What is Payment Terms?

Definition

Payment terms specify when payment is due, how it must be made, and what happens when payment is late. Common structures include Net 30 (payment due within 30 days of invoice), Net 60, milestone-based payments tied to deliverables, and payment upon delivery. These terms directly affect your cash flow and financial planning, making them one of the most practically important sections of any contract. Vague or unfavorable payment terms can leave you financing a client's project out of your own pocket for months. For example, if your freelance contract specifies Net 60 with no late payment penalty, a client who routinely pays at day 90 faces zero consequences while you wait three months for money you earned. Watch for terms that condition payment on client 'satisfaction' without objective criteria, and contracts that lack any late payment interest or penalty provision. A strong payment clause includes clear due dates, a defined late fee, and the right to stop work if payment is overdue.

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