Net 30
Definition
Net 30 is a payment term that gives the customer 30 calendar days from the invoice date to pay the full amount due.
What Net 30 Means for Your Business
What it means
Net 30 is the most common commercial payment term. Net 15, Net 45, and Net 60 all follow the same pattern. It is an interest-free loan from the contractor to the customer for the length of the term.
Why it matters
Net 30 is standard in commercial work but dangerous for small shops. Every day the customer holds onto your money is a day you are floating payroll and parts on your credit line.
How contractors use it
Shops offer Net 30 only to qualified commercial customers, run credit checks, and charge late fees past the term. Aggressive shops offer 2% discount for payment within 10 days to accelerate cash flow.
Real-World Example
A commercial plumbing company running Net 30 billed $2.1 million annually with an average 38 day DSO. They offered a 2/10 Net 30 discount and cut DSO to 22 days, freeing $92,000 in working capital.
Related Terms
Invoice
An invoice is a billing document that lists the work performed, parts used, and total amount due from the customer.
Days Sales Outstanding
Days sales outstanding, or DSO, is the average number of days it takes a business to collect payment after an invoice has been issued.
Accounts Receivable
Accounts receivable is the total amount of money owed to a business by customers for services already delivered but not yet paid.
Payment Terms
Payment terms are the written rules that define when and how a customer must pay for services rendered.
Progress Billing
Progress billing is the practice of invoicing the customer in stages as work is completed on a long project, rather than waiting until the end.
Put This Into Practice with Free Software
Kaldr Tech handles net 30 and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.