What complete terms answer

Good payment terms settle four questions before the work starts, in the same words on the estimate, the signed contract and every invoice:

When is it due, and what starts the clock? Thirty days from the invoice date, from the day it arrives and from the end of the job are three different due dates. Name the one you mean.
How can they pay? Card, bank transfer or check, plus any card fee your state and your processor allow.
Who pays? The homeowner, a property manager, an insurer or a lender. Terms sent to someone who can't approve payment don't get paid.
What happens if it's late? Any late fee or interest, and when it starts.

Terms a customer first sees on the invoice are a request, not an agreement.

The common terms

Due at completion: paid before you leave or the day the work is finished. The usual choice for service calls, details and house washes.
Due on receipt: due the day the invoice arrives, which only helps if it goes out the day the job ends.
Net 15 and net 30: due 15 or 30 days after the invoice date. Common with property managers, general contractors and other businesses that pay on their own cycle; agree on them in writing before the first job.
Deposit, progress and final payments: a schedule tied to events in the contract, for larger jobs. See progress billing.
Early-payment discount: written like "2/10, net 30", meaning a discount for paying within 10 days and the full amount by day 30.

Example: A property manager gets a $5,000 invoice on terms of 2/10, net 30. Paying by day 10 costs them $4,900; otherwise $5,000 is due by day 30. You give up $100 to be paid 20 days sooner, which works out to roughly 37% a year (2 ÷ 98 × 365 ÷ 20). Offer it only if the cash is worth that much to you, and don't let the discount be taken on late payments. The numbers are made up for illustration.

Terms run both ways

Your supply house gives you terms too. If it wants payment before your net 30 customers pay you, you're funding those jobs from your own bank account in between. Keep net terms for accounts that have earned them, and ask suppliers for terms at least as long as the ones you give.

Late fees only work if agreed first

A late fee or interest charge has to be in the terms the customer accepted before the work; added to an overdue invoice, it starts an argument rather than a payment. What you can charge, and how you must disclose it, depends on your state's law, so have a local attorney check your wording once, or start with your state attorney general's consumer protection office.

Common mistakes

Vague wording. "Due upon completion" invites a debate about what complete means. Tie it to an event, such as the final walkthrough.
Net 30 by default. Net terms for homeowners push your cash back a month for no reason.
Invoicing late. Net terms count from the invoice date, so an invoice sent a week late gets paid a week late.
No follow-up. Terms nobody enforces on day 31 turn net 30 into net 60.

How it connects

Payment terms decide when an invoice turns past due in your accounts receivable, and how much cash flow it takes to carry your work. A deposit and retainage are terms too: one paid up front, one held back until the end. How to get paid faster has a terms block you can adapt, and how to collect overdue invoices picks up when terms are broken.