Net 30, Net 60 and Net 90 are payment terms that give a customer 30, 60 or 90 days after the invoice date to pay in full. Longer terms can help you win bigger clients, but every extra day is a day you're effectively lending them money. Understanding payment terms means knowing how much cash each option ties up and what that costs you.
This guide is for owners who invoice other businesses and are deciding what terms to offer, or who've been asked by a large customer to accept longer ones. You'll see how to calculate the cash impact, how to price early-payment discounts properly and how to push back on terms that would strain your cash.
What Net 30, Net 60 and Net 90 actually mean
"Net" means the full invoice amount, with no discount. The number is the count of calendar days the customer has to pay. The clock usually starts on the invoice date, not the delivery date, so invoice the day the work is done.
A few variations show up often, and it's worth knowing exactly what you're agreeing to:
| Term | What it means | Effective wait |
|---|---|---|
| Due on receipt | Pay when the invoice arrives | Days, in theory. Often a week or two in practice. |
| Net 15 | Full amount due 15 days after the invoice date | 15 days |
| Net 30 | Full amount due in 30 days | 30 days |
| Net 30 EOM | Due 30 days after the end of the month the invoice is dated | 30 to 60 days, depending on invoice date |
| 2/10 Net 30 | 2% discount if paid within 10 days, otherwise full amount in 30 | 10 or 30 days |
| Net 60 / Net 90 | Full amount due in 60 or 90 days | 60 or 90 days |
Watch the EOM version closely. An invoice dated June 2 under Net 30 EOM isn't due until July 30, which is 58 days later.
How payment terms affect your cash flow
The amount of cash stuck in unpaid invoices is roughly your average daily sales multiplied by the number of days customers actually take to pay. That's the key point: actual days, not the stated terms. A customer on Net 30 who routinely pays in 38 days is really on Net 38.
- Cash tied up in receivables ≈ average daily credit sales × average days to collect
- Extra cash needed for longer terms ≈ average daily credit sales × additional days
- Annual cost of carrying that cash ≈ extra cash tied up × your cost of borrowing
The average days to collect is closely related to days sales outstanding. Our guide to days sales outstanding explains how to measure it from your books.
Worked example: a commercial cleaning company weighing Net 60
Suppose a hypothetical commercial cleaning company bills office clients $60,000 a month. To keep the math simple, treat each month as 30 days, so average daily billing is $60,000 ÷ 30 = $2,000.
Step 1: Today, on Net 30
Clients are on Net 30 but actually pay in 38 days on average. Cash tied up in receivables: $2,000 × 38 = $76,000.
Step 2: If every client moved to Net 60
Assume the same eight days of slippage, so clients pay in 68 days. Receivables: $2,000 × 68 = $136,000. The company would need an extra $136,000 − $76,000 = $60,000 of cash, a full month of revenue, just to stand still.
Step 3: What that costs
If the company covers the gap with a line of credit at 10% annual interest, the carrying cost is $60,000 × 0.10 = $6,000 a year. And that's before accounting for the higher risk that an invoice 60 days old never gets paid at all.
Step 4: One big client instead of all of them
More realistically, one large property manager asks for Net 60 on a $15,000-a-month contract. That's $500 a day in billing ($15,000 ÷ 30). Thirty extra days ties up $500 × 30 = $15,000. At 10%, carrying cost is $15,000 × 0.10 = $1,500 a year, or $125 a month on a $15,000 contract. That's about 0.8% of the contract value, which is a number the owner can build into the price or trade for something else.
Early-payment discounts: what "2/10 Net 30" really costs you
Offering a discount for fast payment sounds cheap. It usually isn't. Under 2/10 Net 30, a customer who pays on day 10 instead of day 30 gets 2% off for paying 20 days sooner.
- The customer gives up 2% to keep 98% for 20 more days: 2 ÷ 98 = 2.04% for 20 days.
- There are about 365 ÷ 20 = 18.25 twenty-day periods in a year.
- Annualized: 2.04% × 18.25 ≈ 37%.
So offering 2/10 Net 30 is roughly like borrowing at 37% a year. That's far more expensive than most lines of credit. It can still make sense if you're very short on cash, can't get other financing or have a customer who is otherwise slow and unreliable. But for most businesses, a 1% discount or a small late fee does the job at a much lower cost. The same math works in reverse: when a supplier offers you 2/10 Net 30, taking the discount is often one of the best returns available on spare cash.
