Invoice payment terms are very important as they state when to be paid, how you would like to receive payment, & what period they must pay, among other stipulations. & it's true—especially if you're a small business owner. It's all about cash flow, which is why invoice payment terms are so important.
Here are ten of the most common payment terms & acronyms & what they mean:
PIA - Payment in advance
Payment in advance is pretty much what it says on the tin. It requires a customer to pay the full amount on an invoice before any work or supplies are delivered.
CIA - Cash in advance
Like Payment in advance, cash in advance requires customers to pay the full amount of an invoice in cash before any goods or services are delivered.
After delivery of goods or services & the invoice is received (upon receipt), they are expected to pay the supplier in full immediately.
EOM - End of the month
When this is found on an invoice it indicates that payment is due, & the seller expects payment, by the end of the month of the date on the invoice.
When Net D/X appears on an invoice it indicates that payment must be paid within a certain number of days.
Some common net payment terms you might see on an invoice:
- Net 7 Payment to be received 7 days after invoice date.
- Net 10 Payment to be received 10 days after invoice date.
- Net 30 Payment to be received 30 days after invoice date.
- Net 60 Payment to be received 60 days after invoice date.
- Net 90 Payment to be received 90 days after invoice date.
2/10 Net 30
Net 30 means they still need to pay within 30 days of the invoice date but the 2/10 indicates that if they pay within 10 days of invoice date, they will receive a 2 percent discount.
This can come in many variations, the most come you will see are.
- 1/10 Net 30
- 5/10 Net 30
- 2/30 Net 60
I think you get the picture.
COD - Cash on delivery
This one is simple - the customer must make payment for goods or services at the time of delivery. How this is different to ‘upon receipt’ is lost on me! 🙃
CND - Cash next delivery
This term found on the invoice indicates that the current order/shipment must be paid for before the next is to be delivered. This is most used when there is a standing order of weekly, monthly, quarterly shipments.
21 MFI - 21st of the month following invoice
Another simple one, once you know what the acronym stands for, you are expected to pay on the 21st of the month following the invoice date (or any other date stipulated in the coding).
CBS – Cash before shipment
By this point, it’s most likely that you CBA with these acronyms, but here we’re talking about CBS instead. In this case, the vendor will accept payment before any goods or services are supplied. This term can be used with a custom order.
There are many invoice payment terms, but these are some of the common terms on your invoices that you will most likely encounter.
If you would like to learn how to read an invoice or find out how invoices are paid, check out this article here. You will find that even though there are common invoice payment terms there isn’t a set way a supplier invoice should be set out.
If you can think of any more payment terms, we’d love to hear about them (well, maybe not love, but we’d be vaguely interested in them at least…)! Feel free to drop a comment on our LinkedIn, we’d love to see you there!