An invoice is a commercial document issued by a seller to a buyer, detailing a transaction and requesting payment for goods or services provided. It serves as the formal record of the sale and communicates the financial obligation the buyer holds. The timing for satisfying this obligation is governed by a clear hierarchy of rules. Payment timing is fundamentally established by the agreement between the parties, which takes precedence over all other considerations. When the agreement is silent, commercial law provides default rules to ensure the transaction can still be completed.
The Immediate Answer: Reliance on Contractual Terms
The most straightforward answer to when an invoice must be paid is the date explicitly stated on the document. This date is typically derived from the terms previously agreed upon in the underlying contract, purchase order, or master service agreement. The initial, signed agreement between the buyer and seller establishes the legally binding terms of trade. For example, if a contract specifies a 45-day payment window, the invoice must reflect a due date 45 days from its issue date. The most immediate payment term is often labeled “Payment Upon Receipt” or “Due on Receipt,” requiring the buyer to remit funds immediately upon receiving the invoice.
Decoding Standard Payment Terms
Business-to-business (B2B) invoicing frequently uses specific shorthand terms to communicate the exact payment timeline. The most common of these are the “Net” terms, which specify the maximum number of days a buyer has to pay the full amount due, starting from the invoice date. Net 30, Net 60, and Net 90 mean payment is due within 30, 60, or 90 calendar days, respectively, giving the buyer a period of trade credit.
Other terms offer alternative structures for payment timing. EOM, or End of Month, requires the balance to be paid by the last day of the month the invoice was issued. PIA, or Payment in Advance, demands payment in full before the goods or services are produced or delivered. A term like 2/10 Net 30 incentivizes early payment: the buyer receives a 2% discount if they pay within 10 days, otherwise the full amount is due within 30 days.
Default Rules: When an Invoice Lacks a Due Date
When neither the invoice nor the underlying contract specifies a payment due date, commercial law steps in to provide a default rule. In the United States, the Uniform Commercial Code (UCC) governs commercial transactions involving the sale of goods. The UCC generally provides that payment is due at the time and place the buyer receives the goods, unless otherwise agreed. This means that without a stated credit period, payment is due upon delivery.
For transactions involving services not covered by the UCC, the legal concept of “reasonable time” for payment is invoked. Reasonable time is not a fixed number of days but is determined by considering factors like industry standards, the prior course of dealing between the parties, and the specific jurisdiction’s legal interpretation. For instance, if a seller consistently accepted payment 60 days after the invoice date, a court may consider that the established reasonable time between those parties.
Financial and Legal Ramifications of Late Payment
Failing to pay an invoice by the due date creates immediate financial and legal exposure for the buyer. Once the due date passes, the unpaid invoice constitutes a breach of contract. A direct financial consequence is the imposition of late fees and interest charges, which must usually be stipulated in the original contract to be enforceable. Late fees can be structured as a flat charge upon the payment becoming overdue, or as a percentage-based interest rate that accrues on the outstanding balance.
Beyond these direct costs, late payments can damage the business relationship, potentially leading the seller to revoke future credit terms or require stricter terms, such as Payment in Advance. Escalation begins with payment reminders, progresses to formal demand letters, and may involve referring the debt to a collections agency or filing a lawsuit for breach of contract.
The Statute of Limitations for Invoice Enforcement
The ultimate deadline a creditor faces is the Statute of Limitations (SOL), which is the maximum period allowed to legally file a lawsuit to enforce the debt. The SOL clock generally starts running the day after the payment due date is missed. This deadline varies significantly based on the jurisdiction and the type of contract, typically being longer for written agreements than for oral ones.
For a written contract, the SOL may range from three to ten years, depending on the state. A partial payment or a written acknowledgment of the debt by the debtor can reset the clock, providing the creditor with a fresh period to file suit. Once the Statute of Limitations expires, the debt itself does not disappear, but the creditor loses the ability to use the court system to force payment.