What Does Net 30 Mean on Invoices? Definition and Examples
There are many different factors that affect whether you get paid on time. While it would be great if every client paid you as soon as they received an invoice, that’s just not how it works.
Invoice payment terms, like when and how a client should pay you, are one of those factors. They help to ensure that you get paid in full and on time. But in order to avoid cash flow problems and encourage faster payment, one of the most important decisions you need to make is how long a client has to pay you after receiving a bill.
The most common pay period among service providers is net 30, which we’ll explain more in this article.
What does net 30 mean on an invoice?
Net 30 (sometimes written as net-30) refers to the number of days a client has to pay a bill in full after a certain action has been completed. In accounting and finance, this is called the credit term. While net 30 always means within 30 days, when the clock starts ticking is up to you. For example, a client may have 30 days to pay once:
- A job has been completed
- An invoice has been sent
- Materials or supplies have been delivered
Net 30 doesn’t refer to just business days—it includes weekends and holidays unless otherwise indicated in your invoice payment terms. If you were to send an invoice to a client on May 15th with a net 30 due date, full payment would be due by June 15th.
What else to know about net 30 on invoices
Many businesses use net 30 payment terms in their invoices. Whether or not you use them depends on your billing cycle, cash flow, and preferences. Here are some FAQs to help you figure out whether you should use net 30 on invoices for your service business.
Why should I use net 30?
Net 30 is the most common billing cycle. Think about other bills you receive, like vehicle payments, utility bills, and even rent—most are sent monthly and give you 30 days to pay. When you use net 30, you’re making your bills to customers consistent with others they pay. This helps to avoid confusion, unpaid invoices, and it may even help you to get paid on time.
Look at it this way: if you use uncommon payment terms or due dates, customers are going to have a hard time paying you. The margin for error is much greater when you use atypical payment terms. Using a tried and true method not only helps with consistency but automatically makes sense to clients.
Plus, net 30 is also budget-friendly. Most of your customers are used to planning their paychecks around bills that need to be paid once a month.
Is net 30 right for my business?
Whether net 30 is right for your business depends on a few different factors, such as:
- Your cash flow
- When your bills are due
- Whether your customers pay on time
First, you need the cash flow to cover your own expenses. This is directly impacted by whether your customers pay you in full and on time.
✅ To determine whether net 30 is right for your business, you’ll need to figure out what is and isn’t currently working for you in terms of when you’re receiving payments from customers. However, net 30 is typically a good choice if:
- You don’t have standard invoice due dates and you want to implement them
- You think your clients would be more likely to pay you in full with longer payment terms
- Your cash flow is established enough to support net 30 payments
- You’re implementing payment terms for the first time and want to use industry standards
- You frequently receive partial payments or have to charge late payment fees or penalties because your payment period is too short
You also don’t need to use the same payment terms for every client. You could use net 30 for one and net 60 for another.
READ MORE: How to handle short paid invoices
When does net 30 start?
When net 30 starts depends on your business and the job in question. For the most part, net 30 starts the day an invoice is sent.
However, as mentioned earlier, if you send an invoice before the job has been completed, net 30 can also refer to 30 days after it’s been done.
For example, if you were to bill a client for lawn care on May 15th, but the fertilizer you need is back-ordered and it means you don’t finish the job until May 25th, net 30 can either mean the full amount is due within 30 days of the invoice date (June 15th) or 30 days after the job is finished (June 25th).
Some businesses start counting the 30 days the day after an invoice is sent as well. In this case, an invoice sent on May 1st would be due on May 31st.
Where do I put net 30 on an invoice?
There are two places where you can include net 30 on your invoice:
- In your payment due date
- In your payment terms
Pro Tip: When you use invoicing software, you’ll also show clients that you run a modern and professional business, and that you’re easy to work with.
Other common net terms
Net 30 isn’t the only payment cycle you have to choose from. Other common invoice payment terms include net 10 and net 15.
What does net 10 mean on an invoice?
Net 10 means that the total amount due must be paid within 10 days of the invoice being sent or the action being completed. Like net 30, it includes weekends and holidays.
What does net 15 mean on an invoice?
The same goes for net 15 but it allows a client to make payment within 15 days of the invoice date instead of 10 or 30.