How to write payment terms for an invoice

payment terms and conditions

It’s essential to write the right payment terms for an invoice; the invoice is the request for payment, but the terms set out the full details of how that payment should be made, how long the customer has to pay it, and what will happen if they fail to do so.

But it’s also important to remember that payment terms are more a part of your contract than of your invoice – you can’t simply attach brand new terms to a request for payment, and expect the customer to agree to be bound by them.

Keep this in mind when writing payment terms for an invoice, because they will need to stand alone when you first send them out to your customers and ask them to agree to whatever terms you have set out.

At the same time, it is still sensible to attach a copy of your payment terms to each invoice and reminder you send out – especially highlighting the benefits of early payment, or the penalties for late payment.

If your payment terms include a discount for prompt payment, make sure your customers are well aware of this fact, or you will not gain the full benefit of encouraging those who would normally pay late or on-deadline to settle their account earlier.

By highlighting the penalties for non-payment – which might range from your legal right to enforce a fixed fee, debt recovery costs and statutory interest, to stating your intention to cut off the customer’s supply or put future work on hold until they pay – you reduce the risk of them disputing your right to take such action when you do.

In terms of what you should actually write, unfortunately it is not as simple as providing a one-size-fits-all payment terms template, as your terms should be tailored to your specific business.

Keep in mind how much risk you are prepared to take on board, and tweak your credit limits and payment deadlines accordingly; and think about whether you will actually go to court over a small or medium debt, as there’s a big difference between making an empty threat, and threatening action that you will actually go through with.

If you are in doubt, it’s wise to get expert advice on your payment terms. This isn’t a sales pitch; payment Ts & Cs are akin to a formal contract and you need to get them right, or they will not protect you in the way you want them to.

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