Setting Payment Terms for B2B — Australian Guide

Payment terms set the window during which a client can legitimately pay. They are a commercial decision, a legal commitment and a cash-flow tool — all three at once. Most businesses default to "30 days" without considering whether that term is appropriate for their cost structure, or whether it is even enforceable given how they communicate it.

Choosing the right term length

The right term length depends on your industry, your customers and your own cash-flow needs. As a starting point:

7 days: Best for: small discrete jobs (trades, cleaning, courier), low-value services, new customers with no payment history. Most clients pay on time because the amount is low and the work is fresh in their mind.
14 days: Best for: most professional services, consulting, creative, IT and mid-range service businesses. Short enough to stay near the top of the accounts-payable queue; not so short that it creates friction with established clients.
30 days (net 30): Common for: ongoing client relationships, government, large corporates. You are effectively providing a free 30-day credit facility — factor this cost into your pricing. Insist on a signed credit application before extending 30-day terms.
EOM30 (end of month + 30 days): Common in: wholesale, manufacturing, distribution. Aligns with buyers' monthly payment runs but can extend actual credit to 60 days for early-month invoices. Factor this into your working capital requirement.
Deposit + balance: Best for: project-based work, high-value orders, new customers. Require 25–50% deposit before starting, balance on completion. Reduces your exposure and confirms client commitment.

How to communicate payment terms

Terms that are not clearly communicated before work starts may not be enforceable. The correct sequence:

State terms in your quote or proposal — before any work begins. Include the exact term: "Payment: 14 days from invoice date."
Get written acceptance — a signed quote, accepted proposal or email confirmation. "Sounds great, let's go ahead" by email is sufficient.
Repeat terms on the invoice — include the payment terms and the specific due date (e.g. "Due: 29 July 2026") on every invoice.
Include terms in your terms of trade — for ongoing customers, a signed terms of trade document establishes the default terms for all transactions.

Credit applications

For any customer on 30-day or longer terms, a credit application is strongly recommended. A credit application should include:

The applicant's full legal entity name and ABN
Principal place of business
Authorised signatory and their title
Two or three trade references (other suppliers who can attest to payment behaviour)
Agreement to your terms of trade (including payment terms and interest on late payment)
A personal guarantee from a director if the business is a company with limited assets

Check trade references by phone — most can be completed in 2 minutes and reveal payment habits that protect you from the start.

Settlement discounts

A settlement discount (also called an early payment discount) offers the buyer a small percentage reduction for paying early. Common structures:

2/7 net 30 — 2% discount if paid within 7 days, full amount due within 30 days
1% if paid within 14 days — gentler incentive for clients on 30-day terms

Before offering a settlement discount, calculate its effective annual cost. A 2% discount for 23 days early payment (7 vs 30 days) equates to approximately 32% per annum — often more expensive than an overdraft. Settlement discounts are most effective for large-value accounts where the carrying cost of debtor days is material.

What to do when clients push back on terms

Large buyers frequently have standard payment terms (30 or 60 days) that they apply to all suppliers. You have options:

Accept their terms (price accordingly): If the client is large and reliable, accept their terms — but price the cost of extended credit into your fee. A 30-day extension of credit costs roughly the equivalent of your cost of borrowing for that period.
Negotiate a deposit: Even if the client insists on net 30, you can often negotiate a 25–50% deposit on commencement. This reduces your credit exposure without changing the headline terms.
Request supply-chain finance: Some large buyers offer supply-chain finance programmes — you can be paid immediately (at a small discount) by a financier, with the buyer paying the financier at their normal 60-day terms. Ask your buyer's accounts payable team if this is available.
Walk away from uncommercial terms: 90-day or longer payment terms from a buyer with no creditworthy guarantor can make the relationship uncommercial. It is sometimes better to decline the work than to carry 90-day debtors who may not pay.

Including late-payment interest in your terms

Australian law does not automatically entitle you to interest on overdue invoices — you need a contractual right. Include a late-payment interest clause in your terms of trade:

Example clause: "Amounts not paid by the due date accrue interest at the rate of [RBA cash rate + 8%] per annum, calculated daily from the due date until the date of payment, without the need for notice."

This clause does two things: it gives you an enforceable right to interest, and it creates a financial incentive for the debtor to pay. Read the detailed guide on adding late fees in Australia.

Frequently asked questions

When should payment terms be agreed?

Payment terms should be agreed before work starts or goods are supplied — ideally in a signed contract, terms of trade or written quote acceptance. Terms imposed after delivery are harder to enforce and may not be enforceable at all if the customer disputes them.

Can I change payment terms mid-relationship?

Yes, but you must give reasonable notice and get agreement. Changing terms from net 30 to net 14 without agreement is a contract variation. The safe approach is to notify existing customers in writing and apply new terms from a specified future date.

Are verbal payment terms enforceable?

Verbal terms can be enforceable in Australia, but they are difficult to prove. A written record — even an email — is far more reliable. Always follow up a verbal agreement with an email confirming the terms.

What is EOM30?

EOM30 means 'end of month plus 30 days'. An invoice dated any day in June is due 30 days after the end of June — i.e. 30 July. This is common in wholesale and distribution because it aligns with monthly payment runs. It effectively extends credit by up to 60 days for early-month invoices.

Is it legal to charge different terms to different customers?

Yes. You can offer different terms to different customers based on their credit history, order volume or relationship. Just ensure the terms are agreed in writing for each customer.

Related tools and guides

Invoice Generator — ATO-compliant tax invoices, free
Adding Late Fees in Australia
Recurring Invoices & Retainers
How to Write a Tax Invoice That Gets Paid
Chasing an Overdue Invoice
Merion Free Tools — credit terms advisor, late payment calculator
Refer a debt to Merion