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What Are Net 30 Payment Terms? Invoicing Explained (Plus Examples)

What Are Net 30 Payment Terms? Invoicing Explained (Plus Examples)

Learn what “net 30” on an invoice means as well as its benefits and drawbacks. Also, discover alternatives to net 30 payment terms for your small business.


Picture this: you sit at your laptop to send your latest coaching client an invoice. You use an invoice template, plug in all the figures, and run across something that stumps you: “Payment terms.” What are you supposed to put here? “Due on receipt”? “Net 10”? “Net 30”? 

In fact, many small business owners have a limited understanding of these payment terms. But once you learn these phrases, invoicing becomes easier to navigate.

So here’s everything you need to know about net 30 payment terms, with a few examples explaining these further.  

What is net 30? 

Payment terms refer to the time a customer has to pay an invoice. Net 30 typically means the client should pay for a product or service within 30 days of the invoice date. For example, a net 30 invoice dated “April 1” would be due April 30. Business professionals consider net 30 payment terms a form of credit. The vendor offers their products or services based on the promise of payment later.  

Net 30 is an excellent option for small businesses with plenty of cash flow and a healthy client base. These businesses can stay afloat without immediate funds, meaning they can afford to work with customers needing extra time to make payments. 

How does net 30 work?

While net 30 usually means payment is due 30 days from the invoice date, business owners can adjust these terms to suit their needs. For example, you may expect payment 30 days after the product or service delivery or 30 days after closing the sale. It’s wise for business owners to clearly state their expectations with their clients so there’s no confusion leading to late payments. 


What are the pros and cons of net 30 payment terms for small businesses?

Net 30 is a standard option for small business payments because it benefits both the client and the business owner. Some of these benefits include:

  • Increased traction: Some clients may need more cash to book a coaching session or other services from your business. But if they know they have 30 days to pay their bill, they’ll likely make an appointment anyway. This helps you gain a larger customer base more quickly than businesses that immediately insist on payment.
  • Greater customer loyalty: Whether offering coaching services to individuals or selling products to larger companies, you know how important it is to make your clients happy and keep them coming back. One way to put a smile on their face and earn their loyalty is by offering net 30 payment terms, which indicates that you trust the person or business to uphold their end of your agreement. 
  • Standardized cash flow: Net 30 is a helpful tool for monthly budgeting, as you have a clear picture of when people or companies will pay you. This allows you to plan appropriately for the month ahead. 

The benefits we’ve just listed can be vital to your business’ success. But also note that net 30 payment terms don’t work for every business. This payment policy has a few drawbacks, and you should assess these risks before extending net 30 terms to customers. Here are some cons:

  • Slow cash flow: We just mentioned that net 30 payments ensure regular cash flow. This is true — but if your business needs money immediately, waiting a month can be detrimental. Companies must honestly assess their financial situation before deciding whether they can afford to offer a net 30 due date for their services.
  • Late payment risk: Net 30 gives people time to get the money they need to pay their invoices. However, it also gives them time to forget they ever received it. It’s easy for a net 30 invoice to become a net 45, 60, or 90 payment due to customers paying late. Once again, this can spell real trouble for a business that can’t survive without those earnings. That’s why some companies charge customers a late fee for failing to meet the net 30 terms. 
  • Additional work for the business owner: If customers fail to pay their invoices on time, business owners may find themselves scrambling to cover bills, chasing down payments, or even dealing with collections agencies if customers disappear. This can create extra work and be very stressful. The potential for distress and this extra work can discourage some businesses from offering net 30 terms. 

Are there alternatives to net 30 payment terms?

Let’s say you’ve weighed the pros and cons and decided that net 30 isn’t suitable for you. So do you have any other options? While net 30 is the standard payment term for most industries, you can try a few alternatives to extend credit to your customers.

  • Due on receipt: This payment term is most common in retail stores, where payment is due at the time of the transaction. This is a good policy for customers who haven’t yet established a history of timely payments or those known for paying late.  
  • Net 10: Net 10 invoices require the customer to pay within 10 days of invoicing, delivery, or service. This is a popular choice among businesses or entrepreneurs who want to give their customers some credit line but can’t afford to wait until the EOM (end of the month) to get paid.
  • Net 60 or 90: These terms offer even longer payment windows than net 30, carrying even greater risks. However, net 60 and 90 terms significantly benefit the buyer, as they are interest-free loans allowing the customer to use a product or service. If you decide to offer these terms to your clients, it’s crucial that you lay out very clear expectations for getting paid — including consequences for paying past the due date.
  • Discounts on net 30: If you want to use net 30 terms but are worried about clients missing their payments, you have two options: penalize them with late fees or incentivize them with discounts. Businesses frequently offer options like “3/10 net 30,” which means you’ll offer a 3% discount to customers who pay within 10 days. This is a great way to inspire loyalty and get paid faster.

The “bottom line” on your bottom line

All the payment terms discussed here have pros and cons, and no system works for every business. When deciding which payment policy to use with your clients, consider your business cash flow needs and overall goals for reaching customers. 

But whether you opt for net 10, net 30, or net 90 payments, it’s always essential to have a quality customer relationship management (CRM) tool. And Practice’s Client Management Software, designed with small business owners and coaches in mind, helps you schedule meetings with clients and colleagues, tackle bookkeeping, and efficiently manage everything on your plate for your business –– all in one place. Try it today.

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