Net 30 is a payment term where the client has 30 days after the invoice date to pay in full. It gives clients 30 days of credit. You record it as accounts receivable debt. Vendors specify net 30 on invoices to indicate when they want payment. It allows small businesses to predict income and plan accordingly.
What Does Net 30 Really Mean?
Net 30 means payment is due 30 days after the invoice date. It gives clients 30 days to pay in full without interest or penalties. Net 30 is a form of trade credit, allowing clients to buy now and pay later. If an invoice says “net 30” and is dated January 1st, payment must be made by January 31st.
Alternatives and Incentives
Alternatives like net 15 or net 60 indicate different deadlines for full payment after the invoice date. Some suppliers offer a small percentage discount for early payment before the net day. This incentive is called 2/10 net 30 – a 2% discount if paid within 10 days, otherwise full payment due within 30 days.
Benefits and Risks
The key benefit of net 30 terms is allowing suppliers to make sales without prepayment. Extending some credit risk encourages more business. However, bad debt can hurt suppliers, so limits may apply to higher risk clients.