Payment terms best practice
Updated 28 June 2026
Your payment terms are the single biggest lever you control over when you get paid. Vague or over-generous terms quietly transfer working-capital risk onto your own business; clear, enforced terms set the expectation that invoices are paid on time.
This guide covers the fundamentals of terms that work for UK SMEs invoicing other businesses.
Keep terms short by default
Default to 14 or 30 days rather than 60 or 90. Every extra day of terms is a day you are financing your customer. Reserve longer terms for customers who have earned them and where the margin justifies it.
Put it in writing — and get it signed
Agree terms in writing before work starts, and get them signed. Written, signed terms remove the most common excuse for delay and are decisive if an invoice is ever disputed. This is also one of the dimensions a Late Payment Score assesses.
Use deposits and milestones
For larger or longer jobs, take a deposit up front and bill against milestones rather than a single invoice at the end. This caps how much is ever outstanding and keeps cash flowing through the project.
State your right to charge interest
Make clear in your terms that you will charge statutory interest and compensation on overdue invoices. You have this right by law even without a clause, but stating it sets expectations. See our guide to UK statutory interest on late payments.
Frequently asked questions
What payment terms should a small business use?
Default to short terms — 14 or 30 days — with deposits and milestones for larger jobs, and reserve longer terms for trusted customers where the margin justifies financing them.
Are 30-day payment terms standard in the UK?
30 days is common, and is also the default period that applies under UK law if no payment date is agreed. Many SMEs use 14 days to get paid faster.
Should payment terms be in writing?
Yes. Written, signed terms agreed before work starts are far easier to enforce and remove the most common cause of payment disputes.
Sources
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