• Stage payment: “Stage 2 of 3: design approval. Payment terms Net 14, due 3 November 2026.”
• Late payment: “We reserve the right to charge interest on payments received after the due date.” If you have agreed a contract interest rate, state it; otherwise, for UK business customers, statutory interest is the fallback described above.

For the full list of what else belongs on an invoice, including numbering, dates and tax details, see how to write an invoice.

Sources

• UK default payment period of 30 days and the right to set your own terms, including early-payment discounts and payment upfront (GOV.UK): https://www.gov.uk/invoicing-and-taking-payment-from-customers/payment-obligations
• UK agreed payment periods: usually within 60 days between businesses and 30 days for public authorities, with longer B2B periods allowed if fair to both (GOV.UK): https://www.gov.uk/late-commercial-payments-interest-debt-recovery
• UK statutory interest of 8% plus the Bank of England base rate, and that it does not apply where the contract sets a different rate (GOV.UK): https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt
• EU Late Payment Directive 2011/7/EU summary: 30 days (exceptionally 60) for public authorities, 60 days for businesses unless expressly agreed and not grossly unfair, €40 minimum, interest at least 8 points above the ECB reference rate, and the planned revision (European Commission): https://single-market-economy.ec.europa.eu/smes/challenges-and-resilience/late-payment_en
• EU interest payable 30 calendar days after receipt of the invoice where no period is fixed, and the €40 flat fee per late invoice (Your Europe): https://europa.eu/youreurope/business/finance-and-tax/making-receiving-payments/late-payment/index_en.htm
• US federal agencies: taking vendor discounts when economically justified, and payment due within 30 days of receipt of a proper invoice when the discount is not taken (Bureau of the Fiscal Service): https://fiscal.treasury.gov/payments-from-government/prompt-payment/discounts
• All dates, discount rates and worked examples in this guide were calculated for this article; the businesses and amounts in the examples are hypothetical.

Where to go next

Once the terms are set, the next question is what to do when a due date passes. Overdue invoice follow-up and late fees covers the reminder schedule, the wording, and the statutory interest calculation step by step. If you are still putting your first invoices together, how to write an invoice walks through every field.

Freelancers deciding between deposits, retainers and milestone billing will find the detail in how to invoice as a freelancer, and if you are unsure whether a deposit request should be a pro forma, a quote or an invoice, invoice vs receipt vs quote sets out which document does what.

Common questions