Payment terms around the world: net 30, MSME interest, late payment laws by country

Net 30 is not net 30

"Net 30" sounds standard, but it means different things in different markets. In Germany, late payment after 30 days triggers statutory interest at 9.62% above the ECB base rate. In the UK, late payment of a commercial debt triggers 8% above the Bank of England base rate plus a fixed fee. In India under the MSMED Act, late payment to a registered small enterprise triggers 3× the bank rate compounded monthly. In the US, it triggers nothing automatic — only what your contract says.

The UK regime — Late Payment of Commercial Debts Act

The UK's Late Payment of Commercial Debts (Interest) Act 1998 gives commercial creditors a statutory right to interest at 8% above the BoE base rate, a fixed debt-recovery fee (£40-£100 depending on debt size), and reasonable costs of recovery. The right exists even if your contract is silent — but you can't contract it away below a reasonable level.

The EU regime — Late Payment Directive

The EU's Late Payment Directive 2011/7/EU requires public authorities to pay within 30 days and commercial parties within 60 days, with statutory interest at 8% above the ECB rate. The 2024 proposal to harmonise the rules further and cap payment periods at 30 days across all transactions is moving slowly through the Council.

The India regime — MSMED Act 2006

The Micro, Small and Medium Enterprises Development Act 2006 requires payment to registered MSMEs within 45 days. Late payment triggers compound interest at 3× the RBI bank rate, with no contractual override permitted. The Samadhan portal provides a fast online dispute resolution mechanism — most claims are resolved within 90 days.

The U.S. regime — Prompt Payment Act + contract

Federal contracts in the U.S. are governed by the Prompt Payment Act (typically 30 days). Private contracts are governed by what they say. If your contract is silent on late-payment interest, courts apply the statutory pre-judgment interest rate, which varies by state — typically 5–10%. Always specify in the contract.

Drafting that survives enforcement

A payment clause that holds up in court: (1) net 30 from date of valid tax invoice (not from invoice receipt — too vague), (2) statutory interest plus contractual interest at the higher of [X]% per annum, (3) right to suspend services after [Y] days of non-payment with [Z] days' written notice, (4) right to recover reasonable collection costs including legal fees. Without (4), the cost of recovery often exceeds the recovery.

E-invoicing and the death of disputes about receipt

Across the EU, the VIDA package is mandating B2B e-invoicing by 2030. India has had mandatory e-invoicing for large businesses since 2020. E-invoicing eliminates the "we never received it" defence — every invoice has a verifiable, timestamped receipt at the government portal.

Negotiating payment terms

For new vendor contracts, push for: (1) shorter payment cycle (net 15 if you're a freelancer, net 30 for SaaS), (2) deposit or upfront payment for new customers, (3) explicit late-payment interest, (4) right to suspend service on non-payment, (5) currency and exchange-rate clauses for cross-border deals. The first three should be in every freelance and small-business contract.

How AI helps

For SaaS and services businesses operating in multiple markets, ContractScan AI auto-detects the customer's jurisdiction, surfaces the applicable late-payment regime in your AR dashboard, and flags contracts whose payment terms are weaker than the local statutory minimum. That last point alone has paid for the product for several of our customers.