No matter what type of small business you run, you want to make sure that you’re paid promptly for your hard work. This means that creating a professional and well-organized invoice for your clients is imperative to your success.
Even before you complete any work for a new client, you should negotiate payment terms with them. This ensures that both parties go into the business relationship knowing what to expect. Then, this conversation should be reflected on your invoice.
To establish the best communication with your clients regarding payment, your invoices need to be properly formatted and include the correct billing information and payment terms. Skynova’s free invoicing software lets you easily create professional invoices to send to your clients. Just plug your information into the template, and within minutes, you’ll have an invoice ready to send directly to clients.
The terms in your invoice should spell out how you want to be paid and how much time your client has to pay you. One of the more common payment terms is called "Net 30," which means a client has 30 calendar days to pay you from the payment date. Keep reading to learn more about Net 30 and why it might be a useful practice to adopt as a business owner.
What Is Net 30?
When creating invoices, you’re likely to include the payment term "Net 30." All sizes and types of companies use it as a standard. It means that your client owes a payment to you within 30 days of the transaction for goods or services. So, the due date will be within 30 full days of the invoice date. For example, if your invoice is dated Oct. 1, payment is due on or before Oct. 30.
There’s more to the term "Net 30" than telling clients that their payment is due in 30 days, though. The difference between the two might be subtle, but it’s there.
Many people, business owners included, don’t realize that Net 30 is actually a trade credit term. Essentially, you’re extending short-term credit — in this case, 30 days — to your client. You’re providing services or goods upfront, and your client has 30 days to pay their debt to you interest-free.
Often, to incentivize payment before hitting the 30-day mark, many businesses will offer a discount when a client pays their bill sooner. This is an effective way to inspire early payments so that you’re not chasing down payments after 30 days. You might consider other types of discounts as well, such as paying with cash rather than a credit card. Likewise, you might choose to tack on interest or a late fee for late payments, which will also likely lead to earlier payments.
Understanding Net Payment Terms
Just because Net 30 is one of the more common invoice payment terms used by businesses, it doesn’t mean that it’s the only one. There are several net terms to consider using on your invoice, some with longer and shorter credit terms.
There are many factors you’ll use to consider the invoicing practices that work for your company — such as cash flow, customer relationships, terms offered by your competitors, and inventory cost. Ultimately, it comes down to what makes the most sense in your industry and for your business.
Here are a few other net terms you might use on your invoices.
2/10 Net 30
One term you might want to use is "2/10 Net 30." With this term, the payment is due in 30 days. However, if a client elects to submit their payment within 10 days of the invoice date, you’ll offer them a 2% discount. If they pay you after that, they will owe the full amount.
For example, let’s say you send a client an invoice for $1,000 on June 1. This means the full payment is due by June 30. However, if they pay by June 10, using the "2/10 Net 30" term, they get a 2% discount on their bill. Two percent of $1,000 is $20. This means they owe you $980.
As a business owner, you might opt to offer this 2/10 Net 30 term to clients if you decide that having cash in hand sooner is worth offering a discount to incentivize an early payment.
Net 30 EOM
With the "Net 30 EOM" term, EOM stands for "end of the month." This means the payment is due 30 days from the end of the month when the invoice was sent.
For example, if you send your invoice on Oct. 15, payment would be due 30 days from Nov. 1. This option offers even more payment flexibility for your clients.
Like Net 30, the "10" in "Net 10" refers to the number of days your client has to pay their invoice. In this case, though, they have 10 days from the invoice date to make their payment. And since this is a credit term, it means you’ve extended a 10-day credit to your client.
There’s less flexibility for your client when you shorten payment terms. You might choose it because you expect the full payment for your work, and you don’t want your cash flow tied up, so you’d prefer payment sooner.
This is also like Net 10 and Net 30, except that your client has 15 days from the date of an invoice to pay you for your work. For example, if your invoice is dated Oct. 1, payment is due by Oct. 15. This is also a credit term, so it’s important to remember that you’re extending a 15-day credit to your client.
This option also offers less payment flexibility to clients than the more common Net 30. So, it’s important to think about what makes sense for your business.
Why Do Companies Accept Net 30?
By offering a Net 30 short-term credit to customers, you’re enticing them to do business with you. If they have 30 days to pay for the goods or services you provided, they might be more likely to do business with you because of that delayed payment.
Also, many companies offer a small discount for paying an invoice before the 30 days is up. This further incentivizes your client to work with you. It helps build trust and a relationship with them, as well.
And if you work with larger businesses, these bigger companies tend to prefer Net 30 terms, as it improves their bookkeeping practices. Net 30 terms mean they get to hang on to their cash longer, improving their cash flow and helping them meet their day-to-day business needs.
Should My Company Use Net 30?
There are many reasons you might choose to use Net 30 when invoicing clients. As discussed, it’s the most common payment term. This means many companies are already set up to work with it, and it should make for smoother business relationships with many clients.
And by offering discounts for clients who pay early, you’re likely to see fewer problems when getting paid for your work. Who doesn’t want to be paid on time?
Net 30 might not be for every business, though. If you’re a freelancer or running a small company, you might not have the type of cash flow that allows you to wait 30 days for payment. In this case, a shorter term might work best for you.
Also, you might not want to use Net 30 payment terms for all clients. Maybe you’re only comfortable using these terms — perhaps, even longer credit terms — with trusted clients, ones with a proven track record of paying for your work. If you have a new client, consider shorter terms at first until you get to know how they operate.
Where Do I Put Net 30 on an Invoice?
When creating an invoice, you might be uncertain where to indicate Net 30 when formatting it. Many businesses include the payment terms at the bottom of an invoice. Closer to the top, they also include a due date to drive home when payment should be submitted.
Skynova’s invoicing template makes it easy to include your payment terms and any discounts for paying early or late fees. The "Notes" field at the bottom left corner of the template is ideal for spelling out these terms. There is also a "Due Date" field at the top directly under where you input your "Invoice Date." This should make it clear to clients when their payment is due.
Invoice With Skynova’s Sales Invoice Template
When you’re running a small business, prompt payment is imperative. The invoice you create and the payment terms you choose, such as Net 30, can make things run smoothly when it comes time for clients to pay up.
These administrative tasks aren’t fun, but Skynova’s free invoicing template makes it easier for you to get paid. As a business owner, it’s crucial that you submit accurate, easy-to-read invoices to your clients. Our customizable software makes it easy to build a professional invoice for each job.
Skynova’s full range of free business templates and software products is an excellent resource for small businesses. We can help you create everything from invoices and job quotes to receipts. Use our tools to simplify your accounting processes, look more professional, and get paid faster.