Net 30 Payment Terms: What They Mean & How to Use Them

What Are Net Payment Terms?

"Net" payment terms specify when an invoice is due. "Net 30" means payment is due 30 days after the invoice date. These terms are standard in business-to-business transactions and set clear expectations for when you'll be paid.

Common Payment Terms Explained

Net 30

Meaning: Payment due 30 days after invoice date

Example: Invoice dated Jan 1 → Payment due Jan 31

Most common for: Standard B2B transactions

Net 60

Meaning: Payment due 60 days after invoice date

Example: Invoice dated Jan 1 → Payment due Mar 2

Most common for: Large corporations, government contracts

Net 15

Meaning: Payment due 15 days after invoice date

Example: Invoice dated Jan 1 → Payment due Jan 16

Most common for: Smaller projects, new clients

Net 90

Meaning: Payment due 90 days after invoice date

Example: Invoice dated Jan 1 → Payment due Apr 1

Most common for: Very large companies, international clients

Due on Receipt

Meaning: Payment due immediately upon receiving invoice

Most common for: Small projects, consumer transactions, new/risky clients

Net 10 EOM (End of Month)

Meaning: Payment due 10 days after the end of the month

Example: Invoice dated Jan 15 → Payment due Feb 10

Most common for: Recurring services, established relationships

2/10 Net 30

Meaning: 2% discount if paid within 10 days, otherwise due in 30 days

Example: $1,000 invoice → $980 if paid by day 10, $1,000 if paid by day 30

Most common for: Encouraging early payment

Pros and Cons of Different Terms

Net 30 (Most Common)

Pros:

• Industry standard
• Acceptable to most clients
• Reasonable for cash flow
• Professional

Cons:

• 30-day wait for payment
• Some clients stretch to 45-60 days
• Cash flow challenges for new businesses

Due on Receipt

Pros:

• Fastest payment
• Best for cash flow
• Clear expectations

Cons:

• May deter some clients
• Seen as less flexible
• Harder to enforce

Net 60/90

Pros:

• Attracts larger clients
• Competitive advantage
• Builds relationships

Cons:

• Long wait for payment
• Significant cash flow impact
• Higher risk of non-payment
• Need financial cushion

When to Use Each Payment Term

Use Net 15 or Due on Receipt When:

• Working with new clients (no payment history)
• Small project amounts
• Consumer/individual clients
• You need fast cash flow
• Client has payment issues in the past
• One-time projects

Use Net 30 When:

• Standard B2B transactions
• Established client relationships
• Medium-sized projects
• Industry standard in your field
• You have healthy cash flow

Use Net 60/90 When:

• Working with large corporations
• Government contracts
• Client requires it (non-negotiable)
• You have strong financial reserves
• Project value justifies the wait
• Building relationship with major client

How to Set Payment Terms

Step 1: Assess Your Cash Flow Needs

• How long can you wait for payment?
• What are your monthly expenses?
• Do you have financial reserves?
• How many outstanding invoices can you handle?

Step 2: Research Industry Standards

• What do competitors offer?
• What do clients expect?
• What's standard in your industry?

Step 3: Evaluate Client Risk

• Low risk: Established clients, good payment history → Net 30-60
• Medium risk: New but reputable clients → Net 15-30
• High risk: Unknown clients, red flags → Due on receipt or 50% deposit

Step 4: Consider Project Size

• Small (<$1,000): Due on receipt or Net 15
• Medium ($1,000-$10,000): Net 30
• Large (>$10,000): Milestone payments or Net 30-60

Improving Cash Flow with Payment Terms

1. Require Deposits

• 25-50% upfront
• Reduces risk
• Improves cash flow
• Shows client commitment

2. Milestone Payments

Example:

• 25% deposit
• 25% at design approval
• 25% at development complete
• 25% at final delivery

3. Offer Early Payment Discounts

• 2% discount for payment within 10 days
• Incentivizes faster payment
• Improves cash flow
• Small cost for big benefit

4. Charge Late Payment Fees

• 1.5% per month (18% annual)
• Stated clearly on invoice
• Encourages on-time payment
• Compensates for delayed payment

5. Use Shorter Terms

• Net 15 instead of Net 30
• Get paid twice as fast
• Better cash flow
• Less risk

How to Enforce Payment Terms

1. State Terms Clearly

• In contract
• On invoice (large, bold)
• In proposal
• Discussed verbally

2. Send Invoices Promptly

• Immediately upon project completion
• Or on agreed schedule for milestones
• Don't delay—every day matters

3. Send Payment Reminders

• Day 15: Friendly reminder
• Day 25: Second reminder
• Day 30: Payment due today
• Day 35: Overdue notice
• Day 45: Final notice
• Day 60: Collections or legal action

4. Make Payment Easy

• Accept multiple payment methods
• Provide clear payment instructions
• Include payment link on invoice
• Offer auto-pay for recurring clients

Sample Payment Terms Language

Standard Net 30

"Payment is due within 30 days of invoice date. Late payments are subject to a 1.5% monthly interest charge."

With Early Payment Discount

"Payment terms: 2/10 Net 30. A 2% discount applies if paid within 10 days. Full payment due within 30 days of invoice date."

Due on Receipt

"Payment is due upon receipt of this invoice. Please remit payment immediately to avoid service interruption."

Milestone Payments

"Payment schedule: 50% deposit due upon contract signing, 50% due upon project completion. Each payment is due within 7 days of invoice."

What to Do When Clients Don't Pay on Time

Week 1 (Days 1-7 Overdue)

Send friendly reminder:

"Hi [Name], just checking if you received invoice #123. It was due on [date]. Let me know if you have any questions!"

Week 2 (Days 8-14 Overdue)

Send firmer reminder:

"Hi [Name], invoice #123 is now [X] days overdue. Please remit payment by [date] to avoid late fees."

Week 3-4 (Days 15-30 Overdue)

Call or send final notice:

"This is a final notice that invoice #123 is seriously overdue. Payment must be received by [date] or we will pursue collections."

After 30 Days Overdue

• Stop all work
• Send to collections
• Consider small claims court
• Report to credit bureaus (if applicable)

Alternatives to Net Terms

1. Upfront Payment

100% payment before work begins

Best for: Digital products, high-risk clients

2. Recurring Billing

Monthly subscription or retainer

Best for: Ongoing services

3. Progress Payments

Pay as work is completed

Best for: Long-term projects

4. COD (Cash on Delivery)

Payment upon delivery of work

Best for: Physical products, one-time services

Conclusion

Payment terms significantly impact your cash flow and business sustainability. Choose terms that balance client expectations with your financial needs, state them clearly, and enforce them consistently. Don't be afraid to negotiate or require deposits for better cash flow.

Set clear payment terms and get paid on time with InvoiceKit!