Net 30 is a payment term allowing the client 30 calendar days after the billing date to pay for purchased services or products. It is a form of trade credit extended to clients. You must record the transaction as debt under accounts receivable.
Benefits and Implementation
The workings of net 30 payment terms allow businesses to expand their customer base by extending a 30-day grace period for payments. This flexibility appeals to new clients or those struggling with payment timelines. Net 30 terms also allow businesses to offer early payment incentives like a 1% discount if paid within 10 days, while full payment is due within 30 days.
To extend net 30 terms, the seller lists "net 30" within the invoice’s payment terms section. The buyer then has 30 calendar days after receiving the invoice to remit payment. Depending on agreement, late fees or interest may apply to overdue payments. If never paid, the seller may have to write off the receivable as bad debt.
Net 30 is commonly used in business-to-business industries. It differs from advance payment terms requiring full or partial payment before delivery. Immediate payment terms require payment upon delivery or service rendering. Net 30 offers a longer payment period than other dated payment terms like end of month and month following invoice.
Invoice Terms and Legal Implications
Invoices contain the date of sale, goods or services purchased, payment terms and conditions, etc. The payment terms refer to the conditions under which a buyer has to pay-off the full value of the invoice. The use of net 30 payment terms implies you expect payment in full within 30 days, with no applied discounts. Net 30 payment terms are legally binding.
Net 30 and “due in 30 days” generally refer to the same outcome: your supplier wants you to pay the invoice in one month. Net-30 terms will often only charge interest on late payments.
Offering net 30 terms used on invoices simply means that the client will pay within the due date in most cases and this will ensure workable cash flow.
Variations of Net Terms
What Is the Difference Between Net 10, Net 15, And Net 30? Net 30 isn’t the only payment period you can include on an invoice. Common variations include net 10, net 15, and even net 60. The difference is simple. The number indicates how many days the customer has to make their payment. Net 30 indicates that the full payment is due, at the latest, by 30 days from the invoice date. Most small businesses use net 30 as their standard credit term.