Net 30: What It Is and How Small Businesses Use It

Net 30 is a common payment term for businesses that sell to other businesses. Learn the pros, cons and how-to’s.

A small business owner sending an invoice

As a business owner, you rely on your customers to pay you for the goods and services you provide. Your payment terms are the conditions you set for when and how your customers pay you. For example, you might expect customers to pay you immediately when they receive the goods or services. Or you might give them more time to pay.

What is Net 30?

Net 30 is a form of trade credit. It means your client has 30 calendar days from your invoice date to pay the amount due. After that due date, you can charge interest or take other steps to collect payment.

This payment period is based on calendar days, not business days.

Many medium to larger small businesses use Net 30 payment terms.

How does Net 30 work?

When a product is sold or a service is given, you provide an invoice with payment terms indicating Net 30.

If the buyer doesn’t make a payment or doesn’t pay the whole amount within the window, the payment is late. Depending on your agreement, you may be able to charge late fees or interest for overdue payments. If the payment is never made, you may have to write the receivable off as a bad debt.

When Net 30 gets used

Net 30 is a common invoice term used in many industries, often where businesses provide goods or services to other businesses. Some business clients may expect to be offered Net 30 invoice terms. When you extend Net 30 terms, you effectively give them a 30-day no-interest loan so think about what that means for your business and specifically your cash flow. Clients that are big businesses often have long payment procedures. They might have to process invoices and get proper approvals, which is why they sometimes want a lot of time to pay your invoice.

Common types of net terms of payment

When setting the terms of payment, consider your cash flow. Longer payment terms can cause cash flow problems for small businesses. Pick payment terms that will work for your business without hurting your finances.

Some common payment terms are on delivery, Net 10, Net 30, and Net 60. In each case, the number refers to the number of days to pay the bill.

You don’t have to use the same credit terms with every customer. Businesses often give trusted customers longer payment terms, while new customers or customers that have a tendency to run late are given less time.

Some businesses offer Net 30 EOM (end of month), which means 30 days after the end of the month the bill is issued. If your bill is issued on May 20, payment is due on June 30.

You can offer early payment discounts if the customer pays the full amount early. For example, you could offer a 5% discount for paying in 15 days.

Advantages of Net 30

  • Some customers expect it.
  • Providing it may build goodwill
  • The flexibility may attract some customers
  • Giving customers extra time to collect payments they’re owed could theoretically ensure they don’t miss your deadlines, although that’s a supposition rather than a data-backed fact

Disadvantages of Net 30

  • You might be waiting up to a month or longer for clients to pay you.
  • That can create cash flow issues for you.
  • You may have to defer paying your own bills in the meantime.
  • For large invoices, the impacts of long payment terms are felt even more acutely

It’s always worth exploring shorter due dates with customers before accepting payment terms that will tie up your cash and limit your liquidity.

How to start using Net 30

Don’t take the Net 30 decision lightly. Using it as a default can expose you to financial risks. But if you work in an industry where it’s common, then failing to offer it may make you less competitive. Research industry standards and make payment terms a talking point when negotiating with new customers.

If you decide to offer it, then simply set due dates 30 days from the issuing date. But be sure to issue invoices straight away so you can get your customer on the clock. With such long payment terms, it never hurts to send a reminder a week before the final due date.

Tips for using accounting software to customize your invoices

Accounting software enables you to easily customize your invoices and follow up on late payments.

Create and keep up-to-date customer profiles with each customer’s agreed payment terms. With accounting software like Xero, you can automate much of the invoicing and payment process.

Set up your payment terms and ensure your invoice templates or accounting software reflect those terms. If there’s been a change in your terms, make sure you communicate and explain them to your clients.

Create automatic reminder payment emails that are set to go to clients who are at risk of a late payment. A friendly “Reminder, your payment is due in two days” goes a long way to helping them keep track. Consider implementing a late fee to discourage clients from paying late, but be aware of the laws that apply in your state – some states have maximum late fees.

Have payment options that make invoice payments as easy as possible. Include a link to one or more online payment services on your invoice. It’s a great way to potentially get paid faster, since the easier it is, the more likely clients will pay you straight away.


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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