'Net X' on an invoice means payment is due X calendar days after the invoice date. Picking the right Net term is one of the most under-discussed levers in a small service business, because it directly determines how long your money sits in someone else's bank account before it sits in yours.
What each Net term actually means. Net terms are calendar days from the invoice date — not from the date the customer receives the invoice, not from the date the work was completed, and not from the date the customer approves it. If your invoice is dated June 1 with Net 30 terms, payment is due July 1. (Some industries date from end-of-month — write it
The hidden cost of long net terms. Every day between work-done and money-received is a day you are financing your customer's business with your own working capital. A $10,000 Net 60 invoice ties up $10,000 of your money for two months — at a 10% cost of capital, that is roughly $165 in real cost. Multiply by every invoice and the math gets serious quick
When to use early-payment discounts. A '2/10 Net 30' term offers a 2% discount if the customer pays within 10 days. That works out to an effective annual interest rate of roughly 36% — generous to the customer, expensive to you. Use early-payment discounts when your cost of capital is high (you would otherwise need a line of credit) and your gross margin
Frequently asked questions
Does Net 30 mean 30 business days or 30 calendar days?
Calendar days. If you mean business days, write 'Net 30 business days' explicitly — but it is non-standard and many AP departments will pay on the calendar-day interpretation anyway.
Can I change a customer's payment terms?
Yes, on future invoices. You cannot retroactively shorten terms on an invoice that has already been issued. Communicate the change in writing before the next invoice goes out.
What is the most common payment term?
Net 30 is the dominant default in U.S. B2B billing. Net 15 is rising in popularity for small service businesses, and Due on Receipt remains standard for B2C residential service calls.
