Payment Terms List: Common Terms for Customers and Vendors

Payment terms are a shorthand way of expressing when you expect to receive payment from a customer, or when a vendor expects to receive payment from you. Terms show the number of days (or date) by which payment is due and can include a discount for early payment.

For service contractors, clear payment terms help establish expectations for customer invoices and vendor bills. They also help you manage accounts receivable (A/R), track accounts payable (A/P), and plan cash flow.

Payment terms can be used for both customers and vendors. The terms you offer customers determine when you expect to collect payment, while the terms offered by your vendors determine when you need to pay their bills.

Explanation of Common Payment Terms

Some common payment terms include:

• 1% 10 Net 30 Days: Payment is due in 30 days, with a 1% discount if paid within 10 days.
• 2% 10th Prox Net 30 Days: Payment is due in 30 days, with a 2% discount if paid by the 10th of the following month.
• Net 10th Prox: Payment is due by the 10th of the following month, with no discount offered. This is a date-driven term that can accommodate invoices or bills issued shortly before the next monthly due date.
• Due on Receipt: Total payment is due as soon as the invoice or bill is received, subject to the applicable agreement.
• Net 15 Days: Total payment is due 15 days from the invoice date.
• Pre-Paid: Payment is collected in advance, which can be useful for scheduled maintenance performed under service agreements or other prepaid activities.

For example, a vendor may offer terms of 1% 10 Net 30 Days. If you owe the vendor $1,000 and pay within the first 10 days, you can take a $10 discount and pay $990. If you do not pay within the discount period, the full $1,000 is due within 30 days.

The exact meaning of a payment term depends on the agreement and how the due date is calculated. The U.S. Department of the Treasury’s Prompt Pay Guidance provides examples of how payment terms define when vendor invoices are due.

Standard vs. Date-Driven Payment Terms

Payment terms generally fall into two categories.

Standard terms specify the number of days from the invoice date that payment is due. For example, Net 30 means payment is due 30 days from the invoice date.

Date-driven terms specify a particular day of the month when payment is due, such as the 25th. Depending on the agreement, invoices issued shortly before that date may be due the following month instead. This gives the customer additional time to pay rather than requiring payment just a few days after receiving the invoice.

Both types of terms can include an early payment discount. Oracle’s documentation on payment terms explains how standard and date-driven terms establish due dates and discount periods.

Using Payment Terms for Customers and Vendors

Payment terms should reflect the agreements you have with your customers and suppliers. A single set of terms can be used for both accounts receivable and accounts payable, provided the terms fit the applicable agreement.

When billing customers, consistent payment terms help establish when invoices are due and when follow-up may be necessary. For contractors managing multiple jobs, keeping those due dates visible can help prevent overdue invoices from slipping through the cracks. Aptora’s accounts receivable tools for contractors support customer statements, past-due alerts, collections, and A/R reporting.

Vendor terms serve a similar purpose. They help you determine when bills need to be paid and whether an early payment discount is available. Paying attention to both due dates and discount deadlines help you make informed decisions about available cash.

Choose terms that your business can consistently apply and that reflect what you have agreed to with each customer or vendor. Clear terms, accurate invoice dates, and consistent follow-up make it easier to manage money coming into and going out of your business.