Payment terms: what to put on your invoices

Payment terms are the conditions that tell a customer when and how they must pay you for goods or services, and what happens if they pay late. They usually appear on your quotes, contracts and invoices.

Terms are part of the deal you agree with the customer, so they work best when the customer has seen and accepted them before the work starts. Setting them out only on the invoice leaves room for argument. Clear terms do not stop a customer paying late, but they make it much easier to chase and, if needed, to recover the debt.

Every invoice should say what the customer owes, the date it is due, how to pay and what you will do if payment is late. Write it so that someone who has never met you could act on it.

• A due date: write the actual date, not only a length of time such as “30 days”.
• The amount owed: with a clear description of the goods or services.
• How to pay: the bank details and the reference the customer should use.
• Your late payment position: whether you will charge statutory interest or a rate agreed in the contract, and any fixed recovery sum.
• Early payment terms: if you offer a discount, say what it is and the date it applies until.

If you are VAT-registered, GOV.UK says your invoices must include your VAT number and display the VAT separately. Capzy does not give tax or legal advice, so check the full list of what an invoice must contain with GOV.UK or your accountant.

The most common terms are due on receipt, a fixed number of days after the invoice date, and payment in stages. Which one suits you depends on your customers, your costs and how much credit you can afford to give.

Terms vary between industries, and a large customer may insist on its own. Compare any term you are asked to accept with your own supplier and payroll dates, so you can see how long you would be funding the gap.

If you agree a payment date with another business it must usually be within 60 days, and with a public authority within 30 days. That is GOV.UK’s guidance on late commercial payments.

You can agree a longer period than 60 days for business transactions, but it must be fair to both businesses. If you do not agree a date at all, the law says payment is late 30 days after either the customer gets your invoice or you deliver the goods or provide the service, if that is later. This is another reason to put a date in writing: it removes the guesswork.

If another business pays you late, you can charge statutory interest of 8% plus the Bank of England base rate, and a fixed sum towards recovery costs. You cannot claim statutory interest if your contract has a different rate of interest.

The fixed sum can be charged once for each payment, and as a supplier you can also claim reasonable costs each time you try to recover the debt. GOV.UK says to send a new invoice if you decide to add interest to the money you are owed. Our guide to late payment interest goes through how the calculation works.

Changes have been proposed but are not law yet. The Commercial Payments Bill was introduced in the House of Lords on 19 May 2026, and as of October 2026 it has not been enacted, so the rules above remain the ones that apply.

The announced measures include a 60-day cap on payment terms for large firms paying smaller suppliers and mandatory interest on late payments. A Bill can change as it passes through Parliament, so do not plan around it until it becomes law, and check the Parliament page in the sources for its progress.

Choose terms that you can afford to fund and that your customers will accept: the shorter you can make them, the less cash you need to carry. Start from your own costs and work forward.

• List when your main costs fall due, such as wages, suppliers and VAT, and test your terms against them.
• Ask for deposits or stage payments on larger or longer jobs, so you are not funding all the work up front.
• Offer shorter terms to new customers until they have a record of paying you on time.
• Be consistent: customers learn quickly whether your terms are enforced.
• Invoice as soon as the work is done, and chase on the day a payment becomes overdue.

If you want to see how terms play out in practice, our guides to debtor days and creditor days and working capital show how the length of the cycle drives how much money the business needs.

Longer terms mean you wait longer for money you have already earned, while your own bills fall due on their own schedule. The result is a gap that you must cover from cash, credit or finance.

Putting terms and expected payment dates into a cash flow forecast shows where the gap will fall. If the gap is structural, because customers always pay slowly, invoice finance is one way businesses cover it: a lender advances money against invoices that have not yet been paid. It costs money, so it is not a substitute for sensible terms, and it is subject to status and lender criteria.

Capzy is a credit broker, not a lender, and is paid by the lender. Setting your payment terms is your decision, but if customers pay slowly and you need to cover the gap, we can introduce you to lenders that offer finance against invoices, and set out what comes back so you can compare it. Our lender directory shows who offers it.

You can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and any offer is subject to status and lender criteria.