Net 30 vs Net 60: What Payment Terms Mean After Taxes
Getting paid on time is crucial for any business and waiting on payments is never fun. Whether you offer Net 30, Net 60, or Net 90, these payment terms can impact how money moves through your business.
A 2019 study by Xero and PayPal found that 48% of invoices issued by small businesses were paid late. More recent research, surveying small, medium, and enterprise-sized businesses, shows that 87% of businesses report that their invoices get paid after the due date.
That’s a major issue when you’re trying to keep cash flowing. Understanding how net terms work can help you avoid payment delays and choose what’s best for your business.
This guide breaks down net payment terms, their pros and cons, and how they compare to other payment methods. Plus, we’ll share tips on how to manage them effectively without losing sleep.
What Are Net Payment Terms?
Net payment terms tell customers how many days they have to pay after receiving an invoice. Instead of demanding payment upfront, businesses offer a grace period, making it easier for customers to buy now and pay later.
This flexibility is especially useful for businesses that rely on bulk purchases or long-term projects, allowing them to manage cash flow more efficiently while keeping clients happy.
Common Net Terms:
- Net 30 – Payment is due 30 days after the invoice date. This is the most widely used term and is common for freelancers, small businesses, and suppliers.
- Net 60 – Payment is due 60 days after the invoice date. Often used by larger companies that manage long-term budgets and supplier payments.
- Net 90 – Payment is due 90 days after the invoice date. This is usually reserved for big corporations and government contracts, where longer billing cycles are standard.
Early Payment Discounts:
To encourage faster payments, some businesses offer incentives like 2/10 Net 30—this means the client can take a 2% discount if they pay within 10 days, but the full amount is still due in 30 days.
These types of arrangements benefit both parties: businesses get paid faster, and clients save money.
How Net Terms Impact Your Business:
- Cash Flow Management: Longer net terms can delay incoming funds, so businesses need to plan accordingly.
- Client Relationships: Offering flexible terms can attract bigger clients and build trust.
- Risk of Late Payments: While net terms are helpful, they also come with the challenge of overdue invoices. Using automated reminders and invoice tracking tools can help keep payments on schedule.
Net 30: What Does It Mean and How Does It Work?
Net 30 means a customer has 30 days from the invoice date to make a payment. It is one of the most common payment terms used in small business transactions and corporate contracts.
How It Works:
- A business delivers goods or services and sends an invoice.
- The client has 30 days to pay from the date the invoice was issued.
- Payment is due by the 30th day unless otherwise specified.
Pros of Net 30:
- Encourages customers to buy without immediate financial pressure.
- Improves cash flow predictability for both parties.
- Easier to manage compared to longer payment terms.
Cons of Net 30:
- Can lead to late payments if clients delay.
- May strain cash flow if many payments are outstanding at once.
Net 60: What Does It Mean and How Does It Work?
Net 60 extends the payment period to 60 days from the invoice date. This term is typically used by larger businesses with established vendor relationships.
How It Works:
- A business delivers products or services and sends an invoice.
- The client has 60 days to settle the payment.
- Payment is due on or before the 60th day.
Pros of Net 60:
- More flexibility for customers, increasing the likelihood of larger purchases.
- Helps build long-term relationships with reliable clients.
Cons of Net 60:
- Delayed cash flow can create financial strain for small businesses.
- Risk of late or non-payment increases with longer terms.
Net 90: What Does It Mean and How Does It Work?
Net 90 is a long-term payment structure where customers have 90 days to complete payment. This term is often used by large corporations with strong cash reserves.
How It Works:
- A business provides goods or services and issues an invoice.
- The client has up to 90 days to pay in full.
- Payment is due on or before the 90th day.
Pros of Net 90:
- Attracts large clients who prefer extended payment cycles.
- Can increase order volume from businesses that require longer repayment windows.
Cons of Net 90:
- Can severely impact cash flow for small businesses.
- High risk of non-payment or significant delays.
