Payment Terms Explained: Net 30, Net 15, and What to Actually Offer
"Payment terms" sound like accounting jargon, but they're really just one decision: how long you're willing to wait to get paid. Set them too generously and you're financing your customers for free. Set them without thinking and you're leaving cash on the table. Here's what the common terms mean and how to choose.
The terms you'll see
- Due on receipt — payment is expected immediately. Best for small jobs, new customers, or one-off work.
- Net 15 — payment due 15 days after the invoice date. A good default for small businesses: fast enough to protect cash flow, standard enough that customers accept it.
- Net 30 — due 30 days after invoicing. The most common B2B term, but understand what it means: you've effectively given the customer a 30-day interest-free loan.
- Net 60 / Net 90 — due in 60 or 90 days. Common with large corporate buyers who use their size to dictate terms. Fine if your margins and cash reserves can carry it; dangerous if they can't.
The hidden cost of long terms
Every day of payment terms is a day you're funding someone else's business with your money. If you're on Net 60 and your own suppliers want Net 15, you have a 45-day cash gap to cover on every job. That gap is why profitable businesses still run short of cash.
So the real question isn't "what's standard?" It's "what can my cash flow actually afford?"
Early-payment discounts
A common tool: offer a small discount for paying early, often written as 2/10 Net 30, meaning "2% off if you pay within 10 days, otherwise the full amount is due in 30."
It works because it gives the customer a concrete reason to pay now instead of later. The 2% you give up is often cheaper than the cost of waiting, or of chasing. Use it when you'd rather have cash sooner than squeeze out the last few percent.
What to actually offer
A simple, defensible policy for most small businesses:
- New customers: due on receipt or Net 15 until they've paid you reliably a few times.
- Established customers: Net 15 or Net 30, depending on your cash position.
- Large buyers who demand Net 60: accept only if your margins and reserves genuinely allow it, and consider an early-payment discount to pull some of it forward.
Then write the actual due date on the invoice, not just the term. People pay dates, not jargon.
Make the terms do the work
Terms only help if they're enforced, tracked, and followed up on the day they're due. Arvalox applies your terms to every invoice, tracks what's current versus overdue automatically, and reminds customers before and after the due date, so your payment terms actually shape when you get paid instead of just sitting on the invoice.