Common Invoice Payment Terms Every Freelancer Must Know

This article was written by guest author Lorie Dodson, a full-time writer and content editor

Being your own boss comes with challenges. One of those challenges is drawing up invoices, issuing them to clients, and ensuring that you get paid on time. Unless you’re freelancing in the financial sector, this isn’t always easy.

Whether you’re just starting out in the freelance world or a relatively experienced freelancer who needs to work on your invoicing skills, there are some essential terms that everyone needs to know.

Without this knowledge, you could cause confusion, suffer through extended payment delays and late payments, or have very awkward conversations with clients about why you haven’t yet received your money. What’s worse, it may well be your own fault as you haven’t used terms correctly or haven’t used them at all.

Invoicing terms are standardized for this reason. They’re there to ensure that you clearly communicate financial information to your clients in the most concise, understandable way.

Familiarizing yourself with these common invoicing terms will benefit your freelance career, and your bank balance too.

Types Of Invoices

Not all invoices are the same. In fact, there are different types of invoices, and each relays specific information in a way that clients can easily understand. These types of invoices are the ones that freelancers most commonly use:

Quotes and estimates

These are essentially the same thing. This is something of a negotiable price; a breakdown of what all your services will cost and the timeframe in which you expect to complete the project, or how much you will do during a given, recurring time period.

Proforma invoice

While a quote or an estimate is negotiable, the proforma invoice is the amount or price and time frame agreed upon by both parties.

Recurring invoice

A recurring invoice is for a regular service performed, like a certain number of words written every month or hours for an IT service. It’s good to have as many recurring clients as possible, as this helps you to securely forecast your earnings and build up a substantial cash flow. However, a recurring invoice is not the same as a retainer.


A retainer is like a subscription to someone’s services, but one with on-demand features. A client pays a freelancer or company to have access to their work time and resources. This type of invoice will likely involve some elements of a recurring invoice, but it won’t include ad hoc line items.

Interest invoice

This is the invoice you don’t want to have to issue.

In the case of a client not settling their balance within the agreed-upon timeframe, you can potentially charge them interest.

Interest invoices look identical to the original, except that you include a final line item in your breakdown entitled ‘interest of x percent’ before the total. The total will then reflect this amount and be higher than the original invoice.

In the terms of sale (explained below) it’s crucial to establish and spell out the penalty for late payment: the amount of interest you’re charging. A bill that keeps growing the longer it takes to get paid is a bill that’s likely to get settled more speedily.

Payment Timeline Terms

Clearly defining your payment terms is an essential part of any invoice. Getting paid on time is crucial for freelancers (or any business) and there are commonly used payment timeline terms for that reason. As a freelancer, these are the terms you need to know about:

Net 7, 10, 30, 60, 90

Net means the total, final amount due after all additions and deductions. 7, 10, 30 and so on refers to the number of days after the date on the invoice (not the date of receiving it, as some slippery customers might try to argue) that the amount is due.

For clarity’s sake, you may want to replace ‘net’ with ‘days’, or spell it out beneath the formula.

2/10 Net 30

In addition to using this formula to describe how long the client has to settle their balance, you can use this extra fraction to offer them a monetary incentive to settle quickly. In this case, ‘10’ refers to the date of early payment—i.e., the number of days they can settle early to receive a reduction, and ‘2’ is the percentage of the total amount due that will be deducted from the bill if it’s settled within 10 days of the date of issue.

Note that we are still using ‘net 30’ in our payment terms—if the client pays 11 days after or 30 days after, they will not receive a discount.


This stands for ‘end of month’. It’s useful if you want all your invoices paid before the end of the month and don’t want to designate a specific number of days before payment is due.

If you’re using this option, we recommend you give clients a fair bit of warning and/or offer a convenient and quick payment method like PayPal.

15 MF

If you use this on your invoice, it means that you’re requesting that clients pay you on the 15th of the month following the month of the date of the invoice. Since it refers to a regularly occurring date, it’s useful for billing recurring clients and makes it easier to forecast your earnings.

Upon receipt

If you want the invoice settled right away, this is the term to use. Payment can then be expected within 24 or 48 hours after issuing your invoice.

Payment Terms

If you’re not sure about the difference between a deposit and a down payment or terms of sale and line of credit, you could make a grave error that costs you money. These payment terms all differ somewhat and are important to freelancers for different reasons:

Terms of sale

These are the agreed-upon amounts, timeframes, payment terms and penalties, methods, and delivery of whatever you and the client have agreed upon. Essentially, these are the agreed expectations from both sides and ensure that you’re not working for free.

Payment in advance

Payment in advance, or PIA for short, is the option or requirement for your clients to pay you ahead of completing or even starting the project. This is not the same as a deposit or a down payment, which has specific meanings outlined below. Payment in advance is a more general term.


A deposit is an amount paid to secure someone’s services and to get a project off the ground. A deposit is usually requested by a freelancer when they require an initial large sum to begin work.

Deposits deter a client from disengaging your services, they provide security, and they’re an excellent idea if you have a new client who you don’t yet have a history of payments with.

Down payment

Like a deposit, a down payment is made to secure a freelancer’s services and is deducted from the final total.

Line of credit pay

This allows a client to purchase your services on credit, with the expectation that the amount due will get settled on a recurring basis (e.g. monthly or quarterly).

However, we don’t recommend this for freelancers starting out or those who don’t have a substantial regular income to fall back on, as it can leave you without funds for an extended period.

Conclusion: Create An Invoice That Gets You Paid

With a thorough understanding of these terms, you can now use them correctly. This will not only boost the chances of your invoices getting settled on time, but it’ll also ensure that your clients view you as a professional.

For the best results, it’s an excellent idea to create a self employed invoice template that includes the relevant terms. If you do this, you can rest assured that every invoice you issue will include the right information and that there’s no room for error or argument about payment.

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