What Net 30 means
Net 30 generally means the full invoice balance is due 30 calendar days after the invoice date.
The same pattern is used for terms such as Net 15 and Net 60:
- Net 15: payment due in 15 days
- Net 30: payment due in 30 days
- Net 60: payment due in 60 days
In practice, contracts and customer procurement policies sometimes define the clock differently. If there is any room for doubt, print an actual due date on the invoice as well as the payment term.
Other payment terms you may see
- Due on receipt: payment is requested immediately
- EOM: usually refers to payment at the end of the month, although the exact convention should be stated
- 15 MFI: commonly used to mean payment on the 15th of the month following the invoice
Abbreviations are convenient between businesses that already understand them. For everyone else, a clear due date is better.
Early-payment discounts
A term such as 2/10 Net 30 generally means the customer can deduct 2% if payment is made within 10 days; otherwise, the full amount is due under the Net 30 term.
For example, on a $1,000 invoice:
- Paid within the discount window: $980
- Paid after the discount window but by the normal due date: $1,000
If you offer an early-payment discount, spell out the dates and calculation rather than relying only on shorthand.
Late fees
Some businesses include interest or a late fee for overdue invoices. Whether you can charge it, how much you can charge and what notice is required depends on the contract and applicable law.
If you intend to charge late fees, put the term in the agreement and on the invoice before the payment becomes overdue. Avoid adding a surprise fee after the fact.
Choosing a payment term
There is no universally best term. The right one depends on your cash flow, bargaining position, industry and customer.
Short terms can improve cash flow, but larger customers may have established payment cycles. Whatever you agree, make the invoice easy to approve and give the customer a specific due date.