Introduction to Net 30 Payment Terms
Net 30 is a shorthand way to indicate that payment is due 30 days from the date of the invoice. It is essentially a short-term, interest-free loan that allows customers to receive goods or services immediately but pay for them at a later date. Net 30 is one of the most common payment terms, but some companies may offer Net 60 or longer payment options as well.
Benefits of Net 30 Invoicing
A healthy cash flow is the most critical element for any small business or start-up to succeed and is essential for covering the everyday expenses necessary to operate a business. Not only does it keep the lights on and the doors open, you also need to be cash positive in order to fuel growth – and sustain it long-term. Unfortunately, it’s not uncommon that companies of all shapes and sizes have to slow business growth due to lack of cash flow needed for expansion.
But a healthy cash flow isn’t just earning more than you spend; it’s about ensuring your business can react to new opportunities quickly without breaking the bank. While there are many ways to conserve cash flow such as cutting costs, bartering, re-negotiating with creditors, and cutting inventory, Net 30 payment options offer an ideal way for your company to keep cash on your balance sheet to take advantage of opportunities as they arise while still securing the products you need to maintain your day-to-day operations. It also gives cash-strapped businesses time to bring in profits before payment is due and is an excellent way to establish credit with suppliers. A business that pays its bills on time can leverage that payment history in future endeavors as your company continues to grow.
Is Net 30 Right for My Business?
While Net 30 allows you to float your business for a month in order to be paid by your own vendors or accrue sales, if you’re unable to pay your balance in full by the due date, you may incur late payment penalties and adversely impact your credit rating, depending on the terms of your agreement.
However, from a practical standpoint, many small businesses don’t have a lot of financing options these days. A survey by the Small Business Administration revealed that 27% of companies were unable to find any source of funding whatsoever. On top of that, in many business-to-business supply chains, sellers simply can’t accept credit cards because margins are razor-thin and processing fees take a big chunk of their revenue. Net 30 offers a mechanism to ensure SMBs can access the goods they need to continue their operations while maintaining suppliers’ profitability.
Pros and Cons of Taking Advantage of Net 30 Terms
Pros:
- No lengthy application process.
- Can bridge cash gaps.
- No interest if paid on time.
- Immediate access to the supplies and materials you need.
- Develops and strengthens relationships with lenders.
Cons:
- Expensive late fees if not paid on time.
- Could put suppliers in jeopardy if you are unable to pay.
- Limits the number of suppliers you can work with.
Ready to Build Your Business with Net 30?
While there are a few potential pitfalls to consider when buying on Net 30 terms, the benefits far outweigh the disadvantages in giving you some much-needed financial wiggle room, and in many cases, offer a competitive advantage that allows you to build your business quicker by getting the goods you need up front to stay solvent and turn a profit before the due date. If you’re interested in securing Net 30 terms for future purchases, Quill offers instant approval with a quick and easy application process. At Quill, we believe your success is our success, so we invite you to learn more about how our flexible payment options can help take your business to the next level.