Net 30: What Is it?

Net 30 is an invoice payment phrase that means the customer must pay the entirety of their bill in 30 days or fewer. Often if the customer does not pay within the 30 day period, interest is charged.

Not all clients will understand what net 30 means, so it is important to make a note somewhere on the invoice to let first-time clients know what is expected. If you have not received payment and the deadline for the net 30 payment is approaching, it is good practice to issue a reminder to your customer.

Advantages of Offering Net 30

  • As the seller, offering Net 30 to your customers shows that you trust them. Some large companies and government agencies demand Net 30 terms from their suppliers, so offering Net 30 terms to your clients allows you to maintain a competitive edge against other businesses in your niche.
  • As the customer, Net 30 is great because it allows you to conserve your cash flow and pay off your purchases a little bit at a time without needing to pay interest.

Disadvantages of Offering Net 30

  • Providing a line of credit to your customers can put your company's cash flow at risk.
  • If you offer Net 30 terms to all of your clients, you may end up with a difficult client that leaves you with debt, which would affect your company's growth.

Net 30 Versus Net 90

Net 30 means that you are giving your customer 30 days to pay for their purchase from the time that they receive the invoice. Similarly, Net 90 means that they have 90 days from the time they receive the invoice. You may also see Net 15 or Net 60.

You should only offer these long-term credit lines to customers that have proven they can pay their debts.

Offering Net 30 When You Can't Afford it

Many small business owners do not have the cash on hand to be able to give their customers Net 30 terms of payment. The problem is, if you want to work with bigger clients, they often won't work with you unless you offer them at least a Net 30, if not a Net 60 or Net 90.

A great way to keep cash flow up while still offering Net 30 is to create an incentive for companies to pay early. The most common way to do this is to offer a discount if they pay within the first 15 days of receiving the invoice. You can simply give them 1 or 2 percent as a way to convince them to pay before the 30-day deadline. This would be demonstrated by putting 2/15 Net 30 on the invoice, meaning they will receive a 2 percent discount if they pay within 15 days and the total amount is due within 30 days.

If this doesn't work, you may have to consider doing what is called factoring. This is when you work with a third party who will buy your invoices and advance you the money that your initial customer owes. When the customer pays the invoice, the money goes straight to the factoring company.

Asking for Net 30 as a Small Business

As a business, being able to secure Net 30 or Net 60 terms from your suppliers is a valuable asset. It's essentially a credit line that doesn't require you to pay back any interest.

When you first begin seeking out vendors who will give you a Net 30 account, try to find vendors who are willing to approve your company based solely on verification of a Tax Identification Number and a 411 business listing.

There are also sellers who will want an initial prepaid order before they can approve your business for a Net 30 account.

Once you establish yourself with companies like this, you should be sure to pay within the first 10 to 16 days. You will also need to make consistent purchases with them for at least a year. Only then will your business's credit score increase. The higher your business credit score, the more likely you will be able to work with larger suppliers who offer better payment terms.

Net 30 as an Online Publisher

If you are a website that makes money through display ads or affiliate marketing, Net 30 is something you will want to pay close attention to. Many large ad networks use Net 30 to pay their publishers. This means they will need to pay you 30 days from the time that you send your invoice.

As a publisher, Net 30 terms are excellent and rarely seen outside of the major ad networks. While the payment period shouldn't be your sole reason for choosing an ad network, the cash flow will be best with this type of company.

If you are seeking direct ad sales instead of working with a large ad network, you will likely not discuss payment terms until after you have received an insertion order (IO) from the agency. If the payment terms are not expressly written on the IO, then according to the Interactive Advertising Bureau, they will automatically be Net 30.

Frequently Asked Questions

  • Should I offer Net 30 to all of my customers?

Not necessarily. You may want to look into each of your clients by checking their credit scores before offering them Net 30.

  • Why do large companies pay slowly?

Often large companies ask for Net 30 terms because there are several layers of internal approval required before payments can be made. This takes time. They also know that Net 30 is good for their cash flow and the power of a large company means they can demand Net 30 terms with most of their suppliers.

  • What does it mean when an invoice says due upon receipt?

This means that payment needs to be made as soon as the invoice is received. This works best for small projects and the payment should be received within 24 hours of issuing.

If you need help with Net 30 payment terms, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.