Contractor Invoice Payment Terms Explained
By ActiveEngine · 5 min read · Last updated August 27, 2026
What Net 15 and Net 30 really mean
"Net" terms count calendar days from the invoice date, not from when the client opens the email. Net 15 means payment is due 15 days after the date printed on the invoice.
Shorter terms are almost always better for small trade businesses. Residential clients rarely need 30 days, and asking for it trains them to pay slowly.
Deposits and progress billing
For jobs over a few thousand dollars, collect a deposit up front — commonly 25% to 50% — to cover materials. Show the deposit as a credit line on the final invoice so the balance is unambiguous.
On multi-week jobs, bill progress payments at defined milestones rather than waiting for completion. It keeps cash flowing and surfaces payment problems early.
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General contractors often hold back 5% to 10% of each payment until the project closes out. Budget for it: retainage is not extra profit arriving later, it is working capital you are lending for free.
List retainage as its own line so the client sees exactly what is being withheld and when it is released.
Late fees that hold up
A late fee only sticks if it was disclosed before the work started, so put it in your estimate and repeat it on the invoice. 1.5% per month (18% annually) is the common ceiling, but some states cap it lower.
Enforce it consistently or drop it. Selectively applied fees create arguments and rarely collect.