When working with freelancers, contractors, vendors, and suppliers, it’s important to agree to payment terms at the start of the engagement. Payment terms are the guidelines for when and how you will pay.

What is Net 30?

When you tell someone you’ll pay Net 30, you’re saying you will pay them within 30 calendar days after being billed for a good or service. Net 30 is essentially a form of trade credit. In other words, when your vendors and freelancers agree to Net 30 terms, you’re borrowing money owed to them. Your contractors and suppliers deliver the goods and services immediately while they keep track of the debt owed; then, in 30 days, you must repay the debt.

These Net payment terms can be a huge benefit to small businesses that may not have much cash on hand to spend on large expenses.

What is Due upon Receipt?

This means you should process and pay the invoice immediately once received.

What are the benefits of using Net 30 payment terms for freelancers and vendors?

Using Net 30 or other Net terms usually expands the potential client base for freelancers, vendors, and suppliers — allowing them to take on more clients than if they required immediate payment for their goods and services. While smaller freelancers and vendors are usually most comfortable with no more than Net 45 terms, larger businesses will sometimes even extend Net 90 terms. This is because large businesses usually have enough cash on hand to survive not getting paid by a client for 90 days.

When does Net 30 start?

It depends on what you have agreed to.

Net 30 could mean 30 days after the sale is made, 30 days after the goods are received, 30 days after the invoice is sent, 30 days after the invoice is received, or some other date. Generally, Net 30 starts on the date the invoice is received.

Note that Net 30 refers to calendar days (versus business days) and includes weekends and holidays.

Do all businesses offer Net 30 or other Net payment terms?

Net 30 is very common for large businesses and smaller businesses in consulting, marketing, graphic design, software development, content creation, and other service industries.

However, not all businesses offer Net 30. Whether or not a business use Net 30 terms depends on the kind of business they operate. For example, retail businesses rarely extend credit to their clients. If you want to buy a sandwich from your corner deli, you’ll usually have to pay for it upon ordering. Much smaller, non-retail businesses will also avoid Net 30 because 30 days is simply too long for them to wait to get paid. They might be willing to agree to less generous payment terms, like Net 7 or Net 14, or they might not extend trade credit at all.

Are there other reasons a freelancer or vendor might not agree to Net 30 terms?

Some businesses will research their clients before agreeing to Net 30 — to make sure you are creditworthy and have a track record of paying invoices in a timely manner.

Commercial credit reports are available from Dun and Bradstreet or Smart Business Reports. These will detail a business’s payment history and any liens and judgments a business might have against them. In addition, most commercial credit reports will also provide a credit score and a credit recommendation.

If you are a smaller business that doesn’t appear in Dun and Bradstreet, your freelancers, vendors, and suppliers may request a credit application along with references before agreeing to Net 30 terms.

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