Quick Glance: Net 30 vs. Net 60 vs. Net 90
Payment Term | Pros | Cons |
Net 30 | Faster cash flow, lower payment delays | May still result in late payments |
Net 60 | Builds trust with reliable clients | Longer wait for payments impacts liquidity |
Net 90 | Appeals to corporate clients | High risk for small businesses, cash flow struggles |
Pros and Cons of Offering Net Payment Terms
For businesses that want to maintain working capital, balancing net payment terms with alternative payment options can be key to financial stability.
Pros | Cons |
Encourages larger orders | Can create cash flow problems |
Builds long-term business relationships | Risk of late or missed payments |
Helps businesses stay competitive | Harder for smaller businesses to manage |
Provides flexibility for clients | Payment processing delays can impact operations |
Net Payment Terms vs. Credit Cards
Some businesses prefer to use credit card payments instead of offering net terms. Here’s how they compare:
Payment Method | Pros | Cons |
Net Terms | Encourages larger purchases, builds business relationships | Payment delays, risk of non-payment |
Credit Cards | Immediate payment, no outstanding invoices | Processing fees apply |
Pro Tip: For businesses looking to balance both, Invoice Fly’s Online Payments allows customers to pay instantly while also offering flexible invoicing options.
Who Offers Net Payment Terms?
Net terms are commonly offered by:
- Wholesalers and Suppliers – Allowing bulk buyers time to pay.
- Manufacturers – Large production runs often involve extended payment periods.
- Consultants and Service Providers – Net terms can make long-term contracts more appealing.
- Retailers – Some suppliers offer Net 30 to encourage stock purchases.
For businesses that rely on steady cash flow, offering shorter payment due dates or installment plans can be a smarter approach.
Risks Associated with Net Terms
While net terms can attract customers, they also come with risks:
- Late Payments – Clients may delay beyond the due date, disrupting cash flow.
- Bad Debt – Some invoices may never be paid, leading to financial losses.
- Cash Flow Issues – Businesses relying on net payments may struggle to cover expenses.
To minimize risk, use Invoice Fly’s Reporting Software to track overdue invoices and follow up on payments.
What Are the Alternatives to Net Payment Terms?
If net terms don’t work for your business, consider:
- Upfront Deposits – Require partial payment before work begins.
- Milestone Payments – Clients pay in phases throughout the project.
- Subscription-Based Billing – Charge customers a set amount regularly.
- Early Payment Discounts – Encourage faster payments with incentives.
Which Invoice Term Is Right for Your Business?
Choosing the right invoice term depends on:
- Your cash flow needs – If cash flow is tight, shorter terms like Net 30 are better.
- Client reliability – Larger, established clients may prefer longer terms.
- Industry standards – Some industries favor Net 60 or Net 90 by default.
Invoice Fly’s Invoice Maker lets you customize payment terms to match your business model.
Best Practices for Managing Net Payment Terms as a Small Business
- Set Clear Terms in Contracts – Clearly define number of days for payment, late fees, and consequences for non-payment.
- Send Invoices Immediately – Delays in receiving the invoice can push back the entire payment cycle.
- Monitor Payment Behavior – If a client frequently misses payment due dates, reconsider offering extended terms.
- Offer Multiple Payment Options – Credit cards, early payment discounts, and installment plans can help clients pay invoices on time.
For businesses that need to get paid faster, Invoice Fly’s Invoice Templates make it easier to create professional invoices with automated follow-ups.
Net 30 vs. Net 60 FAQs
Net 30 terms allow customers time to pay, but they can also delay income for businesses. If not managed properly, they can cause cash flow problems, making it harder to cover expenses while waiting for payments.
If a client doesn’t pay within 10 days or by the agreed due date, you can send reminders, charge late fees, or take legal action if necessary. Using payment processing tools can help streamline collections.
For small business owners, Net 30 is usually a safer option since Net 60 extends the waiting period for receiving the invoice. Smaller businesses typically need working capital more frequently than larger corporations.
If waiting for payments is a concern, consider:
- Upfront deposits – Helps cover costs before delivering a product or service.
- Milestone payments – Payments split into phases for long projects.
- Subscription models – Customers pay in advance for services.
To avoid waiting too long for payments, use tools like Invoice Fly’s Online Payments to offer instant digital payment options. Additionally, offering early payment discounts encourages clients to settle invoices sooner.
