Key Takeaways

• Clear payment terms help contractors avoid delays. Most delays happen because of vague or missing terms. Outlining when and how clients should pay makes a big difference. 
• Common contractor payment terms include Net 30 and cash on delivery, with penalties for late payments to encourage timely payments.  
• Stating the preferred currency and offering early payment discounts can make the payment process faster and smoother.  
• Including payment terms in invoices provides legal protection and keeps both parties on the same page.  
• Using invoicing tools like Moon Invoice makes it easier to create professional invoices with clear terms and multiple payment options.

What is a Payment Term for a Contractor?

Payment terms are conditions that outline how and when payment should be made to avoid late fees. Often included in an invoice or estimate, they clarify the accepted payment methods and underscore any special requirements discussed during a meeting with the client.

Failing to meet the payment terms mentioned in an invoice may result in late penalties for the recipient. Contractors include clear payment terms when they generate a new invoice to ensure timely payment.

Typical Payment Terms for Contractors

Here are some of the standard payment terms utilized by contractors when generating an invoice or estimate.

1. Payment on Delivery

Construction Contractors often ask clients to complete payment once they have finished the task. So, contractors neither have to wait longer for payments nor annoy clients by making frequent phone calls.

With this payment term, the client is responsible for making an instant payment immediately after the contractor completes their job. Sometimes, contractors also outline the same payment terms in an estimate to inform the client about payment urgency.

2. Use of Currency

The mention of accepted currency by the contractor is another standard payment term. With this, contractors aim to keep their foreign clients informed and reduce the time it takes for fund transfers. Such payment terms also help clients choose the ideal payment method, which usually has low transaction fees.

Clarifying this payment condition prior to the payment process can save time for both parties. The client doesn’t incur additional charges for transferring money twice, while the contractor receives the funds on time.

3. Net 30 Payment Term

Net 30 is a standard payment term that allows clients 30 days to clear the payment. Contractors use a net 30 payment term on an invoice to provide payment flexibility and strengthen their relationship with the client.

Noticing a net 30 payment term, the client will understand that they have 30 days to pay the outstanding amount, starting from the day the invoice is issued. 

4. Late Payment Penalties

Describing late fees upon payment delays is also a common practice. Contractors use this term to inform clients how much more money they need to pay if they fail to make a payment on time. Contractors mentioning late payment terms not only boost payment but also set them free from having to chase payments.

Such payment terms are used to encourage clients to make timely payments, so that contractors can collect the money without needing follow-up emails.

Why Include Payment Terms in Construction Contracts?

Below are the factors that explain why writing payment terms in construction contracts should be a common practice for invoicing.

1. Timely Payments

Specifying the payment terms can make sure the client follows the contractor’s payment schedule. This is because when the client learns about late penalties, they might process payments as early as possible, before the due date. Payment terms could be your only solution to combat late payments.

2. Legal Protection

Payment terms listed on an invoice help you avoid legal consequences if a client files a lawsuit against your construction company. Since an invoice is a legally binding document, you can settle legal cases if you have properly mentioned payment terms and conditions in an invoice.

3. No Communication Gaps

The presence of contractor payment terms on an invoice leaves no room for communication gaps. Both the issuer and the recipient would be on the same page. The issuer will know when to expect the payment, while the recipient will realize how quickly they need to complete the payment.

Contractor Payment Schedule Examples

Below are examples of contractor payment terms to check out.

1. Cash on Delivery (COD)

COD is a pretty straightforward payment term. It is the contractor’s way of saying, “Hey, I delivered the service, so you owe me money”. As soon as the contractor’s work is done, the client needs to initiate the payment online or hand over the cash. Failing to pay dues according to the payment schedule may result in fines.

For example, a contractor is hired to repair a pipe leak at a local restaurant. Upon completing the work, the contractor sends an invoice with a COD (cash on delivery) payment term to the client. Now, the hiring party needs to pay the contractor after assessing their work.

2. Net 30, 60, & 90 Payment Terms

While some contractors can schedule their payments using short payment terms, such as net 7, 15, or 30 days, others prefer longer payment terms, like net 30, net 60, or net 90 days. Short payment terms provide extra days to fulfill the payment. Whereas, long payment terms offer a month or even more time to pay the outstanding amount.

Let’s say the flooring contractor is hired to repair wood flooring. Soon after completing the flooring job, the contractor sends an invoice with net 30 payment terms. This means that the client can pay the due amount within 30 days to avoid any additional fees.

3. 2/10 Net 30 Payment Term

If a contractor uses 2/10 net 30 or 1/10 net 30 payment terms, it provides a rewarding opportunity for the client. In simpler terms, the client can earn a 2% or 1% discount on the total amount if they complete the payment within the first 10 days from the invoice issue date.

