Quick answer
Good payment terms state clearly when payment is due as a specific date or number of days, how to pay, any deposit or progress payment schedule, what happens if payment is late and how disputes are handled. Agree them before work starts, put them on quotes and invoices, and apply them consistently. Shorter terms, deposits and staged payments reduce how much your business has to fund.
Key points
- Agree terms before the work starts, in writing.
- Use shorter terms and deposits where reasonable.
- Stage payments on longer jobs.
- Apply terms consistently, including any late fees.
Payment terms are the rules you set for how and when customers pay you. Many small businesses never write them down properly, relying on a vague “30 days” printed at the bottom of an invoice. Clear, agreed terms are one of the cheapest and most effective cash flow tools available. They set expectations, reduce disputes and give you a firm footing when you need to chase. This guide covers what to include, how to word it and how to introduce new terms without upsetting the customers you value most.
What good payment terms include
- When payment is due. A specific number of days from the invoice date, or a calendar date.
- How to pay. Bank details, payment link, card options.
- Deposits. How much, when, and whether it is refundable.
- Progress payments. For longer jobs, the stages and amounts.
- Late payment. Any late fee or interest, and when it applies.
- Disputes. How to raise a query and the timeframe to do so.
- Suspension. Your right to pause work or supply if payment is overdue.
Choosing the due date
Thirty days has become a habit, not a requirement. Consider what suits your cash flow and your industry:
- On completion or within seven days for small jobs and consumer work.
- Fourteen days for many business-to-business invoices.
- Thirty days where it is standard in your industry or for large clients who insist.
Shorter terms reduce how much you fund. Set shorter terms for new customers from the start; it is easier than changing them later.
Deposits
For larger, custom or long-lead work, a deposit covers materials and reduces your exposure if the customer cancels. Specify the amount, when it is due and whether work starts only after it is received. Customers generally accept reasonable deposits when they are explained at the quote stage.
Progress payments
On longer projects, link payments to clear milestones that match your costs, for example: deposit on acceptance, a payment when materials are delivered, a payment at a defined stage and the balance on completion. Define each milestone precisely so there is no argument about whether it has been reached. Some industries, such as construction, have specific legislation about progress payments; check what applies to you.
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Late payment terms
If you charge late fees or interest, state the amount or rate and when it applies, and make sure the customer agrees before work begins. Keep any fee reasonable and apply it consistently. Unreasonable or one-sided terms may face challenge, and small businesses have protection against unfair contract terms. Many owners find that clear terms and a reliable reminder process work better than penalties.
Where to put your terms
- On quotes and proposals, so acceptance includes agreement to terms.
- In written agreements or terms of trade for ongoing customers.
- On every invoice, as a reminder.
- In your account application form if you offer credit accounts.
Introducing new terms to existing customers
Changing terms for existing customers needs a little care. Give notice, explain the reason briefly and apply new terms to new work rather than existing invoices. Most customers accept reasonable changes, especially when explained politely. Valued customers who need longer terms can be accommodated, perhaps with pricing that reflects the cost.
Credit accounts
If you offer customers ongoing credit, consider a simple account application that captures their legal details, ABN, accounts contact and agreement to your terms. Set a credit limit and review it. Stop supply if an account goes significantly overdue until it is brought up to date.
Aligning your terms with your suppliers’
Look at the gap between how quickly you pay suppliers and how quickly customers pay you. If you pay in 14 days and customers pay in 45, you are funding a month of trade. Tightening customer terms and negotiating supplier terms closes the gap from both ends. See negotiating supplier terms.
Terms are only as good as your follow-up
Clear terms set expectations, but they work only if you follow through: invoice promptly, remind consistently and act on overdue accounts. Our guide to getting customers to pay faster gives you a practical routine.
Sample wording
A simple payment clause might read: “Payment is due within 14 days of the invoice date by bank transfer to the account shown, or by card using the payment link. A deposit of 30 percent is payable on acceptance of this quote, and work will be scheduled on receipt. Overdue accounts may result in work being paused until payment is received.” Adjust it to suit your business, and get advice if you are unsure about anything.
Terms for large customers
Large businesses and government agencies often have fixed payment terms of their own and may ask you to accept them. Before agreeing, check whether the terms suit your cash flow, and consider pricing in the cost of waiting. Ask about early payment programs, which some large organisations offer to small suppliers, and check the customer’s reported payment times through the Payment Times Reporting Scheme.
Reviewing terms each year
Once a year, look at how long customers actually took to pay compared with your terms, how many disputes you had and which customers caused the most chasing. Use what you learn to adjust terms, deposits or credit limits. Small refinements each year compound into a noticeably healthier cash cycle.
Terms for consumer customers
If you work for households as well as businesses, keep consumer terms simple and fair. Many consumer-facing businesses take payment on completion or before work starts, often by card. Deposits are common for larger jobs. Consumer protection laws apply, so make sure your terms are clear, reasonable and provided before the customer commits. Simple, upfront terms reduce misunderstandings and make collection far easier than chasing a homeowner weeks after the job.
An illustrative example
An illustrative cabinet maker used to invoice the full amount on completion with 30-day terms, funding materials and labour for six to eight weeks per job. She introduced a 40 percent deposit on acceptance, 40 percent on delivery of carcasses and 20 percent on completion, all due within seven days. Within a few months, she was funding almost nothing upfront and her line of credit balance fell to near zero.
Terms that work for you
If clearer terms will take time to improve your cash flow, we can help bridge the gap. There is no credit check to enquire, your details are not passed to a list of lenders, and a real person reads every enquiry. Apply now.
Frequently asked questions
What payment terms are normal in Australia?
It varies by industry. Seven to 30 days is common for small business invoices, with deposits and progress payments for larger jobs. Some industries have their own norms or legislation.
Can I change payment terms for existing customers?
Yes, with notice. Explain the change, apply it to new work and give customers time to adjust their processes.
Should payment terms be in my quote?
Yes. Including terms in the quote means the customer accepts them when they accept the quote, which avoids disputes later.
Are late fees enforceable?
Late fees are more likely to be accepted when they are reasonable and clearly agreed before the work. Get advice for your specific situation.
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