What Is Net 30?
Net 30 is a payment term meaning the full amount of an invoice is due 30 days after the invoice date. It's one of the most common trade-credit terms, letting a buyer receive goods or services now and pay within a set window rather than on delivery.
What Net 30 is and why it matters
Net 30 is short-term credit a seller extends to a buyer. For the buyer, it's free working capital — 30 days to use the goods before cash leaves. For the seller, it's a receivable that ties up cash until collected, which is why payment terms directly shape a company's days sales outstanding (DSO) and cash-flow timing. Terms are often combined with early-payment discounts, written as "2/10 Net 30": a 2% discount if paid within 10 days, otherwise the full amount at 30. Offering generous terms can win business but slows collections; tighter terms protect cash but can deter buyers.
A worked example
A supplier issues a $10,000 invoice dated April 1 with terms "2/10 Net 30." The buyer has two choices: pay by April 11 and take the 2% discount, paying $9,800; or pay the full $10,000 any time through May 1. If the buyer routinely skips a 2% discount to hold cash 20 extra days, that's an expensive habit — the implied annualized cost of passing on 2/10 Net 30 is roughly 37%.
How firms handle it today
Payment terms live on the invoice and in the AR/AP records; teams track due dates on an aging report and chase or schedule payment as the 30-day mark approaches. Missed discount windows and late payments are common when this is managed by memory rather than a system.
Related terms
- Accounts receivable
- Accounts payable
- DSO
- Aging report
- Invoice
FAQ
When does the Net 30 clock start?
Almost always from the invoice date, not the delivery date — though some contracts specify "end of month" or receipt of goods, so the terms should state it.
What does "2/10 Net 30" mean?
Pay within 10 days for a 2% discount; otherwise the full amount is due in 30 days.
Is Net 30 legally required?
No — it's a negotiated commercial term. Buyers and sellers can agree to Net 15, Net 60, due-on-receipt, or any other schedule.