How net 30 works
"Net" refers to the full amount owed, and "30" is the number of days the customer has to pay it. If a shop sends an invoice dated the first of a month on net 30 terms, payment is due 30 days later. Some agreements count from the end of the month or from the date the customer received the invoice instead, so the agreement should say exactly when the clock starts.
Why shops offer it
Fleets often pay vendors in batches through an accounts payable process and expect net terms from regular vendors. Offering net 30 can help win fleet work. It also means the shop pays technicians and suppliers before it is paid, so net 30 is a form of credit and should be offered only to approved customers. See how to handle net 30 fleet terms.
Government customers
For federal agencies, 5 CFR 1315.4 says payment is generally due on the date in the contract or, if none is stated, 30 days after the agency receives a proper invoice, and 5 CFR 1315.10 provides interest penalties on late payments.
Good practices
- Approve customers before granting terms.
- Print the terms and due date on every invoice.
- Send invoices the same day the work is done.
- Track open invoices by age. See accounts receivable aging.
- Follow up before the due date, not only after it.
Net 30 and cash flow
Every customer on net 30 is money the shop has earned but not collected. The more work done on terms, the more cash the shop needs to cover payroll and parts in the meantime. Watch the total owed by each customer and set a limit, and pause new work on terms for accounts that run well past due. A late fee policy, stated in the agreement and on invoices, gives the shop a clear step to take when payment is late.
Related: net terms, statement billing.
MetaFleet supports invoicing with per-customer terms printed on every invoice, payments with pay links, and reports. Get a walkthrough.