How to Write Invoice Payment Terms That Get You Paid on Time

Clear invoice payment terms help customers understand when and how they need to pay.

However, the strongest payment terms do more than add a due date to an invoice: they set expectations before supply begins and provide a practical process for handling delayed or disputed payments.

What are invoice payment terms in Australia?

Invoice payment terms are the conditions that explain:

• When payment is due
• How payment should be made
• Whether deposits or instalments apply
• What happens if payment is late
• How disputes are handled

These are most useful when they reflect obligations already agreed in a contract, quote, Terms of Trade, or Services Agreement.

Where should your payment terms actually go?

The right document depends on your business model, customer relationship, and the type of work or supply involved.

For recurring customers, a well-drafted Terms of Trade can establish credit periods, late-payment consequences, recovery costs, dispute processes and account suspension rights across multiple orders.

For a defined project or professional engagement, a Services Agreement is usually more suitable because it can connect payment to scope, milestones, variations and delivery.

Business situation	Best place for payment terms	Useful Lawpath links
Ongoing supply to customers	Terms of Trade	Create Terms of Trade
Defined client service engagement	Services Agreement	Create a Services Agreement
Website-based sale or service	Website Terms & Conditions	Create Website Terms
Large or negotiated commercial deal	Bespoke agreement	Get the contract reviewed
Invoice already overdue	Recovery process	Create a Letter of Demand

You shouldn’t introduce terms for the first time in your invoice. These should already be established elsewhere before invoicing.

Should I include payment terms on invoices and contracts?

Yes, if it’s practical, payment terms should appear consistently across the documents used in the transaction.

The detailed rights and obligations belong in the underlying agreement. Then, invoice terms and conditions should appear in your billing documents without contradicting the agreement or introducing material terms for the first time.

A useful hierarchy is:

Document	Main role
Contract / Terms of Trade	Full rights and obligations, including deposits, late payment, suspension, disputes, and recovery costs
Quote / Proposal	Commercial price, scope, and payment structure
Invoice	Amount due, due date, payment instructions, and agreed operational terms

This consistency reduces misunderstandings and makes it easier to follow up when payment becomes overdue.

What should your invoice say about payment?

Your invoice should clearly communicate the operational details the customer needs to pay. Here is a payment terms example checklist:

• Your business name and ABN
• Invoice number
• Invoice date
• Due date
• Amount due
• “Tax invoice” (if registered for GST). For sales of $1,000 or more, also include the buyer’s identity or ABN.
• Accepted payment method
• Bank or payment details
• Purchase order or customer reference where required
• A short reference to agreed payment terms
• Late-payment wording only where it has already been agreed
• Contact details for billing queries

For statutory invoicing requirements, refer to Lawpath’s guidance on different types of invoices.

What payment due date should you use?

There is no single payment period that works for every Australian business. The best due date depends on your cash flow, the job’s size and risk, the customer type, and the commercial norms in your industry.

Common options include:

• Due on receipt
• Payment within 7 days
• Payment within 14 days
• Payment within 30 days
• Milestone-based payment
• Staged payment
• Payment before delivery or completion

For example, a shorter payment period may suit a small service provider that needs predictable cash flow and completes relatively low-value work. For example, a freelance designer may require payment within 7 or 14 days of the invoice date.

Meanwhile, a 30-day period is more common for established business customers with formal accounts payable processes. However, a longer period can increase your exposure if the customer delays payment or experiences cash-flow issues.

The key is to choose a period that your business can afford, communicate it clearly, and agree on it before you begin work or extend credit.

Should you use “Net 7”, “Net 14” or “Net 30”?

“Net 7”, “Net 14” and “Net 30” payment terms are commonly understood in business settings. However, plain language is usually clearer, especially where a customer may not use standard commercial terminology.

For example, “Payment due within 14 days of invoice date” is clearer than “Net 14” payment terms.

The goal is to remove ambiguity about when the payment clock starts. If you use a payment term measured from the invoice date, state that explicitly. If payment is due after delivery, completion, or approval, identify that trigger instead.

Should you ask for a deposit?

