·5 min read
Net 30 vs Net 15: Payment Terms Explained
Payment terms define when your invoice is due. Net 30 means payment within 30 days. Net 15 means 15 days. The terms you choose directly impact your cash flow — here's how to pick the right ones for your business.
What Are Payment Terms?
Payment terms are the conditions under which you expect to be paid. They appear on your invoice and set a clear expectation for when payment is due. Standard terms include a time period (Net 15, Net 30) and sometimes early payment incentives or late payment penalties.
Common Payment Terms Explained
Due on Receipt — payment expected immediately upon receiving the invoice. Net 15 — payment due within 15 days of the invoice date. Net 30 — payment due within 30 days, the most common B2B term. Net 60 — payment due within 60 days, common for large corporations. 2/10 Net 30 — 2% discount if paid within 10 days, otherwise full amount due in 30 days.
Net 30 vs Net 15: Which Is Better?
Net 15 is better for freelancers and small businesses because it improves cash flow and reduces the risk of forgotten invoices. Net 30 is standard for corporate clients and larger contracts. The best approach depends on your industry, client relationships, and cash flow needs.
When to Use Each Payment Term
Due on Receipt: one-time clients, small jobs, retail transactions. Net 15: freelancers, contractors, service providers, recurring clients. Net 30: established B2B relationships, corporate clients, large projects. Net 60: enterprise contracts, government work (often required).
Early Payment Discounts
Offering a small discount for early payment (e.g., '2% off if paid within 10 days') can dramatically improve cash flow. The cost of the discount is typically offset by faster access to your money and reduced collection effort. Add these terms clearly to your invoice notes.
Late Payment Penalties
Including a late fee (typically 1-2% per month) on your invoices encourages timely payment. State the late payment terms on every invoice: 'A late fee of 1.5% per month will be applied to overdue balances.' Check your local regulations for maximum allowable late fees.
How to Enforce Payment Terms
State terms clearly on every invoice. Send invoices promptly. Follow up on the due date with a friendly reminder. Consistently enforce late fees — inconsistency undermines your terms. For chronic late payers, switch to upfront payment or deposit requirements.
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Try Invo freeFrequently asked questions
What does Net 30 mean on an invoice?
Net 30 means the full invoice amount is due within 30 calendar days of the invoice date. It's the most common payment term in business-to-business transactions.
Is Net 15 or Net 30 better for freelancers?
Net 15 is generally better for freelancers. It gets you paid faster and is still considered professional. Most clients can pay within 15 days without difficulty.
Can I charge late fees on overdue invoices?
Yes, but you must state the late fee policy on your invoice before it's overdue. Common rates are 1-2% per month on the outstanding balance. Check local regulations for any limits.