As of 2022, there are 70.4 million freelancers in the United States. If you are a part of this group, you may be curious about the best way to charge your customers for your services. One of the most popular payment terms in the freelance world is net 30.
But how does net 30 work, and is it right for your business? If you are curious about net 30 payment terms, its advantages and disadvantages, read on to learn more.
This Net 30 Payment Term blog covers the following:
- What Does a Net 30 Payment Term Mean?
- How Does a Net 30 Payment Term Work?
- Is a Net 30 Term Right for Your Freelancing Business?
- How to Incorporate Net 30 Payments
- Examples of Net 30 payment terms
- Other Alternatives to Net 30 Payment Terms
- Send Your Invoices via CheckYa
1. What Does a Net 30 Payment Term Mean?
Net 30 is a common credit term used by freelancers as a way to charge their customers.
By extending this credit to your customer, you ask them to pay the full invoice amount within 30 days of the invoice date.
2. How Does a Net 30 Payment Term Work?
The payment terms of net 30 are fairly simple. You as the freelancer will provide a service, write an invoice, and give it to the customer. Your customer will then have 30 days from the date on the invoice to pay you.
For example, if you send an invoice dated on June 1st, your customer will have until July 1st to make the payment.
In the following example, your net 30 payment term can be placed in the “terms” section of the invoice. There is also a “due date” at the top that clarifies what day payment is due.
3. Is a Net 30 Term Right for Your Freelancing Business?
Many factors go into deciding whether net 30 payments are the right move for your freelancing business. This is what you need to consider before offering a net 30 payment term to your customers.
3.1. Advantages of Net 30:
Net 30 can be incredibly beneficial to your business in many different ways. Here are the main advantages of offering this type of payment term.
Give your clients more flexibility
Customers love payment flexibility. The world of freelancing can be very competitive, and net 30 payment terms can give you a leg up. A client may be more likely to choose a freelancer with flexible payment options as opposed to a freelancer who requires payment upfront. Offering more flexibility allows you to keep up with the competition and eliminates the possibility that a potential client might choose another freelancer simply over payment terms. .
Offering a net 30 payment term will also help to draw in a wider range of customers. For instance, If you sell to larger businesses then you may know that it is very hard to get payments at the time of service anyway. This is because invoices sent to larger businesses need to go through a chain of approvals before payment can be issued.. A 30-day payment option allows companies to put your invoice through their normal accounting processes and get you paid on time.
Maintaining client relations
Your customers are the heart and soul of your business, so establishing strong relationships with them is a must. Giving your clients less time to pay will increase the likelihood of late payments. This can create uncomfortable scenarios where you have to send late payment reminders and ultimately strain the relationship with your client. If being late on a payment causes your client to feel stressed or uncomfortable during a transaction then they are less likely to become a repeat customer. Offering a net 30 payment term alleviates somes of the payment stress from your customers and shows them that you trust them, which can help you to establish a better relationship.
3.2. Disadvantages of Net 30:
While there are many benefits of net 30, there are also some possible drawbacks to consider. This is why net 30 isn’t right for everyone.
When you offer net 30 payment terms, you are putting a lot of trust in your clients. If the customer doesn’t pay within the 30-day time frame, you can start to acquire debt, which can affect your company’s growth and future spending capabilities.
Cash Flow Issues
If your company is already experiencing cash flow issues, then you may not want to offer a 30-day payment plan. Many freelancers, especially beginners, rely on upfront payments to pay their bills and keep their businesses going. It could be cutting it too close to give a client a full month to pay.
If you are a more experienced freelancer, then this may not be an issue. If you have wiggle room or cash to spare, then the risk may be worth the reward.
More Work for You
If a customer doesn’t pay up, then you are responsible for tracking them down and figuring out the issue. This can create additional work that you would not need to worry about if you charged upfront instead.
Some clients do not understand the concept of net 30. You may spend extra time explaining to them exactly how and when they need to pay you back. If a client fails to pay you, then you never have to work with them again. If they pay you on time, however, you know that they are reliable to work with again in the future.
4. How to Incorporate Net 30 Payments?
There are a few ways to implement net 30 payments into your freelancing business successfully.
Most importantly, you need to ensure that you and your clients agree on the net 30 payment terms before you provide them with services. This can be outlined in your initial agreement or contract.
If you want to go the extra mile with net 30, you could offer an early payment discount that makes the customer happy and gets you paid sooner. For example, you can give a 3% discount to clients who pay within 10 days of the invoice date. This changes the billing term to 3/10 net 30.
5. Examples of Net 30 payment terms:
- “Payment due within 30 days of invoice date” – This payment term clearly states that payment is expected within 30 days of the invoice being sent.
- “Net 30 days with 2% discount for early payment” – This payment term offers an incentive for the client to pay early, by offering a 2% discount if they pay within the first 15 days of the invoice date.
- “Net 30 days with a $50 late fee for payments received after the due date” – This payment term includes a penalty for clients who are late in paying their invoices.
- “Net 30 days with a 10% interest charge for overdue payments” – This payment term includes an interest charge for payments that are received after the due date.
- “Net 30 days with a 5% late fee for payments received after the due date, and a 10% interest charge for payments received more than 60 days past the due date” – This payment term includes both a late fee and an interest charge for overdue payments, with the late fee increasing for payments received more than 60 days past the due date.
6. Other Alternatives to Net 30 Payment Terms:
If 30 days is too long for you, then you could consider net 10 or net 15. These are exactly the same as net 30, only they offer a shorter payment time frame of 10 and 15 days, respectively.
Many companies even offer net 60 and net 90 terms. However, these are typically reserved for wholesalers or retailers and are not as common in the world of freelancing.
7. Send Your Invoices via CheckYa:
If you are considering net 30 payment terms but need help with invoicing, then CheckYa is here. We can help you send your invoices and receive payments on time.
In addition to helping with payments, CheckYa can help you to sell your goods and services, schedule meetings, and generate leads.
If you are interested in our services, please contact us anytime with questions or concerns.