Net 30, Net 15, Net 7: Payment Terms Explained
Net 30, Net 15, 2/10 Net 30 — payment terms look like code, but they are simply your rules for when money is due. Choosing the right terms is one of the highest-leverage decisions in invoicing. Here is what each term means and how to pick.
Decoding the Terms
'Net 30' means the full invoice amount is due 30 days after the invoice date; Net 15 and Net 7 work the same way with shorter windows. 'Due on receipt' means payable immediately (in practice, within a few days). '2/10 Net 30' adds an early-payment discount: 2% off if paid within 10 days, otherwise the full amount is due in 30 days.
EOM (end of month) variants like 'Net 30 EOM' count from the end of the invoice month rather than the invoice date. Whatever terms you use, print them plainly on every invoice — terms buried in a contract nobody re-reads do not get followed.
How Terms Affect Cash Flow
Longer terms are an interest-free loan to your client. Moving from Net 30 to Net 15 on $20,000 of monthly billing frees up roughly $10,000 of working capital on average — money you no longer need to fund while waiting. For small businesses, that difference often decides whether growth is comfortable or stressful.
Match terms to the relationship: new clients get shorter terms or deposits until they prove reliable; long-standing good payers can earn longer terms as a loyalty benefit. Terms are a business tool, not a fixed tradition.
Choosing Your Default Terms
For most freelancers and small service businesses, Net 15 or due-on-receipt is the sensible default — clients adapt to whatever is printed. Net 30 remains standard in many B2B industries where buyers' payment runs are monthly; if your clients are large companies, fighting their Net 30 or Net 60 policies may cost you the work, so price accordingly.
Consider tiered terms: deposits for project work, due-on-receipt for small invoices, Net 15 as standard, and Net 30 only for established clients. One default for everyone is simple; tiered terms are profitable.
Enforcing Your Terms
Terms only work if enforced. State late-payment consequences in your terms (late fees or interest where legally permitted), send reminders on schedule, and pause work for overdue accounts. The first time you enforce terms consistently, payment behavior across your client base visibly improves.
When a big client demands longer terms than you offer, negotiate rather than just accepting: a longer term can be traded for a larger order, a deposit, or a small price increase that compensates for the slower cash. Never give away time for free.
Frequently asked questions
What does Net 30 mean on an invoice?
The client owes the full invoice amount within 30 calendar days of the invoice date. It is the most common B2B payment term, though many small businesses do better with shorter terms like Net 15.
Is Net 30 30 business days or calendar days?
Calendar days, unless your contract specifies business days. To avoid confusion, you can write 'due within 30 days of invoice date' instead of relying on the shorthand.
Can I change payment terms for an existing client?
Yes, with notice — announce the change before it takes effect (e.g., 'from next quarter, our standard terms move to Net 15') and update your contracts. Apply changes to new invoices, not ones already issued.
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