Depending on the type of business that you run, you may require cash on delivery or you may be able to send out invoices at the completion of a particular project. Alternatively, you may also be able to send out invoices at set time intervals for clients with whom you have a continuing relationship. If you are sending out invoices to your customers, it is important that you lay out very clear payment terms.

Generally speaking, there are three critical elements to the payment terms to any given invoice. First is the due date for payment. If you see an invoice that says “net 30″, for example, that means that full payment of the total amount owing should be made within thirty days. The second element makes the first element more specific. Is it 30 days from the date of the invoice? From the date the goods or services were delivered? That’s why payment terms should not be stated simply as “net 30″, but they should rather by stated in a way similar to “net 30 from date of invoice.”

The third element describes what happens if payment is not received by the due date. It is under this portion that you describe any sort of interest terms that may be attached to your invoice. With the interest rate, be sure to describe whether the percentage applies on a monthly basis or an annual basis. As you can imagine, 2% interest annually is quite different than 2% interest monthly.