What Are Net 30 Days Payment Terms?

Just because Net 30 days payment terms are common doesn’t mean they're the right choice for every business. It’s important to think about the payment terms on your invoice before you send it out.

What does “Net 30” mean?

Net 30 is a payment term that indicates the full payment for goods or services is due within 30 calendar days from the invoice date – not when the goods or services were actually provided.

In practical terms, if you issue an invoice on the 1st of the month, the payment should be received by the 30th. This period is measured in calendar days and includes weekends and bank holidays, meaning it’s not limited to business days only.

When you offer net 30 terms, you’re extending trade credit to your customer for 30 days. You deliver the product or service first and trust that payment will be received. One of the reasons it’s common is that if enough industries adopt net 30, then they can count on their own trade receivables coming in within 30 days, and then play on paying their trade payables in 30 days too.

‍

How does Net 30 impact cash flow and working capital?

Net 30 terms delay your inbound cash flow, since customers only pay 30 days after an invoice is issued. This can tie up funds that might be needed somewhere else for operational expenses, reducing your available working capital. But if you manage them right, invoicing on time and planning your spending, it can also be a way to increase your revenue by making your products and services more attractive to customers.

‍

What are the advantages of offering Net 30 terms?

The main advantage of offering net 30 terms is that it makes your business more attractive to customers who may not have funds on hand, which widens your potential pool of customers.

For example, if you’re selling inventory to a retailer who has a two-week sale cycle, Net 30 enables them to buy stock from your business on credit, sell it, then repay you from the revenue generated. 

Extending trade credit is also a sign of trust, which can build long-term relationships and repeat business. And for B2B payments trade credit is an essential tool for many businesses, your customers may expect some flexibility, with net 30 an easily negotiated agreement.

‍

What are the disadvantages of offering Net 30 terms?

The most obvious issue with a 30-day payment window is that you’ll be waiting to receive your funds, which can limit your own ability to meet your obligations. 

What’s more, there is always a risk that some customers may pay late or default entirely, which can leave you out of pocket, and create more work chasing invoices.

‍

How do I implement Net 30 payment terms?

Implementing net 30 terms requires clear communication, prompt invoicing, and clear follow-up processes.

• Ensure that all invoices clearly state the payment deadline and use consistent language. Always include “Net 30” clearly on your invoices, using unambiguous phrases such as “Payment due 30 days from invoice date.”
• It can be worth investing in digital invoicing tools, where you can use automated reminders to help keep customers on top of payment due dates and reduce the likelihood of late payments.
• Issue invoices immediately upon delivery of goods or completion of services to start the 30-day period as early as possible.
• If you want to speed up your payments, you could offer a discount for early payment (e.g., “2/10 Net 30” provides a 2% discount if paid within 10 days) to encourage faster payment.
• Consistent Follow-Up: Establish a standard process for following up on overdue invoices, including friendly reminders and, if necessary, escalation procedures.

‍

What are the alternatives to Net 30?

While net 30 is standard, there are a range of options across industries and business types, including shorter terms such as net 10 or net 15, which can speed up cash flow, or longer terms such as net 60 and net 90, which may be useful for larger, established clients. 

• Net 10 or Net 15 terms can reduce the payment cycle, improving liquidity for businesses that require faster cash flow.
• For industries where customers need more time, net 60 or net 90 terms may be possible, though this means waiting significantly longer for settlement.
• You might also see EOM (End of Month) or PIA (Payment in Advance), which don’t deal with counting days, but payments relative to the date of delivery – either month end afterwards or in advance, respectively.

‍

How to manage credit risk for your clients

If you’re trusting clients to pay you in 30 days, it helps to know that they’re good for the money. That’s where managing credit risk comes in. Key steps to consider include:

• Credit checks: A company credit check helps you understand the financial stability of new customers using credit reports, financial statements, and trade references.
• Set credit limits: Make sure to establish and enforce credit limits to protect your business. Usually these are based on a customer’s payment history and overall financial performance.
• Track your outstanding payments: Centralising your invoicing with a digital accounting platform helps you spot patterns in how and when your clients pay – and send reminders for overdue invoices if needed.
• Diversify risk: Avoid relying on just a few customers, where non-payment could leave you substantially out of pocket, by building a diverse base. 
• Nudge with interest or late fees: Clearly state and consistently enforce late payment fees to incentivise timely settlement.
• Consider insurance: In case of late or non-payment, trade credit insurance can cover a portion of unpaid invoices, protecting your cash flow. 

‍

Protecting your cash flow with B2B BNPL and Net 30 terms

If you want to offer Net 30 terms without the risk, B2B Buy-Now-Pay-Later can combine the flexibility your customers need with cash flow security for you.

 With BNPL providers like iwocaPay, you receive payment upfront even if you offer net 30 terms, closing the cash flow gap. 

• Immediate settlement: You receive funds straight away, closing the gap between when you deliver goods or services and when the customer is due to pay. Meanwhile, customers can pay back over 3 or 12 months.
• Reduced risk: iwocaPay takes on the work of late or non-payments. This means you don’t have to worry about chasing overdue invoices or handling defaults yourself.
• Enhanced customer experience:
  By offering BNPL, you give your customers the flexibility they need, driving more sales without the risk.

‍

{{find-out-iwocapay-cta="/components"}}

‍

What risk management strategies can I use to prevent late or non-payments?

While late or non-payments are always a possibility, there are steps you can take to minimise the risk. Reducing payment risk starts with understanding your customers and their ability to pay, making it easy for them to pay and protecting your business in case of client defaults. 

• Set clear terms: Always state the payment due date, any late fees, and early payment discounts on your invoices and in your contracts.

• Automated reminders: Use digital invoicing tools to send reminders before and after the due date so nothing slips through the cracks.
• Credit checks: Regularly check the creditworthiness of your customers and set appropriate credit limits.

‍

{{iwoca-pay-cta="/components"}}

‍

What UK-specific legal and contractual considerations should I be aware of?

In the UK, there are specific requirements for what an invoice must include, as well as rules on payment terms and late fees. Ensuring your invoices and contracts meet these standards helps protect both you and your customers.

• Invoice essentials: Your invoice should have a unique identification number, your business name and address (and the customer’s), a clear description of the goods or services provided, the date they were supplied, the invoice date, the amounts charged, any VAT details, and the total owed.
• Sole trader or limited company: If you’re a sole trader, include your own name and any business name used, plus an address where legal documents can be sent. For a limited company, you must use the exact name from your certificate of incorporation. If you list directors, you need to list them all.
• Payment terms: Unless you’ve agreed otherwise, customers legally have 30 days to pay from the invoice date or from when the goods/services are received. You’re entitled to charge interest on late payments, but these charges must be clearly outlined on your invoice or in your contract.
• Data protection and compliance: If you handle customer financial information, follow UK data protection regulations. Also, if your business deals with large cash transactions, you might need to register for an anti-money laundering scheme.

‍

Beyond Net 30: How to get paid faster while offering flexible terms 

Net 30 payment terms give customers valuable breathing room, but they can still leave you waiting weeks for cash to hit your account. 

What if you could offer flexible terms without delaying your own cash flow? That’s where iwocaPay comes in. Our B2B Buy Now, Pay Later platform ensures you get paid upfront, while your customers can spread the cost over manageable instalment payments.