How to choose terms: a decision checklist
Before you agree to longer terms, run through these questions:
- Can I fund it? Multiply the customer's daily billing by the extra days. Do you have that cash, or a credit line to cover it, without cutting into payroll?
- What does it cost? Multiply that amount by your borrowing rate. Is it a small share of the gross profit on the account?
- How reliable is the payer? A large, established company on Net 60 may be safer than a small one on Net 30. Check references or ask other suppliers how they pay.
- How concentrated am I? If this customer would be a large share of your revenue, slow payment from them can create a cash crunch across the whole business.
- What can I get in exchange? A longer contract, a price increase, a deposit, electronic payment or a larger scope can all offset the cost.
- What's my fallback? If they pay on day 90 instead of 60, what happens? Options like invoice factoring exist but carry their own costs.
A script for negotiating terms with a large customer
You can adapt this when a client asks for longer terms:
"We'd love to take this on. Our standard terms are Net 30, and they're built into our pricing. We can do Net 60 for this contract if we adjust the rate by about 1% to cover the longer carry, or keep the current rate if you can pay by bank transfer on Net 45. Which works better on your side?"
You're not refusing. You're showing that terms have a price and giving them two reasonable choices.
Common mistakes with payment terms
- Planning around stated terms instead of actual payment behavior. Track how many days each customer really takes and use that in your cash planning.
- Not putting terms in writing before work starts. Terms should be in the quote, contract and invoice. If they only appear on the invoice, customers can reasonably argue they never agreed to them.
- Offering big early-payment discounts without doing the math. As shown above, 2/10 Net 30 is an expensive way to get cash. Compare it with your other options first.
- Invoicing late. A Net 30 invoice sent two weeks after the job is really Net 44. Invoice the same day whenever you can.
- Accepting long terms from customers while paying suppliers fast. If you pay in 15 days and collect in 60, you're financing the gap. Try to line up your own payables timing with your receivables.
- Letting overdue invoices sit. Follow up the day after the due date. The longer an invoice ages, the less likely it is to be paid in full.
Where AI can help
If you export an accounts receivable aging report or a list of paid invoices with invoice and payment dates, an AI assistant can calculate each customer's average days to pay, rank customers by how late they typically are and flag anyone whose payment speed is getting worse. It can also draft polite reminder emails at 1, 7 and 21 days past due that you can edit and send.
Double-check its calculations on a handful of invoices before relying on them, and be careful what customer data you paste into any tool. Decisions about changing a customer's terms, or when to escalate, still need your judgment about the relationship.
To see how different terms and collection speeds change the cash tied up in your own receivables, try our accounts receivable calculator.
Frequently asked questions
Is Net 30 standard for small businesses?
Net 30 is very common in business-to-business sales, but "standard" varies by industry and customer size. Many small service businesses do fine with Net 15 or due on receipt, especially for smaller jobs. Choose terms based on your cash needs, not on what feels polite.
Can I charge a late fee on overdue invoices?
Many businesses do, but it needs to be agreed in advance, stated in your contract and invoices, and kept within whatever limits apply where you operate. Because the rules vary, check with an attorney before adding late fees to your terms.
Does Net 30 include weekends and holidays?
Generally yes, it counts calendar days. If the due date lands on a weekend or holiday, many customers pay the next business day. Spell out your expectations in your terms to avoid disputes.
Should I require a deposit instead of offering terms?
For large projects, a deposit is often the better tool. Taking part of the payment upfront, then invoicing the balance on completion, cuts the cash you have tied up and reduces the risk of non-payment on work you've already done.
Key takeaways
- Cash tied up in receivables ≈ daily credit sales × the days customers actually take to pay.
- Moving a customer from Net 30 to Net 60 ties up roughly one extra month of their billing.
- Price the cost of longer terms using your borrowing rate, and ask for something in exchange.
- A 2/10 Net 30 discount costs about 37% a year on an annualized basis, so use it carefully.
- Watch for EOM terms, which can nearly double the wait.
- Put terms in writing up front, invoice promptly and follow up the day after the due date.
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