Ask FundThrough

Business Financing

Grow My Business

Invoice Factoring

Net 30 Payment Terms: Frequently Asked Questions

Invoicing became a normal business practice 4,000 years ago, when Mesopotamians merchants recorded transactions on clay tablets. Net terms are not far behind, with merchants offering trade credit to customers in ancient civilizations. And yet, questions about net terms–specifically net 30 terms–still persist. We’ll answer the most frequently asked questions about the topic in this article. 

What Does Net 30 Mean?

Net 30 is a payment term that gives customers 30 calendar days from the invoice date to pay for goods or services. It’s one of the most widely used terms in B2B transactions and is considered standard in many industries.

Is net 30 standard for all industries?

Net 30 is common but not standard for all industries. It is widely used in manufacturing, wholesale, and business services. However, industries like construction or creative services may use shorter payment terms, such as Net 15, longer terms like Net 60, or milestone payments. Longer net terms are common in retail, fashion, and energy.

According to a 2023 QuickBooks survey, over 60% of small businesses use net 30 as their default invoice term (source). However, confusion around when the 30 days starts—date of invoice, delivery, or acceptance—can lead to missed payments and strained relationships.

How do Net 30 terms work?

Net 30 is one of the most widely used invoice terms in business-to-business (B2B) transactions. It means that your client has 30 calendar days to pay the full amount of an invoice—starting from the invoice date, the delivery of goods, or the completion of services, depending on your agreement.

Example of Net 30 terms:

If you send an invoice dated June 1, payment is due by June 30—even if that includes weekends, national holidays, or your client’s vacation.

Rethinking Early Payment Discounts

While early payment discounts like 2/15 net 30 can seem beneficial, we’ve don’t recommend them. Here’s why:

  • Costly in the Long Run: Discounts might appear small per transaction, but they add up, significantly impacting your revenue over time. For instance, a 5% discount for early payment effectively translates to a 60% annual percentage rate over 30 days, which is steep by any measure.
  • Misaligned Expectations: Our experience has shown that even when clients pay within the standard terms, they might still expect a discount. This can lead to difficult conversations and potential strain on client relationships.
  • Cash Flow Predictability: Offering discounts for early payments can make cash flow management unpredictable, even though it’s meant to do the opposite. It’s challenging to forecast revenue when you’re unsure of who will take advantage of the discount and how much you’ll actually get paid.

Our approach to getting businesses paid early – by advancing capital for outstanding invoices – focuses on giving you the benefits of prompt payment without the above drawbacks. Additionally, we make our process easy for your clients to encourage timely payments by net terms. This strategy aligns better with maintaining healthy cash flow and building sustainable client relationships.

Does Net 30 include weekends or holidays?

Yes, Net 30 includes weekends and holidays. The term means payment is due 30 calendar days from the invoice date. It does not refer to business days unless specified. If the due date falls on a weekend or holiday, companies often process payment on the next business day. So if you issue an invoice on July 1, the due date is July 31, regardless of how many Saturdays, Sundays, or statutory holidays fall within the payment period.

Why it matters: Some businesses mistakenly believe Net 30 means 30 business days—which would extend the payment window by 2+ weeks. Clarifying this can prevent late payments and confusion.

When does the Net 30 clock start — from the invoice date or delivery date?

The Net 30 clock usually starts from the invoice date, not the delivery date. Unless a contract states otherwise, payment terms like Net 30 are calculated based on the date the invoice is issued. Always check the agreement for exceptions or alternate terms.

What Do Credit Terms “2/15 Net 30” Mean?

The term 2/15 Net 30 is a payment incentive that rewards clients for paying early.

  • 2 = 2% discount

  • 15 = Must pay within 15 days to get the discount

  • Net 30 = Full invoice payment is due in 30 days if discount is not taken

Example of Calculation for 2/15 Net 30 Terms:

If your invoice total is $10,000 and your client pays within 15 days, they only owe $9,800 (a 2% discount). If they pay after day 15 but before day 30, they owe the full amount.


Rethinking Early Payment Discounts: Why They Might Hurt More Than Help

At first glance, early payment terms like 2/15 Net 30 seem like a win-win—clients save money, and you get paid faster. But after working with hundreds of businesses navigating cash flow management, we’ve found these discounts often come with hidden costs that outweigh the benefits.

Here’s why we recommend rethinking them.

1. They’re More Expensive Than They Seem

That small 2% discount for paying early? It’s not as harmless as it looks.

Let’s break it down:

If a client takes a 2% discount for paying 15 days early, that’s an annualized rate of 48%. A 5% discount over 30 days? That’s equivalent to a 60% APR—which would make any CFO’s eyes widen.

According to The Wall Street Journal, early payment discounts can quietly “shave thousands off your bottom line” if used habitually, particularly for large-ticket invoices. (source)

2. They Create Misaligned Expectations

In our experience, offering early payment incentives can inadvertently train clients to expect discounts—even when they pay on time, not early.

What starts as a courtesy can become a point of contention, especially with long-term clients who begin seeing the discount as a standard. This undermines your pricing integrity and can complicate future negotiations.

3. They Make Cash Flow Less Predictable

Ironically, a strategy designed to accelerate payments can actually make cash flow more volatile.

When you’re unsure who will take the discount and when, revenue forecasting becomes guesswork. It gets harder to plan for payroll, inventory, or debt repayments when payments fluctuate by 2–5% across clients.

