What Does Net 30 Terms Mean on an Invoice? | Payments 101

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As a business owner, you want to give your customers and clients the best experience possible. One of the ways you can ensure this is to give them the option of net 30 terms. In short, net 30 means that you’re letting your client pay you for your services within 30 calendar days after you have billed them. But is this the right move for your business? Here at Seek Capital , we want you to be armed with the best tools to successfully run your company. In this guide, we’ll discuss all there is to know about net 30 terms. We’ll also be sharing our thoughts on this option and why you should or shouldn’t implement net 30 terms into your business model.

What Exactly Is Net 30?

When you offer your clients net 30 terms, you are giving them the opportunity to pay you for your goods or services up to 30 calendar days after billing them. As a form of trade credit , net 30 is essentially the same as lending a client money (in the form of goods or services). Since they aren’t paying you right away (at the time of the transaction), it’s akin to loaning your clients money to pay for the products or services you offer in your business. As such, your goods and services are being delivered immediately. If the net 30 terms are kept, your client will pay you the total amount due before 30 calendar days are up. To effectively honor net 30 terms, you will need to keep track of the debt your clients owe you by using your accounts receivable. This will furthermore ensure that your finances are kept in order. It’s important to note that net 30 isn’t the only trade credit option available. If you prefer, you can offer your clients net 10, net 14, net 15, or even net 60.

Benefits of Net 30

The most common benefit of implementing net 30 is that it allows your business to take on more clients than if you immediately required payment for your goods and services. By offering net 30 terms, you can effectively serve other businesses that may not be in a position where they can pay you right away. This is often common with small businesses, so you could be doing them a big favor by offering net 30 terms. And when you factor in the hurt that COVID-19 has put on small businesses around the world, offering net 30 could effectively help these business owners weather the storm. What’s more, you could play a big role in helping communities survive. The service or good that your business offers could allow another business to keep its doors open. You might be surprised by the domino effect that small businesses can have on one another. In a time when many companies are struggling to maintain their customer base, net 30 makes more sense than ever before. If you can afford to give your clients a small window of time to pay you back, it might just make all the difference in the world. If you look at bigger businesses, it’s not uncommon to find them offering their clients trade credit terms that far exceed net 30. In some cases, you’ll find net 60 and net 90 terms being made available to select clientele. Of course, with bigger businesses also comes more cash on hand (typically). They can often afford not to get paid for up to 90 days. Moreover, offering flexible payment plans to their customers goes a long way in attracting new clientele. As advanced as our communication abilities are, there is perhaps still nothing quite as powerful as word of mouth. Letting other clients in their network know about your generous business offerings will bode will you in gaining new customers.

When Does Net 30 Start?

When net 30 terms begin all depends on the agreement between you and your client. The good news is that you get to decide, making net 30 as flexible as you need it to be. For example, maybe you want your net 30 terms to start from the time you deliver your goods to your client. Maybe you would rather they began in a couple of weeks from the time of the transaction to accommodate your client’s payroll needs. The choice is yours (and as long as your client agrees to it). This gives you a lot of versatility in how you service your customers. Regardless of what you and your client agree to, you must be sure to provide it in clear writing and get their signature, as well as your own. Not only does this seal the agreement, but it ensures that your client understands what’s actually in the agreement, as well. Net 30 terms always include calendar days, including business days, weekends, and holidays). Your contact also needs to clarify, as you don’t want there to be any confusion on the matter.

What Is 2/10 Net 30?

You’ve likely seen “2/10” at some time or another in your business dealings. Net 30 terms often come with a discount whenever there is an early payment. This serves to encourage clients to pay more over a shorter period of time. For instance, many businesses offer net 30 terms that have a 2% discount included if the customer pays within 10 days (2/10). As such, contracts and invoices will often have these terms written out as “2/10 Net 30.” You aren’t forced to stick with this format, either. If you prefer, you can adjust it to include whatever terms you like. As such, if you decide to offer your client net 60 terms and choose to include a 5% discount if they pay you back in 15 days, you can. On your invoices and contracts, then, you would simply write “5/15 Net 60.”

Is Net 30 Right for Me?

It really depends on what kind of cash you have on hand. But not only that, you need to research how much cash you typically have on hand, as well. You could be in a unique position currently that has you with more cash than usual. If you know that your business is usually sitting comfortably each and every month, you’re more likely to be able to offer net 30 terms to your clients. However, there are other factors you need to consider before you make your decision. Look at how many clients you have. Then do some research to see whether net 30 is commonly offered in your industry. Finally, you want to think about how much your business can afford to spare each month. The key is to make sure that you can comfortably survive if there are a few late payments from your clients. You also need to consider that net 30 could help you gain even more clientele. If you’re in a position where you can offer your clients net 30 terms, it might just give your business a boost over time. But what if you don’t have a lot of cash on hand? Or maybe your company relies on one or two clients to ensure your business’s success. If this is the case, offering your most-needed clients net 30 terms could put you in a tight spot financially. Also, consider this: You might be tempted to extend net 30 trade credit to your clients if you’re in a tough financial position. It’s essential to your business that you avoid this temptation. Just because things are tight right now should never be the reason that you offer net 30 terms. In fact, it’s just the opposite. Net 30 should be offered when your financials are at their best. You want to be generous with your clients, not cut them a deal because it might help you in the short-term. If your business is a relatively new startup and you’re struggling to make money, ask your clients for upfront deposits on all of the larger orders. Furthermore, add late payment interest fees into your contracts. In doing so, all new clients will see these terms upon signing your contracts. They will know going forward that you are serious about receiving on-time payments.


It’s crucial to your business’s success that you avoid offering net 30 terms in an attempt to get sales. This could easily backfire in the long run, so only offer it if you’re in a position to be generous to your customers. In doing so, you are far more likely to see organic growth in your business. If you are interested in learning more valuable tips, be sure to check out the rest of our articles section . And if there is anything we can help you with in the meantime, don’t hesitate to contact us . Sources https://www.entrepreneur.com/encyclopedia/trade-credit https://www.cnbc.com/2020/10/15/small-businesses-are-in-survival-mode-as-the-covid-pandemic-drags-on.html https://tipalti.com/210-net-30/

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