Payment Terms Comparison Calculator NZ 2026

Reviewed 7 August 2026.

Quick answer On $120,000 of invoicing, moving from the 20th of the month following to 7 day terms cuts average days to cash from 40.5 to 13.0, releases $9,041.10 of working capital and saves $1,084.93 a year at a 12% cost of money. The 20th of the month following is the most common New Zealand trade term and also the least even, because an invoice issued on the 1st waits far longer than one issued on the 30th.
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Payment terms are usually inherited rather than chosen. Most New Zealand sole traders offer whatever their first client asked for, or copy the 20th of the month following because it is what the trade does, and never price the difference. The difference is real money. Terms determine how long you finance your clients, and financing your clients costs whatever money costs you, whether that is an overdraft rate, a business loan, or the return you gave up by leaving cash in the business instead of somewhere useful. This calculator puts the common terms side by side on three measures: how many days on average until the cash arrives, how much working capital is tied up at that speed, and what that capital costs to finance across a year. It also lets you add the slippage you actually experience, because the term you offer and the day you are paid are rarely the same thing, and comparing stated terms alone flatters every option equally.

Your current terms cost
$1,597.81
a year to finance $13,315.07
Average days to cash
40.5
on your current terms
Best available saving
$1,084.93
moving to 7 days from invoice

Every term compared

Average days to cash includes the slippage you entered. Your current terms are highlighted.

TermsAvg days to cashWorking capital tied upAnnual financing costAgainst current

Your current position

Revenue per day$328.77
Average invoice$5,000.00
Stated term, average days34.5
Slippage added6
Average days to cash40.5
Revenue financed by you$120,000.00
Working capital tied up$13,315.07
Annual financing cost$1,597.81
Cost per invoice$66.58
This is an estimate. It prices the financing cost of the gap between doing the work and being paid for it. It does not price the risk that an invoice is never paid, the time spent chasing it, or the commercial cost of losing a client who will not accept tighter terms. Whether you can charge interest on an overdue account depends on your terms of trade having been agreed before the work started.

Why the 20th of the month following is not a 20 day term

The name misleads. It does not mean twenty days; it means every invoice dated within a month is settled on one fixed day the following month. An invoice issued on the 1st of March waits until the 20th of April, which is about 50 days. An invoice issued on the 30th of March waits 21 days. If you invoice steadily through the month the average lands near 35 days, but the spread runs from three weeks to seven. That unevenness is the real cost. Your rent, your fuel and your own drawings do not arrive in one monthly lump, so a term that concentrates all your income on a single day forces you to carry the rest of the month yourself.

Slippage is part of the term

Comparing stated terms is close to meaningless on its own, because almost nobody is paid on the day the invoice says. A stated 30 day term with a fortnight of slippage is a 44 day term in practice, and it should be compared as one. The slippage field here applies equally to every option, which is deliberate: it keeps the comparison honest without pretending that tightening your terms magically makes clients punctual. If in your experience shorter terms attract proportionally more slippage, the saving shown for the shorter options is optimistic.

Deposits beat terms

Any portion of a job paid before you invoice for the balance is capital you never had to finance at all. A 30 percent deposit on a job removes 30 percent of that job from every calculation on this page. For project work of any length this is usually a bigger lever than the terms themselves, and it is often an easier conversation, because a client who hesitates over a deposit has told you something useful about their own cash position.

Worked example

A contractor invoices $120,000 a year across 24 invoices, so revenue accrues at $328.77 a day on an average invoice of $5,000.00. They offer the 20th of the month following, which averages 34.5 days, and clients slip a further 6 days, giving 40.5 days to cash. That leaves $13,315.07 of working capital outstanding at any moment, costing $1,597.81 a year at a 12% cost of money, or $66.58 per invoice.

Moving to 7 day terms, with the same 6 days of slippage, would bring average days to cash down to 13.0, release $9,041.10 of working capital and save $1,084.93 a year.

How this is calculated

Revenue per day is annual revenue divided by 365. For terms expressed as days from invoice, the average wait is that number of days plus your slippage. For the 20th of the month following, the wait for an invoice issued on day d of a 30 day month is 50 minus d, which averages 34.5 days across the month, plus slippage. Working capital tied up is revenue per day multiplied by average days to cash, which is the standard debtor days relationship. Annual financing cost is the working capital multiplied by your cost of money. Any percentage paid on completion before invoicing is removed from the revenue being financed before all of this is worked out.

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Frequently asked questions

What does the 20th of the month following mean in New Zealand?

It means every invoice dated in a given month is paid on the 20th of the next month. An invoice issued on the 1st waits about 50 days, one issued on the 30th waits about 20 days, so across a month of steady invoicing the average is roughly 35 days. It is the most common trade term in New Zealand.

Why is the 20th of the month following worse than 30 day terms?

On average it is not far off, but it is far less even. Work invoiced early in a month waits much longer than work invoiced late, so the cash arrives in one lump each month rather than steadily. For a sole trader with weekly outgoings that unevenness matters more than the average.

Are shorter payment terms always better?

Financially yes, commercially not always. Shorter terms release working capital and cut financing cost, but some clients will not accept them and larger organisations often pay on their own cycle regardless of what your invoice says. The value of tightening terms is only real if clients actually comply.

Can I charge interest on overdue invoices in New Zealand?

Only if your terms of trade said so and the client agreed to them before the work started. There is no automatic statutory right to interest on late commercial payment in New Zealand, unlike some other countries.

Does invoicing sooner help more than shorter terms?

Usually. The gap between finishing work and issuing the invoice is entirely within your control and needs no negotiation, whereas changing terms is a commercial conversation. A week of invoicing delay costs exactly as much as a week of client delay.