In such cases, payment is scheduled to be made within 30 days, but contractors may receive it early due to the discounts that 2/10 net 30 terms bring.

For instance, if the client assigns a landscaping job to a local contractor, the contractor may complete the work and send an invoice with terms such as “net 2/10” or “net 30”. Now, the client can pay the money within 10 days and earn a 2% discount on the total amount due. Following the 10 days,  the full amount needs to be paid before the due date.

4. End of Month

As its name suggests, end-of-month payments are scheduled for collection at the end of the current month, regardless of when the work was completed. Contractors include the end-of-month payment term so the client can understand that they need to fulfill their dues before the end of the month.

For example, if the client receives an invoice on April 11th, the payment is scheduled to be completed before the end of the month, i.e., before April 30th. That’s how contractors get paid in the same month.

How should you create an invoice with payment terms? The solution is right here.

Checklist for Creating an Invoice with Payment Terms

Creating an invoice isn’t just about listing what you’re owed—it’s also about setting the right expectations for how and when you want to get paid. Here’s a handy checklist to follow:

1. Include Basic Invoice Details

Make sure the basics are in place so there’s no confusion:

• Your business name, address, contact info
  
• Client’s name and contact details
  
• Unique invoice number
  
• Invoice date and due date
  
• Description of services provided
  
• Total amount due
  

2. Mention Payment Terms

This is key. Spell out exactly how and when you expect to be paid. Examples:

• Net 30 (payment due within 30 days)
  
• COD (Cash on Delivery)
  
• 2/10 Net 30 (2% discount if paid within 10 days)
  

3. State the Accepted Payment Methods

List the payment options you’re okay with:

• Bank transfer
  
• Credit/debit card
  
• PayPal, Stripe, etc.
  
• Checks or cash (if applicable)
  

If you work with international clients, mention the accepted currency to avoid back-and-forth later.

4. Add Late Payment Penalty (if applicable)

Let your client know what happens if they don’t pay on time:

• A flat late fee (e.g., $25 after the due date)
  
• Interest charge (e.g., 1.5% per month overdue)
  

This sets expectations and encourages clients to pay on time.

5. Include a Payment Due Date

Even if you’ve used a term like “Net 30,” adding an actual date (like “Due by May 15, 2025”) helps avoid misunderstandings.

6. Include Notes or Special Instructions

This is optional but helpful for things like:

• Project references
  
• Warranty or service follow-ups
  
• Friendly thank-you message to build rapport
  

7. Double-check Everything

Before sending the invoice:

• Make sure all numbers add up
  
• Confirm that client details are accurate
  
• Review the payment terms for clarity
  

8. Use Professional Invoicing Software (Optional but Smart)

Tools like Moon Invoice will help you:

• Automate invoice creation
  
• Add payment terms easily
  
• Offer multiple payment methods
  
• Track if and when the invoice is opened and paid

Adding Contractors Payment Terms is Easy With Moon Invoice

Including payment terms using advanced software like Moon Invoice is not just easy but also boosts on-time payments. Here’s how.

1. Customizable Invoice Templates

Moon Invoice has built-in 66+ pre-designed invoice templates tailored to meet the requirements of every business type. This means you no longer need to create an invoice from scratch; just type the required details and start adding payment terms in such a way that they can quickly grab the client’s attention.

2. Automation in Every Step

It is a state-of-the-art invoicing software offering automation like no other. You don’t have to rely on manual things like pen and paper, even when it comes to adding payment terms. It will help you generate a professional invoice that clearly outlines the payment terms and keeps your client informed.

3. One-click Invoice Share

Unlike a traditional method, you don’t have to arrange a physical meeting to hand over an invoice or exchange cash as long as you use Moon Invoice. Invoices can be shared digitally using WhatsApp or Email with a single click of the button, and hence, there is no need to organize meetings.

4. Customer-centric Payment Methods

Since payment terms encourage consumers to clear their dues on time, offering multiple payment methods is equally important. That’s where Moon Invoice takes care of your invoicing job. It boasts more than 20 payment integrations, so contractors can offer a customer-preferred payment method to collect money in less time.

Conclusion

Whether you are a contractor or a freelancer, payment delays are common for many. Encompassing payment terms may clarify how and when the payment should be made, but don’t always guarantee timely payment.

Either keep following up even after mentioning payment terms, or switch to a powerful invoicing software like Moon Invoice if you want to get paid faster. The latter is more effective, as it comes with advanced invoicing features that help prevent payment delays and enhance customer satisfaction.

Avail Moon Invoice’s free trial for a limited time and experience seamless invoicing.

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