How net terms work
Net terms set how many days a customer has to pay an invoice. Net means the full amount, after any discount already on the invoice; the number is the days allowed. The count starts on the invoice date, and the invoice is past due from the day after the due date.
Common variants are net 15, net 30, net 45 and net 60. Due on receipt, or net 0, means payment is expected straight away. Early payment discounts combine with net terms: 2/10 net 30 means the customer may take 2% off if they pay within 10 days, and otherwise owes the full amount in 30.
Net terms usually go with paying by invoice rather than an automatic card charge: the customer receives the invoice, routes it through their approval process, and pays by bank transfer or on a payment page.
Worked example
You issue a $2,400 invoice on March 1 on 2/10 net 30 terms.
- Invoice date
- March 1
- Discount deadline: March 1 + 10 days
- March 11
- Paid by March 11: $2,400 less 2% ($48)
- $2,352.00
- Due date: March 1 + 30 days
- March 31
- Paid on April 12
- 12 days late
On plain net 30, with no early payment discount, the full $2,400 is due by March 31.
Why net terms matter
Larger customers expect payment terms. Their finance teams pay invoices in batches after approval, and a supplier that insists on a card up front may not get through their purchasing process at all.
Terms also cost you: every day an invoice waits is money you have earned but cannot use. Knowing how much is outstanding, and for how long, is what a receivables aging report is for.
Common mistakes
- Counting from the wrong date Net 30 counts from the invoice date, not from the day the customer opened it. Print the due date on the invoice so nobody has to count.
- Terms without follow-up An invoice past its due date needs a reminder. Without one, net 30 quietly becomes net 60.
- The same terms for everyone A small monthly customer can pay by card; a large account may need net 30 or net 60. Set terms per customer.