Skip to content

What do net 30 payment terms mean?

Written by

Last editedNov 20224 min read

Net 30 refers to an invoice with 30-day payment terms regardless of when the goods or services were delivered. The 30-day period includes weekends and bank holidays (non-working days) and essentially provides the customer with a form of credit as goods or services are delivered before payment is due.

Before signing the contract, delivering the work, and sending the invoice to your customer, there’s one critical thing you need to do: work out your payment terms. For many businesses across the country, net 30 invoice terms are the go-to option. But what does net 30 mean, how does net 30 work, and are there any alternatives to net 30 terms? Find out everything you need to know in this comprehensive guide.

What is net 30?

Net days is a term used in payments to represent when the payment is due, in contrast to the date that the goods/services were delivered. So, when you see “net 30” on an invoice, it means that the client can pay up to 30 calendar days (not business days) after they have been billed. It’s essentially a form of trade credit that you’re extending to the customer.

How does net 30 work?

It’s simple – all you need to do is stipulate “net 30” in the payment terms of your invoice. Then, after delivering the agreed goods/services to your customer, send across the invoice. You should be paid within the agreed-upon 30 days, although it’s worth remembering that late payments are an issue that many small-to-medium businesses (SMBs) deal with on a day-to-day basis.

Net 30 invoices and late payments

Even with ‘Net 30’ specified on your invoices, there is no guarantee customers will actually pay within that 30 days. This is because Net 30, and other invoices, are almost always paid via ‘push’ payments that put your customer in control of your payment process. 

Push payments need manual action from your customer to ‘push’ the payment from their account to yours. This is often in the form of a manual bank transfer or a card payment via a link contained on the invoice. By contrast using a ‘pull’ payment method, such as an automated bank payment, puts you in control and ensures your invoices are paid within Net 30, or on whatever due dates you specify.

Click here to skip to the section on eliminating late payments from your invoicing process.

When does net 30 start?

Net 30 could mean 30 days after the sale, 30 days after delivery, or 30 days after the invoice. This completely depends on whatever you and your client have agreed upon, which means that it’s always a good idea to include this information in the contract so that there’s no confusion after the fact.

What does ‘3/10 net 30’ mean?

Sometimes, net 30 invoice terms are coupled with a discount. This discount is intended to encourage customers to pay more quickly. So, when you see an invoice that states ‘3/10 net 30’, it means that customers can receive a 3% discount if they pay within 10 days. Of course, this also applies to other discounts, so a 2% discount on payments made within 10 days would read as ‘2/10 net 30’.

What are the advantages of net 30?

Net 30 terms are relatively generous, meaning that they allow you to take on more clients than you would with stricter payment terms. They’re essentially an extra incentive to buy from you. It’s also worth remembering that offering trade credit to your clients is an expression of trust, and it’s likely to foster a good relationship that could lead to future business.

What are the disadvantages of net 30?

There are disadvantages associated with net 30 invoice terms. For a start, many small businesses can’t afford to wait 30 days to receive payment. In addition, some businesses take advantage of net 30 terms by sending late payments. If this is the case for your business, issuing stricter payment terms could be a good idea.

Is net 30 right for my business?

Ultimately, the suitability of net 30 terms for your business comes down to cash flow. If your business has plenty of cash on hand, multiple clients, and you can survive a couple of late payments, then extending net 30 invoice terms can be a great way to build up a substantial client base. However, if you depend on one or two large clients and your business doesn’t have a particularly healthy cash flow, offering net 30 terms may not be the right option for you.

What are the alternatives to net 30 terms?

You don’t have to offer net 30 terms, and many smaller businesses choose not to do so because it’s simply too long to wait to get paid. If you want to enforce faster payments, net 7 or net 15 might be a better option. On the other hand, if you’re happy to offer more generous payment terms to your clients, think about offering net 60 or net 90 terms.

How to end late invoice payments

GoCardless offers invoicing businesses the ability to automate payment collection on specified due dates using pull payments that can be set up in just a few clicks.

Pull payments are authorised by your customer and automated to collect the agreed amounts on the specified days without any further action from you or your customer.

Case Study: automating payment collection

The WOW Company provide cloud accounting services to SMEs across Britain. Before GoCardless, invoices were created on Word and manually sent via email. At the time, the primary methods of collecting payments were through manual bank transfer and standing order - both of which resulted in a lot of additional admin work.

Accepting push payments such as manual bank transfers resulted in late invoice payments and associated late payment admin. Standing orders were fine for regular payments of the same amount but were inflexible and meant a lot of time was spent raising, sending and chasing invoice payments for ad-hoc work that fell outside of the regularly-billed work.

Once founder Peter Czapp discovered GoCardless, he was amazed at the speed of set-up and the massive impact that automating payment collection had on the business.

“Moving payment collection to GoCardless has been transformational for us. We’re a completely different business as a result of GoCardless, and the second we discovered it we started recommending it to our clients. For anyone who wants to sharpen up their cash-collection function, it really is an astonishing tool.”

GoCardless has enabled The Wow Company to:

  • automate billing and payment collection

  • save time on manual payment admin

  • eliminate late payments

  • save time on chasing late payments

  • enjoy a more secure and predictable cash flow

Peter notes:

“Our people can focus on higher-value tasks and client relationships, rather than chasing bills. GoCardless, as a solution, has just been an absolute revelation for our business and I can’t imagine life without it now."

Take control of invoice payment collection with GoCardless. Eliminate late payments. Reduce time spent on admin. Get paid on time, every time.

Get StartedLearn More

We can help

GoCardless helps you automate payment collection, reducing the amount of admin your team needs to deal with when chasing invoices. Make late payments a thing of the past by collecting payments automatically via bank debit or Instant Bank Pay. Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

Contact sales

Try a better way to collect payments, with GoCardless. It's free to get started.

Try a better way to collect payments

Learn moreSign up