What Does Net 15, Net 30, and Net 60 Mean?

Man taking money out of wallet

Say you’re a full-time freelancer or you run your own business and you’ve just wrapped up a job for a client. You’ve sent off an invoice and are excited to finally get paid for your work. Then, their accounts department informs you that you’ll be paid in Net 15, Net 30, Net 60, or some other Net D payment terms.

Scratching your head wondering what that means? Or, perhaps you’ve vaguely heard about Net D and are curious if it’s something you should be applying on your own invoices.

Once you know the basics of Net D payment, you can figure out exactly how long it’ll be until you’ll get paid, as well as how to use an online business days calculator to figure out when you’ll be getting paid in terms of business days.

What are Net D Payment Terms?

Net D payment terms use a specified period of time to say how long a customer has to pay a vendor. These can be used for both goods and services. The “D” in Net D is short for days and is the variable determines what this time period is. The payment must be made in full by the allotted time, otherwise the bill is overdue and the vendor can invoice for late fees.

Net D is also referred to as a type of short-term trade credit. This is because the job is already complete but hasn’t been paid for yet.

The Difference Between Net 15, Net 30, and Net 60

The difference between the various Net D payment terms is simply how many days someone has to pay. For example, if the terms are Net 15, then the customer must pay within 15 days. If the terms are Net 30, then the customer has 30 days to pay and so on. You may find that clients prefer longer payment terms and try to negotiate, for example, asking for Net 60 rather than Net 15 when ironing out your contract.

What’s important is to make clear with your client is when this “day” countdown begins—whether that’s when you send the invoice, when they confirm that they’ve received the invoice, or when you’ve delivered the actual product or service.

Discounts with Net D

Some companies or vendors choose to offer discounts if their invoice is paid sooner than the Net D terms. This is expressed as a notation like “1% 10, net 30” or “1/10 net 30.” It means that there will be a 1% discount if the buyer pays the bill within 10 days, instead of taking advantage of the whole 30-day period.

Advantages of Net D Payment Terms

While it’s natural to want payment for your products or services immediately upon finishing the job, Net D payment terms give the buyer some cushion for going through all the motions to process your invoice and get the money to you. This is especially true for big companies that work with a lot of independent contractors.

Net D payment terms also make it easier to follow up if you haven’t received your money in time, since there’s a specific period agreed upon by both parties. You’ll have concrete back-up for why you should have your money by a certain time rather than potentially seeming impatient or demanding.

Does Net D Include Only Business Days?

Net D payment terms generally go by calendar days, which includes business days, weekends, and holidays. Though, some customers or clients may assume that it’s only factoring in business days, so you might want to clear this up at the onset before confusion arises later on.

If for some reason your payment terms are being determined by only business days, you can easily use a business days calculator to calculate the business days between a specified start and end date. That way you just plug in the dates without having to sit at a calendar counting each day by hand. 

Taking money out of ATM

What to Do if You Don’t Receive Your Payment

Unfortunately, a client may not pay you on time, even if you’ve agreed upon payment terms and they’re in your contract and/or invoice. If this happens to you, it’s a good idea to send a polite reminder email to your client or customer after the due date, checking in about whether they’ve received your invoice and what the status of your payment is.

If the client is significantly late on their payment and are not responding to your check-in messages, it could be in your best interest to get legal counsel for what to do next.

With Net D payment terms, you can let your customer or client know exactly when they need to pay you for your goods or services to minimize future complications about when you’ll get your money. If you are using payment terms that depend solely on business days, you can use an online business days calculator to easily figure out the number of working days before you can expect to get paid.

This entry was posted in Business, Finance, Money and tagged , , , . By Cindy Brzostowski