A deposit can reduce the financial risk of starting work before you have received payment. Deposits may be appropriate if:

• You need to buy goods or materials before starting.
• You reserve a significant block of time for a client.
• The client could cancel after preparation has begun.
• The work cannot easily be reused or sold to someone else.
• The project is large enough that completing it without payment would create cash-flow pressure.

When deposits are involved, make sure there is a written agreement in place. Deposit payment terms should cover:

• The deposit amount or percentage
• When the deposit must be paid
• Whether work begins only after the deposit is received
• Whether the deposit is refundable
• What happens if the client cancels
• Whether the deposit is applied to the final invoice

Be sure to agree on the deposit terms before work starts. Don’t simply add them to an invoice after the customer has committed.

When should milestone or progress payments be used?

Milestone or progress payments are useful for agencies, consultants, trades, builders, and other project-based businesses. They help you avoid carrying the entire cost of a long project until final completion.

Note: If you do building or construction work, deposits and progress payments may be capped or regulated by state legislation, and security of payment laws can override your contract terms. Check the rules in your state before using a structure like this.

A project payment structure might be:

• 30% upfront before work begins
• 40% when an agreed milestone is reached
• 30% on completion

Other options include:

• Monthly progress claims
• Payment on delivery of defined stages
• Payment at the end of each project phase
• Regular retainer payments for ongoing advisory or creative work

The milestones should be specific enough that both parties can tell when they have been reached. For example, “40% payable on completion of the website design mock-ups approved by the client” is clearer than “40% payable halfway through the project”.

When drafting a services agreement that includes milestone payments, cover:

• A clear definition of each milestone
• When each invoice will be issued
• Payment due date
• What happens if the customer delays feedback, approvals, or information
• Whether deadlines move because of customer-caused delays
• Whether later work can pause until an earlier invoice is paid

What happens if the invoice is already overdue?

Once an invoice is overdue, move from prevention to a clear and proportionate recovery process:

1. Friendly reminder
2. Formal follow-up
3. Final notice
4. Letter of Demand
5. Legal recovery, if appropriate

Start by checking whether the invoice was received, whether the payment details were correct, and whether the customer has raised a genuine query. Keep a written record of reminders, calls and any payment promises.

Keep follow-up reasonable in frequency and tone; undue harassment or coercion in connection with payment for goods or services is prohibited under the Australian Consumer Law (s 50).

If the customer still doesn’t pay, a Letter of Demand can formally state the debt, the payment deadline, and the action you may take if payment is not received.

Can you charge interest on late invoices?

Potentially, but you need to agree on the right to charge interest before the debt arises.

A late payment interest clause should include:

• The interest rate
• When interest starts accruing
• How interest is calculated
• Whether a grace period applies
• That the term was agreed before goods or services were supplied

Avoid treating an invoice as an opportunity to impose interest for the first time. If the customer didn’t agree to the term beforehand, it may be harder to rely on it.

Can you charge debt recovery costs?

Some businesses include terms that allow them to recover reasonable costs incurred in collecting overdue amounts. These may include collection costs, legal costs, or administrative expenses connected with pursuing the debt.

However, a recovery cost clause isn’t automatically enforceable just because it appears in your terms. To improve its usefulness, you should:

• Make the term clear.
• Agree it upfront.
• Keep the costs proportionate.
• Avoid vague or punitive wording.
• Obtain legal review where the commercial value is significant.

Unfair contract terms

If you use the same standard form terms with consumers or small businesses, late fees, interest, recovery costs and suspension rights must be reasonably necessary to protect your interests and not create a significant imbalance. Unfair terms are void and can attract significant penalties.

Can you stop work if an invoice is unpaid?

You shouldn’t assume that you automatically have a contractual right to suspend work simply because an invoice is overdue.

Your agreement should cover suspension rights, including:

• When suspension can occur
• Whether you must give notice before suspending work
• How long an invoice must be overdue before you can act
• Whether project timelines shift during a suspension
• Whether the customer bears costs caused by the delay
• When work resumes after payment is received

For example, an agency may agree to pause campaign management services if an undisputed invoice remains unpaid for more than 14 days after written notice. The agreement can also state that delivery dates are extended by the period of suspension.

What should you say about disputed invoices?

A payment clause should recognise that not every unpaid invoice is the result of bad faith. Sometimes a customer has a genuine question about scope, quantity, quality, pricing, or a purchase order reference.

