Net 30 example
Let’s say you’re a freelance graphic designer working with a small marketing agency. You finish a project for them on May 1 and send an invoice for $2,500 with net 30 terms. That means the full payment is due by May 31, which is 30 calendar days from the invoice date.
Here’s how that plays out:
- Invoice date: May 1
- Payment due date: May 31
- Terms shown: “Net 30” is clearly written on the invoice
Now, let’s say you also offered a 2% early payment discount using “2/10 net 30” terms. That would give the agency a chance to save 2%—or $50—if they pay the invoice by May 11 (within 10 days). If they don’t take the discount, the full $2,500 is still due by May 31.
Where to place net 30 on an invoice
If you're using net 30 terms, you'll want to ensure your customer sees them immediately. So, where should you put them? Here are a few spots that work well:
Near the top of the invoice
Right next to the invoice number and date is a great place to include “net 30” or “payment due in 30 days.” This keeps it front and center.
In the payment terms section
Most invoice templates have a section labeled “Terms” or “Payment Terms.” That’s where you can add something like “net 30,” and if you’re offering a discount—e.g., 2/10 net 30—you can include that here, too.
In your agreement or contract
It’s smart to talk about payment terms before you even send the invoice. Including net 30 in your service agreement or project contract helps avoid surprises later.
Advantages of using net 30 billing cycle
Net 30 payment terms can benefit both buyers and sellers when used correctly. Here are some of the advantages.
For the buyer
If you're on the buying side, net 30 gives you some much-needed flexibility:
- More time to pay: You get a full 30 days to pay the invoice, which can help ease the pressure on your cash flow. That breathing room is especially helpful if you’re waiting on income from your own customers.
- Easier to manage your budget: Delayed payments mean you can plan ahead, keep some cash on hand for other business expenses, and avoid scrambling to cover bills right away.
- Better relationships with vendors: Working with a supplier who offers net 30 shows they trust you, and when you pay on time, it builds trust back. That can lead to better deals or priority service down the road.
- No added fees: As long as payment is made within the 30-day window, there’s usually no extra fee
For the seller
For sellers, offering net 30 can be a smart business move:
- More competitive offers: Net 30 can make your proposal more appealing, especially in industries where flexible terms are expected. It may help you land more clients or bigger contracts.
- Builds trust with customers: Giving clients a little extra time to pay shows confidence in them. That trust can lead to long-term partnerships and steady repeat business.
- Encourages larger orders: When customers aren’t required to pay upfront, they may be more likely to place bigger orders, knowing they have time to pay.
- Opens the door for early payment incentives: If cash flow is a concern, you can still offer incentives like a small discount if they pay early—e.g., 2/10 net 30. It’s a win-win for both you and the buyer.
Disadvantages of using net 30 terms
While net 30 can be great for building trust and giving customers some flexibility, it’s not always the right fit, especially for smaller businesses that need steady cash flow. Here are some of the drawbacks to consider:
Delayed cash flow
Waiting 30 days (or more) to get paid can create serious cash flow challenges. If you’re covering expenses like payroll, inventory, or rent while waiting on invoices, that delay can put a real strain on your business.
Risk of nonpayment or late payment
Not every customer will pay on time. Some may miss the due date, while others might not pay at all. Without a good system to track and follow up on invoices, Net 30 can lead to more time spent chasing payments and a higher risk of bad debt.
It adds more admin work
Offering net 30 means more time managing invoices, tracking payment dates, sending reminders, and possibly dealing with collections. If you’re a solopreneur or running a small team, that extra work can add up fast.
Not ideal for all industries or customers
In some industries— e.g., retail, restaurants, or personal services—cash flow moves faster, and customers expect to pay upfront. Offering net 30 in those cases might not make sense and could even complicate your process.
The importance of creditworthiness in net 30
When you offer Net 30 terms, you're basically extending short-term credit to your customer. You’re giving them your product or service now and trusting that they’ll pay for it in 30 days. That kind of trust is great, but it also comes with risk.
That’s why checking your customer’s creditworthiness is so important. Before offering net 30 terms (especially to new clients), consider checking:
- Credit reports or scores: Services like Dun & Bradstreet, Equifax, and Experian offer business credit profiles.
- Payment history: If you’ve worked with the client before, review how quickly they’ve paid past invoices.
- Trade references: Ask the customer for references from other vendors they’ve worked with.
- Their business health: Look for any red flags, like lawsuits, negative press, or signs of financial trouble.
You don’t need a formal underwriting process to do this. Just some basic checks can help protect your business from past-due invoices.
Understanding net 30 with early payment discounts
Your business can add a little incentive to your net 30 terms by offering an early payment discount, which gives the buyer a small percentage off the invoice total if they pay before the full 30-day window is up.
The most common way to write this is something like 2/10 net 30. That means:
- They get 2% off the invoice total if they pay within 10 days.
- If they don’t take the discount, they still owe the full amount within 30 days.
Here are a few other examples you might see:
