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Average Payment Terms by Industry

You’ve provided services for a client and sent out your invoice. When can you expect to receive payment? It depends. Not only do payment terms differ by country and region, but they also vary by industry. While in some industries it’s standard to pay within a matter of days, others involve a lengthy payment process. Keep reading for our breakdown of payment terms by industry, so that you know what to expect.

What are invoice payment terms?

First things first: what are invoice payment terms, anyway? This term simply refers to the terms of payment outlined between a business and its customers. At minimum, it will be the date when payment is due. Terms are often expressed in “net days” which means the number of days that have passed from invoice receipt to due date.

For example, net 10 terms mean that payment is due within 10 days. Net 15, net 30, net 60, and even net 90 are all standard examples of payment terms.

Understanding invoice terms and conditions

Your invoice terms and conditions should clearly list payment terms for each client. When crafting your business invoice terms, you’ll need to state details like the following:

  • Invoice date

  • Payment due date

  • Penalty for delayed payment

  • Accepted payment methods

  • How to submit payment

  • Contact details for issues with payment

That way, your clients will see all the information they need clearly laid out in the invoice terms, encouraging them to pay you automatically and on time.

Average payment terms by industry

Across the board, net 30 terms are standard practice in most industries and should be a good fallback if you don’t know where you stand. This means that the customer is required to pay within 30 days from receipt of the invoice. However, industry standards fall short or long of this benchmark figure. Here are a few examples:

  • Agriculture: Immediate to 3 days

  • Auto Repair: 30 to 90 days

  • Cleaning: Immediate to 14 days

  • Construction: 90 days

  • Food and Beverage: Immediate to 3 days

  • Landscaping: Immediate to 7 days

  • Professional Services: 75 days

  • Retail: Immediate to 3 days

  • Transportation: 30 to 120 days

As you can see from the figures above, the average invoice terms can vary quite widely. Some industries require immediate payment, while others accept payment with longer net terms. The reason why there is so much variation depends on the nature of the business. For those like retail, food and beverage, and small-scale agriculture, there’s fast turnover of inventory that requires upfront payment to maintain positive cash flow. Professional services may have fewer upfront expenses to maintain, while industries like construction work on longer term projects with longer payment terms to match.

It’s important to note that these average terms above are just a rough generalization of what to expect. They factor in late payments from clients – unfortunately 60% of invoices are paid late in the United States, with an average of 7 days tacked onto the invoice terms and conditions before payment is submitted.

How to improve payment timings

You can use the industry payment terms above as a benchmark for your business. What can you do if your customers aren’t paying invoices on time? Here are a few tips to encourage timely payments:

  1. Place your payment terms in bold at the top of each invoice

  2. Use accounting software with online invoicing capabilities

  3. Provide early payment discounts to customers

  4. Offer a variety of alternative and online payment methods to clients

Finally, if you have problematic customers who never seem to pay on time, it might be time to strike them from the books. They may place regular orders, but if payments are delayed or infrequent it’s not worth the risk. Trimming the fat can keep your incoming payments up to industry standards.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.

GoCardless is used by over 60,000 businesses around the world. Learn more about how you can improve payment processing at your business today.

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