Net 30 Payment Terms and When to Offer Them to a Business Customer

Net 30 means the full invoice is due 30 calendar days after the invoice date. Weekends and holidays count. Net means the whole amount, with no deductions the two of you did not agree to.

The start date is where most disputes begin. Some buyers read net 30 as 30 days from when they receive the invoice, others as 30 days from the end of the month the invoice landed in. Those are three different dates. Write the trigger into the contract in plain words. The federal rule at 5 CFR 1315.4(f) starts its clock on receipt of a proper invoice, which is a reasonable default to copy.

The variants work the same way. Net 15, net 45 and net 60 just move the number. 2/10 net 30 adds a discount, and that one costs more than it looks.

Run the numbers before the decision, not after.

Say you invoice $20,000 on net 30 and the customer pays on day 30. You have covered your materials, your payroll and your rent for a month out of your own cash. Assume a 20 percent margin. You have put roughly $16,000 of real money on the street to earn $4,000, and you cannot touch it until the buyer decides to pay.

Now the discount. 2/10 net 30 means the buyer can knock 2 percent off if he pays within 10 days. That sounds small. Work it out and it is not. You are giving up 2 percent to get paid 20 days early, which annualises to 2 divided by 98, times 365 divided by 20. That is 37.2 percent a year. If you can borrow at anything under that, the discount is the expensive way to fix a cash gap.

Offer 2/10 net 30 when you want the cash badly and you have priced the discount in. Do not offer it as a courtesy.

Here is the fact that should change how you think about a bad invoice. If your business is on the cash method, and most small service businesses are, an unpaid invoice is not a write off. It is a total loss.

The IRS says so directly. Topic no. 453 reads, "If you're a cash method taxpayer (most individuals are), you generally can't take a bad debt deduction for unpaid salaries, wages, rents, fees, interests, dividends, and similar items of taxable income." The rule underneath it is short. You can deduct a business bad debt only if the amount was already included in your gross income.

A cash basis business never records the income until the money arrives. No income recorded means nothing to deduct. You lose the labour, the materials and the time, and the tax code gives you nothing back.

Accrual basis businesses sit differently. They booked the revenue when they invoiced, so the bad debt is deductible. Even then it counts only in the year the debt becomes worthless, and only after you show you took reasonable steps to collect. Ask your accountant which method you file on before you assume an unpaid invoice is somebody else's problem.

This is the part the buyer will not enjoy and you should do anyway. It takes about an hour.

• Get the legal entity name and EIN on a Form W-9. The name on the purchase order is often a trading name. A DBA is not a party you can sue. You need the entity behind it.
• Check the state's business registry. Confirm the entity exists, is in good standing, and has been filing. A company that stopped filing its annual report two years ago is telling you something.
• Pull a business credit file. Dun and Bradstreet, Experian Business and Equifax all sell one. Our guide to the business credit score explains what the ranges mean and which bureau to use for what.
• Call two trade references. Not the ones on the application, or not only those. Ask each supplier one question, how many days past the due date do they usually pay. The number matters more than the adjective.
• Set a credit limit and write it down. Decide the most you are willing to have outstanding with this customer before you need the answer. Then hold it.
• Ask for a personal guarantee on the first order. It is normal. The Federal Reserve's 2026 Report on Employer Firms found that 59 percent of firms carrying debt had signed one.

A customer who will not do the paperwork is telling you something, and the bigger the order the louder it is. That is your answer, early and free.

You do not have to choose between full terms and cash up front. The middle is where most of the workable deals sit.

Take a deposit on the first order, 30 to 50 percent, and put the balance on net 30. Bill in milestones on anything long running, so you are never more than one stage of work out of pocket. Start small. Raise a new customer's limit after two clean payment cycles. Put a late fee in the contract at a rate your state allows, and actually charge it, because a fee you never charge trains the buyer to ignore the date.

Keep the invoice itself boring and correct. Wrong purchase order number, missing reference, wrong address, any of these hands the buyer a legitimate reason to restart the clock.

Every guide hands you the same ladder. Polite reminder, firmer email, phone call, collection agency. It assumes two firms of similar weight, and it breaks the moment your customer is a 200 person company and you are four people. Not one rung on that ladder costs them a thing.

What moves money is knowing how the buyer pays. Big companies pay on a check run, a fixed day in the month when accounts payable clears everything approved before a cutoff. Get that cutoff date when you sign the deal, along with the name of your contact inside accounts payable. An invoice that lands two days after that cutoff waits a whole cycle. Nobody decided that, it just happened.

Your leverage is the next order, not the last one. Holding the next delivery until the balance clears is the one lever a small supplier owns outright. Say it early and say it plainly. Use it once and you tend to move up the queue for good.

Your late fee has a legal ceiling and your state sets it. If your contract names no rate, the state picks one for you, and the numbers are not close. New York sets nine percent a year under CPLR 5004(a), dropping to two percent only when the debt is personal and the party owing is an individual. Texas allows six percent a year under Finance Code 302.002, and that clock does not start until day 30 after the money was due. Texas also treats more than ten percent a year as usury under 302.001(b) unless another law allows it. Worth a check before you paste in the 1.5 percent a month clause that floats around invoice templates. That clause is 18 percent a year.

The federal collection rules were not written about your customer, and they do not bind you either. The CFPB says it plainly. The Fair Debt Collection Practices Act covers debts that are mainly for personal, family or household use. It does not cover business debts, and it does not generally cover the original creditor either, which is you. So the calling hours and contact limits everyone quotes are aimed somewhere else. That cuts both ways. You have more room than you think, and so does any agency you hire. State laws on unfair practices still apply, and a customer worth keeping is a better reason to stay calm than a statute that was never about you.

Two doors narrow while you wait. A factor buys the invoice on your customer's credit and prices it on age, so one already three months past due is usually outside what a factor will take. That is what hoping costs. Small claims is the other door, and the rules for a company are not the rules for a person. In New York City a corporation, partnership or association can sue for up to $10,000 in the Commercial Claims Part with no lawyer, capped at five actions a month, and only if the firm's main office sits in the state. Your state sets its own ceiling and decides for itself whether an LLC may show up without counsel. Check before you assume.

Offering net 30 to win the account and then borrowing to cover the gap is a real strategy. It is also how profitable firms fail.

The Federal Reserve's 2026 report, drawn from 6,525 firms in its 2025 survey, found 60 percent had applied for financing in the previous 12 months, and the most common reason was meeting operating expenses at 56 percent. Approval is not a formality. Of those applicants, 42 percent got the full amount, 36 percent got some of it, and 22 percent got nothing at all. The survey uses a convenience sample rather than a random one, so read it as a strong signal rather than a census.

Two instruments fit this problem. Invoice factoring sells the receivable itself, so it works when your customer's credit is better than yours, and our comparison of the best invoice factoring companies covers what the rates actually run. A working capital loan leaves the invoice alone and lends against the business. The same Fed report is worth one caution here, 60 percent of firms that borrowed from online lenders said the cost came in higher than they expected, against 32 percent at large banks.

The cheaper fix is to need less of it. Start early. Building business credit in your company's name, before you need the money, is what puts you in the 42 percent.

Say no when the order is large enough that losing it would hurt and the customer is new. Say no when the buyer refuses a credit application, a guarantee or a deposit while insisting the terms are standard. Vague references are a no too.

None of that makes net 30 wrong. In plenty of industries a supplier who will not offer terms simply does not get quoted, and that is a real cost of saying no. Just make it a decision each time, with the limit written down, rather than a habit you fall into on a phone call.