Your agreement should address:

• How quickly the customer must raise a dispute
• Who the customer should contact
• What information they should provide
• Whether undisputed amounts remain payable
• What happens while the dispute is being reviewed

Avoid overly aggressive clauses that treat every billing query as a default. A clear dispute process can help preserve the business relationship while allowing you to promptly identify and resolve genuine issues.

What payment terms work best for service businesses?

Service businesses often need payment terms that reflect the time, expertise, and capacity committed to a client. A generic “payment due in 30 days” term may not adequately manage the risks of a long or customised engagement.

Common service business payment terms include:

• Deposits before work begins
• Milestone payments for defined deliverables
• Retainers paid in advance
• Recurring monthly fees
• Payment before final delivery of work or files
• Late-payment consequences
• Suspension rights for overdue invoices
• Reimbursable expenses
• Payment for variation work outside the original scope

For example, a marketing agency may charge a monthly retainer in advance, require written approval for additional work, and reserve the right to pause services if undisputed invoices remain overdue after notice.

What payment terms work best for businesses supplying goods or ongoing services?

Businesses supplying goods or ongoing services often need payment terms that apply consistently over repeated orders, deliveries, or customer accounts. This is where Terms of Trade can be particularly useful.

Relevant terms may cover:

• Payment period and credit terms
• Deposits or payment before delivery
• Delivery arrangements
• Late payment
• Account suspension
• Returns and billing disputes
• Recovery costs
• Ownership and risk, if relevant

Depending on the business model, you may also need separate terms addressing retention of title, the Personal Property Securities Register, or website sales.

Invoice payment terms checklist

Before issuing an invoice, check that your payment framework covers:

• Exact payment due date
• Deposit requirement
• Milestone or progress payment triggers
• Payment method
• GST treatment
• Late-payment interest, where applicable
• Recovery costs, if appropriate
• Suspension rights
• Cancellation and refund treatment
• Dispute process
• Customer acceptance before work begins
• Consistency between the quote, agreement, and invoice

If several of these terms matter to your business, use a proper agreement rather than trying to fit them all onto the invoice.

Lawpath’s wide range of legal document templates and review services can help you put clear, enforceable payment terms in place.

FAQs

What payment terms should I put on an invoice?

At a minimum, state the invoice date, exact due date, amount due, GST, where applicable, payment method, payment details, and a point of contact for billing queries.

Is 7, 14 or 30 days better for invoice payment terms?

It depends on your cash flow, customer type, industry norms, bargaining power, and the risk you take before receiving payment. Seven or 14 days may suit smaller or lower-value service engagements, while 30 days may be common for established business customers with formal payment processes.

Can I add late fees to an invoice?

You can include wording about late fees on an invoice, but it is generally better to agree on the right to charge them before the debt arises. Put the full term in a Services Agreement, Terms of Trade, or other accepted contract.

Can I charge interest if my invoice is overdue?

Potentially, particularly if the interest term was clearly agreed before you supplied the goods or services.

Can I stop work if a client does not pay?

Do not assume you can automatically stop work. Your agreement should expressly state when suspension is permitted, whether notice is required, how overdue the invoice must be, and how suspension affects project deadlines.

Should payment terms be in the contract or invoice?

Use both, but for different purposes. Put the detailed legal and commercial rights in the contract, Services Agreement, or Terms of Trade. Use the invoice to show the specific amount due, the due date, and the payment instructions.

Can I ask for a deposit before starting work?

Yes. Agree on the deposit amount, timing, refund treatment, and cancellation consequences before work begins.

What are milestone payment terms?

Milestone payment terms divide a project price into instalments that become payable when defined stages are reached. For example, 30% upfront, 40% after approval of a key deliverable, and 30% on completion.

What should I do if a customer disputes an invoice?

Ask the customer to identify the disputed amount, the reason for the dispute, and any supporting information. Review the issue promptly and keep detailed records.

What happens if a customer ignores an overdue invoice?

Follow a clear escalation process: send a reminder, make a formal follow-up, issue a final notice, and consider sending a Letter of Demand. If the debt remains unpaid, debt recovery or legal action may be appropriate.