Contractor Invoice Payment Terms Explained | Reddit & LinkedIn

Net-15 and net-30 are the number of days a client has to pay after the invoice date. Net-15 means payment is due within 15 days, net-30 within 30. Shorter terms get you paid sooner, but clients accustomed to net-30 or net-60 may push back. The right term depends on your cash needs and the client. For most small residential work, net-15 on milestone invoices is reasonable and enforceable.

A deposit at signing, commonly 10 to 30 percent, funds initial materials so you are not floating them on your own credit before the job even starts. It also signals client commitment. Some states cap deposits on home-improvement contracts, so confirm local rules. Always put the deposit amount and every payment term in the signed contract, since a verbal understanding is worthless in a dispute.

Retainage is a percentage of each payment, often 5 to 10 percent, held back until the project is complete and any punch list is done. It is common on larger and commercial jobs and gives the client leverage to ensure finish quality. If you accept retainage, price it into your cash-flow plan, since that held-back money can sit for weeks after you have finished the work.

In most states you can charge a late fee or finance charge on overdue invoices if the rate is stated in the contract and within legal limits. A common structure is 1.5 percent per month on the past-due balance. The fee matters less as revenue than as a deterrent. Clients pay stated-late-fee invoices faster. Always disclose the fee in writing before the work begins.

The fastest-paid contractors combine short terms, milestone billing, and automated follow-up. Instead of one net-60 invoice at the end, they collect a deposit, bill each milestone at net-15, and let software chase anything overdue. ContractShield builds the schedule from your quote, invoices through Stripe, and runs Collections on late invoices automatically. You pay a flat 2% per job (1% each side), capped at $250, no per-lead fees, only when funds clear.

Commercial and general-contractor work often comes with terms you do not control. A GC may impose net-30 or net-60, require pay-when-paid language, and hold retainage until the whole project closes out, not just your portion. Read these terms before you bid, because they change your cash-flow math and your price. If you are carrying labor and materials for 60 days plus retainage, that cost belongs in the bid. Never assume a commercial client will pay on the fast residential terms you are used to.

The payment section is the part of the contract that protects your cash. It should state the total price, the deposit, each milestone and its amount, the payment terms such as net-15, any retainage percentage, the late-fee rate, and the accepted payment methods. Spell out what happens on nonpayment, including your right to pause work and to file a lien. Clients rarely read the whole contract, but a clear, itemized payment section removes the ambiguity that most payment disputes are built on.