Net 30 terms; when do you pay?

Do you pay on the 30th day, as soon as you receive the invoice, or something else/in between?

It means they are giving you 30 days to pay the bill. After that it is past due. You should pay them on or before the last day.

I would say if you’re a small customer you pay sometime around 40-45 days and if they complain you apologize and insist you appreciate their patience.

If you’re the vendor, you call them around day 25 and make sure they remember to pay by day 30 because it’s completely unacceptable for a reputable business to pay late.

I pay my own bills twice a month - a bill with 30 day terms gets paid (for example) on the 15th or 30th, whichever is closer to the due date.

If I’m handling money for a business or non-profit, it depends. Is there a discount for paying early? What are the interest and penalties on late payments? How much cash do I have on hand, and how much do I expect to come in/go out over the next couple of months? Do I have a line of credit, or am I cash only? If I’m in good shape, I’ll pay it a couple of days before the due date. If I need to, though, I’ll prioritize payables and pay them when I can. If I do a lot of business with the vendor and we have a good relationship, I’ll keep them updated on when they can expect their money and try to negotiate a waiver or reduction of penalties - if they work with me when I’m in the red, they’ll get paid faster when I’m in the black.

Net 30, Net 15, Net 10 etc. don’t mean ONLY that the bill is due by that date.

Net 30 means the billed amount is what’s owed as long as it is paid by the 30th day after the invoice date. After that, the issuing business can begin charging finance fees.

It’s sometimes coupled with something like Cash -2 or -5; that’s the percentage discount for paying the invoice on receipt.

Interesting (and helpful) responses. It’s my first time billing a client that uses net 30 terms, and I don’t know quite what to expect. I was told up front to invoice monthly, and that they are a net 30 shop. I’m looking forward to receiving against my invoice, and I’ve already decided I’m going to issue my next invoice around the 20th (instead of the 26th this time around). From a business standpoint I understand the advantage to waiting till the end of the term, and (as stated in the OP) I was (and remain) curious as to how people handle this in the “real world”.

I briefly considered extending the offer of net-30 2/15, but I’d be giving up a couple hundred bucks but I guess I’d rather wait two weeks and get all the money.

Discounts for early payment are most often given because the seller has the product on a floorplan or some other type of financing. If they get the payment early, they can pay it off early, and therefore save money on interest. If that isn’t your situation, the early payment discount would often not be worth it for you, unless you are having cash flow issues.

If payment terms are net 30, expect most payments to come in between 28 and 40 days. Very few will pay earlier than that. Smart businesses will put it off until 30 days to get the maximum value out of their money. Dumb businesses will be having cash flow struggles and won’t be able to pay early.

Now that I know what you’re trying to do, I was being a little bit tongue-in-cheek in my earlier post. Although I really meant what I said. Successful businesses have assertive AR practices and you should politely followup when the bill is due. This is important because the client is likely to push the envelope on the payment terms. Especially if they have a relationship with you and they know you don’t complain if they’re a week or two late.

It’s especially easy if they have an AP contact you can call. They’re not the person you have a ongoing relationship with and will expect people calling about payment and as long as you’re polite there won’t be any problem. If your client is an individual then obviously you’ll have to decide if you want to nag the person who you have to keep working with and who decides if he wants to do more business with you.

I’m doing some IT consulting for a small company. I think I’ll call and ask for someone in Accounts Payable around the 20th (3 weeks after submitting the invoice) to remind them. I think.

Not exactly a cash flow issue - there’s no cash flowing in, but none flowing out, either - this is just an investment of my time at this point. However, I don’t want to be waiting 6 weeks to get paid, either.

No! Don’t call to “remind” them, because they haven’t done anything wrong, or even unexpected. If payment hasn’t been made by the due date, then you call. By agreeing to provide your services on a 30 day basis, you’ve essentially told them that there’s no money due until the end of the month, so there’s nothing to remind them of until that day.

If the payment doesn’t come through, then you call and remind them. If the say anything other than “it’s going out this afternoon,” send a second invoice with a finance charge*. You can always waive it and seem like a good guy, but it’ll help them realize that they do, in fact, have to pay for your services.

*Maybe - check your contract to be sure this is kosher. If the current contract doesn’t allow for it, consider it a lesson learned and build that language into the next one you do.

Wow, I never knew anybody bothered with just saying “Net 30” or whatever.

When I did accounts payable back in the late Mesozoic, it was always “10 Net 30” or something like that, which meant pay it now, take 10% off, then on day 30, you have to pay the total amount.

If you’re not giving a discount for quick payment, why not just put “Amount Due”?

Huh. Yeah, fair enough. I’ll wait till the 26th, and if I haven’t received a check I’ll call them on the 27th. I didn’t actually put “net 30” anywhere on the invoice, and I don’t have a written contract with them.

Early pay discounts for buyers are some of the easiest ways to improve the bottom line. Where else can you make 1% or 2% money in 10 days?

Show me a company still offering early pay discounts in the current economic environment, and I’ll show you a company that doesn’t understand finances.

Which means that your avg. collection terms are really 45 days.

Assuming you are working daily for them, you will not collect payment for your first day of the month work until 60 days later and then collect your last day of the month work until 30 days later. The average days collection for your monthly billing will be 45 days.

Ask them whether they have “fixed payment days”. Many companies consider “net 30” to mean “we pay on the first ‘payment day’ after recording receipt of your invoice”.

For example, my current client pays “net 60” but their “payment day” is the 5th of the month (or, if the 5th is not a valid date, the closest earlier valid date). So, they gave this 5th the order to pay me the invoice they received at the end of August. Strictly speaking it was more like “net 65”, but I’d rather get paid fully at “the first payment day after 60 days” than get someone who doesn’t even look at your invoice until the 60 days are past and then comes up with some shit along the lines of “the amounts aren’t properly aligned” (seriously, a coworker once got that as an excuse for not paying her on time).

It may take a while to get to the point in my business relationship where it’s ok to ask those kinds of questions. I still don’t know most of the people there.

That is the kind of question I ask straight away; it’s not a matter of being buddy-buddies, it’s a matter of me being able to ensure my cashflow will be correct. Your clients need to have that information from their own clients, so it’s not something that will send them into fits. Many of my clients volunteer it directly, because it avoids calls from frantic suppliers. Littlebro makes it a policy to always tell vendors about their own policies and check the policies of clients, he started in Treasury* where that kind of information was absolutely vital.

  • Probably not the right name in English: the department which manages cashflow, making sure that money is available for such tiny unimportant things as payroll while juggling loans with CDs with payments with charges with…

I’m not comfortable asking those questions of AP. It seems like it would come off unprofessional and a little bit desperate. I am neither of these things, and don’t want to even remotely create the appearence of either.