Invoices & documents Payments

Invoice payment terms

Payment terms tell the buyer when and how to pay, and what happens if they are late. Clear terms on every invoice, with a due date written as a date, are the cheapest collection tool a business has.

Updated 2026-11-054 min read

Who this is for

Distributors and wholesalers
Manufacturers selling on credit
Micro and small enterprises
Service businesses
Accountants handling collections

On this page 12

Common terms and what they mean

Term	Meaning	Typical use
Advance / 100% advance	Pay before dispatch	New parties, custom orders
Against delivery	Pay when goods arrive	Local deliveries, cash-and-carry
Due on receipt	Pay as soon as the invoice is received	Services, small orders
Net 15 / Net 30 / Net 45	Pay within 15, 30 or 45 days of invoice date	Regular dealers
2/10 net 30	2% off if paid in 10 days, otherwise full in 30	Pushing early payment
PDC with order	Post-dated cheque given at order	Some distributor trades
Part advance	e.g. 30% advance, 70% before dispatch	Projects, large orders

Ready-to-use wording

Payment due on or before 14-12-2025 (30 days from invoice date).
Please pay by bank transfer or UPI to the account shown and share the UTR on WhatsApp.
Interest at 18% per annum will be charged on amounts outstanding beyond the due date.
Cheques are subject to realisation. Bounced cheque charges will be debited to your account.
Payments will be adjusted against the oldest outstanding invoices first unless you specify otherwise.
Any discrepancy in this invoice must be reported within 7 days of receipt.

The 18% figure is an example; pick a rate you can justify and have agreed in writing with regular buyers. Writing the due date as a date stops the endless did-you-mean-30-days-from-delivery debate.

If you are a micro or small enterprise

The MSMED Act protects micro and small suppliers registered under Udyam. In short:

The agreed credit period cannot exceed 45 days from the day the buyer accepts the goods or services.
Where there is no written agreement, payment is due within 15 days.
Late payment attracts compound interest with monthly rests at three times the bank rate notified by RBI.
Buyers who pay micro and small suppliers late can also lose the income-tax deduction for that expense until they pay.

So print your Udyam registration number on every invoice and keep terms within 45 days. Details in the MSME 45-day payment rule. This is general information, not tax or legal advice.

The 180-day GST link

Under GST, a buyer who does not pay the supplier the value plus tax within 180 days of the invoice date has to reverse the input tax credit taken, and can reclaim it after paying. Mentioning this politely helps with slow payers: Kindly note that input tax credit on this invoice is linked to payment within 180 days. Read ITC reversal and the 180-day rule.

Is an early payment discount worth it?

Take 2/10 net 30 on an invoice of ₹1,00,000. The buyer pays ₹98,000 on day 10 instead of ₹1,00,000 on day 30.

Item	Value
Discount given	₹2,000
Days money comes early	20
Cost of the discount, annualised	About 37% a year (2/98 × 365/20)

That is expensive money. A cash discount makes sense only if your alternative is worse, such as a buyer who otherwise pays in 90 days, or if you need cash urgently and cannot borrow cheaper. Also note that a discount given after the invoice, not shown on it, has its own GST treatment; see GST on cash discounts after sale.

Matching terms to the party

New party: advance or against delivery for the first few orders.
Regular, prompt payer: Net 30 with a credit limit.
Regular, slow payer: shorten terms, hold dispatch above limit, or ask for part advance.
Large institutional buyer: accept their terms only after pricing in the wait.

Review terms party by party every quarter using an ageing report.

Making terms stick

Agree terms in writing when opening the account, not after the first late payment.
Print them on quotations, orders and invoices so they are never a surprise.
Send a friendly reminder three days before the due date, not after.
Stop dispatch to parties over the agreed limit, politely and consistently.
Send a ledger statement every month so disputes surface early.

Doing this with Tally and Cashflow OS

Cashflow OS shows bill-wise outstanding and ageing from your Tally data on the phone, so you can see which invoices are past due before a salesperson visits. Documents such as quotations and proformas carry your terms, bank and UPI details, and party statements go out on WhatsApp in a tap. See outstanding receivables.

Avoid these

Common mistakes

MistakeWriting 'Net 30' with no start date
Do this instead
Print the actual due date, and say whether the period runs from the invoice date or the delivery date.
MistakeAgreeing terms only after the first late payment
Do this instead
Put terms in writing when opening the account, and print them on quotations, orders and invoices.
MistakeOffering a cash discount without working out its cost
Do this instead
Annualise it first. A 2% discount for paying 20 days early costs far more than most bank borrowing.
MistakeDispatching to parties over their limit
Do this instead
Hold dispatch politely and consistently above the agreed limit, or ask for part advance.

Keep handy

Checklist

Invoice payment terms — 7 checks. Tick them as you go.

Due date printed as a date near the total
Interest on late payment agreed in writing
Bank details and UPI, with a request to share the UTR
Udyam number printed if you are a micro or small enterprise
Credit limit set for each regular party
Reminder sent a few days before the due date
Terms reviewed party by party every quarter using ageing

In Cashflow OS

How Cashflow OS helps

Cashflow OS puts your TallyPrime books on every phone in the team. Where it fits this topic:

See past-due bills before the visit

Bill-wise outstanding and ageing from your Tally data show which invoices are overdue, on the phone, before a salesperson walks in.

See Outstanding receivables

Statements and reminders on WhatsApp

Send party statements and payment reminders on WhatsApp, and let salespeople record what they collect with the collections module.

See Collections

Questions people ask

Can I charge interest on late payment?

You can if the buyer has agreed to it, ideally in writing. Micro and small enterprises have a statutory right to interest under the MSMED Act.

Should payment terms start from invoice date or delivery date?

Either, but say which. Invoice date is simpler to track; under the MSMED Act, the period runs from the day of acceptance.

What is the most common term in distribution?

It varies by trade and region. Many distributors work on 15 to 45 days of credit with a credit limit per dealer.

What is the difference between payment terms and a credit limit?

Payment terms say when each bill is due. A credit limit caps the total a party can owe at any time. Use both together.

Should I accept post-dated cheques?

Many trades do. Record each PDC with its date, deposit it on time, and follow up immediately if one bounces instead of continuing to supply.

Can I change payment terms for an existing customer?

Yes, by agreement. Tell the customer in writing from a future date and print the new terms on invoices from then on.

Is payment against delivery risky?

It is safer than credit, but agree how payment will be made at delivery, such as UPI or cheque, and who in your team collects it.

Do long payment terms affect when I pay GST?

Yes. GST on goods is generally due for the period in which you issue the invoice, whatever the credit terms, so you may pay the tax before the customer pays you.

This page is general information for Indian businesses, not tax, legal or financial advice. Rules and rates change — check the official portals or your CA before acting.