Payment Terms Generator

How to Use the Payment Terms Generator

Creating clear payment terms is essential for maintaining healthy cash flow and professional business relationships. This free tool helps you generate customized payment terms that you can paste directly into your invoices, contracts, purchase orders, or service agreements.

Steps

• Choose your payment window - Select from standard Net terms (7, 15, 30, 45, 60, 90 days) or set a custom period.
• Add incentives and penalties - Optionally include early payment discounts (like 2/10 Net 30) and late payment penalties to encourage timely payments.
• Select payment methods - Specify which payment methods you accept (UPI, bank transfer, cheque, etc.).
• Add legal clauses - Include GST clauses, MSME compliance terms, jurisdiction, and more.
• Choose your tone - Professional, friendly, firm, or legal language depending on your relationship with the client.
• Copy and use - Copy the generated text to your clipboard, download as a text file, or print as PDF.

Frequently Asked Questions

What are standard payment terms for invoices?

The most common payment term is Net 30, meaning payment is due within 30 calendar days of the invoice date. However, terms vary by industry. Service businesses often use Net 15 or Due on Receipt. Construction and manufacturing may use Net 45 or Net 60. Freelancers and small businesses commonly use Net 7 to Net 15 to maintain cash flow.

What does Net 30 mean?

Net 30 means the total ("net") amount of the invoice must be paid within 30 days of the invoice date. There is no discount for early payment unless separately specified (like 2/10 Net 30). The 30-day clock starts from the invoice date, not the delivery date or receipt date, unless your terms specify otherwise.

What is 2/10 Net 30?

2/10 Net 30 is a payment term that offers a 2% discount if the buyer pays within 10 days. If they choose not to take the early payment discount, the full amount is due within 30 days. This is a powerful incentive - the annualized return for the buyer paying 20 days early at 2% is roughly 36%, making it very attractive.

Can I charge interest on late payments in India?

Yes. Indian businesses can charge interest on late payments if the terms are clearly stated in the invoice or contract. For MSME-registered suppliers, Section 16 of the MSMED Act, 2006 mandates compound interest at 3 times the RBI bank rate (currently approximately 16.50% per annum) on payments delayed beyond 45 days. Under Section 43B(h) of the Income Tax Act, buyers cannot claim the expense as a deduction if MSME payments exceed the agreed timeline.

What are MSME payment terms under Section 43B(h)?

Section 43B(h), effective from April 1, 2024, states that any sum payable to a micro or small enterprise must be paid within the time limit specified in Section 15 of the MSMED Act (45 days if there is a written agreement, 15 days otherwise). If the payment is not made within this period, the buyer cannot claim it as a deductible business expense for that financial year. This makes it financially disadvantageous for buyers to delay payments to MSME suppliers.