In a 2022 survey by QuickBooks, 1 in 4 small businesses cited “unpredictable payment timing” as their biggest barrier to growth (source).

A Better Way: Get Paid Early Without Sacrificing Margin

Instead of giving up revenue through discounts, consider getting your accounts receivable paid early with a factoring company who can give your more than working capital. That’s our approach.

We help businesses access funds immediately after invoicing, without waiting 30, 45, or 60 days. Your clients still pay on Net 30 or whatever net terms you’ve set. But you get your money upfront–along with added values like A/R management and collections support. (Don’t worry, we treat your customers like our own.) 

This creates:

  • Predictable cash flow
  • Stronger pricing discipline

 

Working capital for growth, payroll and more

Ready to get paid now?

What is a 30-day account?

A 30-day account is another way of saying an invoice due in 30 calendar days. In simple terms, it refers to the expectation that payment will be made within 30 days of the invoice date.

While the term “account” might sound complex, it’s just business lingo. Some call it an invoice, others call it a bill—but the meaning of “account” in this context is the same:

A document that outlines the amount owed for goods delivered or services completed, along with a clear payment deadline. Ex: Net 30 accounts

How Does It Work?

  • If you send an invoice dated June 5, and it’s a 30-day account, the payment is due by July 5.

  • It includes weekends and holidays—that’s 30 calendar days, not business days.

What does the term 3/10 n 30 mean?

The term “3/10 Net 30” is a type of early payment discount.

Here’s how it breaks down:

  • 3 = 3% discount

     

  • 10 = if payment is made within 10 days

     

  • Net 30 = full invoice amount is due within 30 days

     

Example Calculation of 3/10 Net 30 Terms:

You invoice a client for $50,000 on June 1.

  • If they pay by June 11, they pay $48,500 (3% discount).

     

  • If they pay between June 12–30, they owe the full $50,000.

     

A 3% discount over 20 days effectively costs your business an annualized rate of over 54%—a steep trade-off for a slightly faster payment.

What does 2/10 Net 30 mean?

2/10 Net 30 is a type of early payment discount. Here’s how to calculate it:

  • 2 = 2% discount

  • 10 = Discount applies if paid within 10 days

  • Net 30 = Full invoice amount is due in 30 days if the discount isn’t used

Example Calculation of 2/10 Net 30:

Let’s say you issue an invoice for $100,000:

  • If the client pays by day 10, they only owe $98,000

  • If they pay on day 11 or later (up to day 30), they owe the full $100,000

According to QuickBooks, businesses that offer early payment discounts see a 30% improvement in average payment speed, though not all clients take advantage of it (source).

When Should You Use 2/10 Net 30?

Pros:

  • Encourages faster payments

  • Can improve short-term cash flow

  • Reduces the risk of late payments

Cons:

  • You lose 2% of your revenue per invoice for only slightly faster payment 

  • Can set a precedent clients may always expect 

  • Not dependable, since clients might not take the discount

It’s most useful if:

  • You need working capital quickly

  • You can afford the margin hit

  • Your cost of borrowing is higher than 2% per 10 days, roughly a 37% APR

FAQs

What happens if a customer doesn’t pay within Net 30 terms?

If a customer doesn’t pay within Net 30 terms, the invoice becomes overdue, and the seller may charge late fees or interest. The seller can also suspend services, withhold future deliveries, or send the account to collections. Repeated non-payment may damage the customer’s credit rating or business relationship.

Can I charge late fees for missed Net 30 payments?

Yes, you can charge late fees for missed Net 30 payments if your contract or invoice terms clearly state this policy. Most businesses include a late fee clause outlining the percentage or flat fee applied to overdue invoices. Without written terms, charging late fees may not be enforceable.

Do Net 30 terms help build business credit?

Yes, Net 30 terms help build business credit if payments are made on time and reported to credit bureaus. Many suppliers and vendors report payment history to agencies like Dun & Bradstreet or Experian. Positive Net 30 history improves your business credit score, making it easier to secure financing, like credit cards, and higher credit limits.

How to write Net 30 terms in a contract?

Write Net 30 terms in a contract by stating: “Payment is due within 30 days of the invoice date.” You can also include details on late fees, interest rates, and acceptable payment methods. Ensure the terms are clear, consistent across invoices, and agreed upon by both parties in writing.

Why do companies offer Net 30 terms?

Companies offer Net 30 terms to encourage sales and build trust with buyers–and because they have to, as buyers dictate net terms. This trade credit gives customers time to receive goods, inspect them, and manage cash flow before making the full payment. 

Is offering Net 30 payment terms risky for small business owners?

Offering Net 30 is risky for small business owners because it can strain cash flow. Small businesses may face late payments, making it harder to cover expenses like payroll or inventory. Without strong credit policies and reliable customers, Net 30 increases the chance of late or unpaid invoices.

Ready to get paid now?

Everything you need to build the business of your dreams — delivered straight to your inbox

Suggested Readings

Limited time only.

GET FREE FUNDING ON YOUR FIRST $50,000 OF INVOICES!*

Days
Hours
Minutes
Seconds

FundThrough is providing this offer for qualified QuickBooks Online users through June 30, 2021. Learn more here

Explore fast payments with an experienced fintech

Interested in possibly embedding FundThrough in your platform? Let’s connect!