Payment Terms That Actually Protect You (Net 30 Is a Trap)

You've probably seen it on invoices everywhere: Net 30.

It sounds professional. Standard. What businesses do.

Here's what actually happens with Net 30:

1. Client receives invoice
2. Client files it away
3. Client forgets about it
4. 30 days pass
5. Client still hasn't paid
6. You send a follow-up
7. Client says "oh yeah, I'll get to that this week"
8. Another week passes
9. You follow up again
10. Client pays — maybe

Net 30 isn't a payment term. It's a procrastination deadline.

Why Net 30 Fails Contractors

Net 30 works for big corporations with accounts payable departments. It doesn't work for contractors dealing with homeowners, small businesses, and property managers who:

• Don't have formal invoice processing
• Are busy and forgetful
• Prioritize other things over your invoice
• May not have the cash on hand

When you give someone 30 days to pay, you're giving them 30 days to forget, procrastinate, or run out of money.

Better Payment Terms

1. Due on Receipt

What it means: Payment is due immediately upon receiving the invoice.

When to use it:

• Small jobs (under $500)
• Service calls and emergency work
• One-time customers
• Jobs where you're still on-site

How to enforce it:

• Ask for payment before you leave
• Accept credit cards on-site
• Send the invoice via text while you're still there

2. Deposit Required

What it means: You require a percentage upfront before starting work.

How much:

• 25-50% for most residential jobs
• 50%+ for large projects with expensive materials
• 100% for material costs (you buy materials, client pays for them upfront)

Why it works:

• Client has skin in the game
• You're not fronting the entire project cost
• Client has something to lose if they don't pay the balance
• It filters out clients who can't afford you

3. Progress Payments

What it means: You break the project into milestones, with payment due at each milestone.

Typical structure:

• 25% deposit before starting
• 25% at rough-in or mid-point
• 25% before finish work
• 25% at completion

Why it works:

• You're never more than one milestone behind on payment
• Client sees progress before each payment
• If client stops paying, you stop working
• Reduces risk of total loss

4. Net 15 (With Late Fees)

What it means: Payment due in 15 days, with a penalty for late payment.

Late fee structure:

• 1.5% per month (18% APR) — common and reasonable
• Flat fee — $25-50 after 15 days
• Both — 1.5% monthly + flat processing fee

Why Net 15 instead of Net 30:

• Creates urgency without being aggressive
• Gives clients time to process (but not too much)
• Late fees create consequences

What to Put in Your Contract

Your payment terms should be in your contract, not just on your invoice. Here's the language:

Common Mistakes

Not Requiring a Deposit

The mistake: You start work without any money upfront.

The risk: Client ghosts, you're out materials + labor.

The fix: Always get a deposit. Even 10% is better than 0%.

Not Defining "Completion"

The mistake: "Payment due upon completion" without defining what completion means.

The risk: Client argues you haven't "finished" because of punch list items, withholding final payment.

The fix: Define substantial completion in your contract. "Completion means all work in scope is installed and functional, excluding minor punch list items."

Letting Work Continue Unpaid

The mistake: Client misses a progress payment, you keep working.

The risk: Now you're two payments behind, client has no incentive to catch up.

The fix: Stop work clause. If a payment is missed, work stops until payment is made.

No Late Fees

The mistake: Invoice says Net 30 but there's no penalty for paying late.

The risk: Client pays whenever they feel like it. Net 30 becomes Net 60 becomes Net 90.

The fix: Late fees in the contract, enforced consistently.

Payment Terms by Job Type

When to Waive Your Terms

Sometimes you might waive or modify your payment terms:

• Repeat, reliable clients. If they've paid on time for years, you can be flexible.
• Large contracts with slow pay cycles. Government and commercial clients often pay Net 60 or longer. Build it into your pricing.
• Emergency situations. Sometimes you help first and bill later. Just know the risk.

But never waive terms for:

• New clients
• Clients who've been slow to pay before
• Clients who push back on deposits
• Large projects where you'd be out significant money

Key Takeaways

• Net 30 is a trap. It's a procrastination deadline, not a payment plan.
• Deposits protect you. 25-50% before work begins.
• Progress payments reduce risk. Never more than one payment behind.
• Late fees must be in the contract. You can't add them after the fact.
• Define "completion." Don't leave it vague.
• Stop work if payment is missed. It's easier to pause than to chase.

Your payment terms aren't just boilerplate — they're your first line of defense against non-payment. The right terms can prevent 80% of collection problems before they start.