A Simple Guide of What Is Net 30

For many small business owners, Net 30 is an unfamiliar business lingo. The invoicing world is in fact an uncharted territory though it should be an important part of every business workflow, large or small.

Below, we’ll cover:

  • What Does Net 30 Mean on an Invoice?
  • Pros And Cons of Net 30 Payment Terms
  • Why Use Net 30?
  • Should You Use Net 30?
  • Where to Put Net 30 on an Invoice?

For many small business owners, Net 30 is an unfamiliar business lingo. The invoicing world is in fact an uncharted territory though it should be an important part of every business workflow, large or small.

This article discusses invoices, the contents and payment terms like due date and Net 30. It analyzes the pros and cons of Net 30, explains what Net 30 means, discusses why this approach is ideal and answers some of the most frequently asked questions on the subject matter. You also have access to WeInvoice's amazing invoice templates and invoice generator.

What Does Net 30 Mean on an Invoice?

What is Net 30? Essentially, when Net 30 is scribbled on an invoice, what is implied by the seller or vendor issuing the invoice is that the client pays for the goods or services provided within 30 full days of the invoice date. The 30 days includes business days, weekends and holidays. It is a credit term used by sellers to attract clients.

Most often than not, the sellers insert a discount clause where customers enjoy a discount if they manage to pay before the 30 days are over.

The Net 30 payment term is usually written a little differently when there is a discount attached. For instance, if a customer is going to be incentivized with a discount of 3% for paying fully within the first 8 days rather than 30 days, it would be written as “3% 8, Net 30" or “3/8, Net 30.”

Pros And Cons of Net 30 Payment Terms

Using the Net 30 credit term is a payment practice that should be approached with some level of caution. When done properly, it could boost the financial health of your business and strengthen the seller-client relationship. However, when things go south, it can spell doom for the business.

The following are some of the pros of Net 30 terms:

  • By offering a discount for paying early, customers or clients are more likely to fulfil payment quicker.
  • It gives the customers some breathing space before paying. This trade credit will only attract more clients. That’s what happens with credit cards.
  • It is a show of trust. By inserting Net 30 terms, the vendor is showing the client that they trust them enough to pay after delivery of the goods or services. This simple act can give a vendor the edge over his or her direct competitors.
  • Both major players – vendors and clients – benefit from Net 30 payment terms. While the client has more room to pay, the vendor is likely to have increased sales.

As with anything on the planet, Net 30 has a handful of disadvantages as well. These are some of them:

  • It is not recommended for small businesses who can’t wait for the unsurprising late payments.
  • It is also not recommended for new clients because it has not yet been established if they will be able to pay.
  • Since small businesses are less likely to be strict on payment terms, some unscrupulous clients may take advantage of this to exploit the vendor.

Why Use Net 30?

To prevent confusion and unnecessary conflict with clients, vendors are encouraged to insert the Net 30 payment terms. This is because it states in clear language when they want to get paid.

Inserting this clause is also key to getting paid on time. According to multiple reports, this approach can help small businesses boost their financial position and improve cash flow.

Talking about writing in clear terms, you may choose to write “payment is due in 30 days" instead of “Net30”. This makes it crystal clear to the customers when they are expected to pay. Another tip worth noting is that the payment terms have to be consistent from invoice to invoice.

Should You Use Net 30?

Yes, you should. However, you must tread with caution if you are not buoyant enough to maintain your business operations if a client doesn’t pay on time.

Here’s a recommended tip for small businesses who fall into this category. You may use Net 10 to Net 15 for new clients or those notorious for paying late and net 30, 60 or 90 terms for repeat customers and trusted clients.

You may also put a disclaimer that late payment attracts extra charges. This will undoubtedly motivate the client to pay on time.

Where to Put Net 30 on an Invoice?

Typically, well formatted invoice templates have a section for credit terms at the top of the invoice. Net 30 payment terms can also be inserted in the terms and conditions section of the invoice, usually located at the bottom.

Sometimes a Net 30 and Payment due date are inserted at the bottom and top respectively to ensure that the buyer/client cannot deny seeing it.

FAQ

What Is Net Amount on an Invoice?

This is the true amount of goods and services before any sales tax, VAT are added. It also doesn’t include discounts. When all other ad-hoc charges and taxes are added, the value of the product is known as gross value.

For tax exempt companies, the total amount due is almost always the net amount.

What Does Net 10 Mean on an Invoice?

Simply put, it means that full payment for the goods or services provided is due in the 10 days after issuance of the invoice.

What Does Net 15 Mean on an Invoice?

It means that full payment should be made within 15 days – at the very latest - after the invoice date.

Invoicing should be a breeze-through if you have proper guidance and the right tools. This article provides you with proper guidance on Net 30 payment terms. Apart from this well outlined guidance, WeInvoice also has in stock for you tens to hundreds of invoice templates you can begin creating invoices with. If you want a more personal touch to it, it is high time you explored the platform’s invoice generator.